Financial Statement Bulletin January-December 2010
Finnlines Plc Stock Exchange Release II 2 March 2011 at 15:20
FINANCIAL STATEMENT BULLETIN JANUARY-DECEMBER 2010 (Unaudited)
October - December 2010
- Revenue EUR 139.3 million (EUR 122.1 million prev. year), increase 14.0%
- Result before interest, taxes, depreciation and amortisation (EBITDA) EUR 16.0 million (EUR 9.3 million), increase 72.9%
- Earnings per share were -0.07 (-0.16) EUR/share
January - December 2010
- Revenue EUR 561.1 million (EUR 494.4 million prev. year), increase 13.5%
- Result before interest, taxes, depreciation and amortisation (EBITDA) EUR 85.9 million (EUR 37.4 million), increase 129.8%.
- Earnings per share were 0.05 (-0.96) EUR/share
JANUARY – DECEMBER 2010 IN BRIEF
|MEUR||10-12 2010||10-12 2009||1-12 2010||1-12 2009|
|Result before interest and taxes (EBIT)||0.5||-5.5||25.6||-23.6|
|% of revenue||0.3||-4.5||4.6||-4.8|
|Result before taxes (EBT)||-4.9||-11.2||3.7||-51.4|
|EPS, EUR *||-0.07||-0.16||0.05||-0.96|
|Equity ratio, %||29.1||29.4||29.1||29.4|
|Shareholders’ equity/share, EUR *||9.14||9.07||9.14||9.07|
* In 2009, key indicators per share have been retroactively adjusted with the share issue adjustment factor.
Calculation of key ratios is presented under ’Calculation of ratios’.
GENERAL MARKET DEVELOPMENT
During 2010, the market volumes started to recover from the sharp drop experienced in 2009, but remained below 2008 levels on an annual basis. Based on the statistics by the Finnish Maritime Administration (FMA), the Finnish seaborne imports carried in container, lorry and trailer units increased by 14% and exports by 13% during January-December 2010 compared to the previous year (measured in tons). According to the statistics published by Shippax, trailer and lorry volumes transported by sea between Southern Sweden and Germany decreased in January-December by 1% compared to 2009. During the same period, private and commercial passenger traffic between Finland and Germany increased by 6% and decreased between Finland and Sweden by 2% (FMA).
During the first quarter of the year, traffic was influenced by a number of external disturbances. Severe ice conditions in the northern parts of the Baltic Sea, stevedores' overtime ban in Finnish ports and the 16-day stevedoring strike in Finland all caused several temporary schedule changes, reroutings and stoppages. Especially the stevedores' strike had big impacts as practically all ro-ro traffic to and from Finnish ports halted during the strike. By the end of March, the situation normalised and the traffic returned to the normal pattern.
During the second half of 2010, Finnlines operated on average 24 vessels in its own traffic, compared to 23 vessels in the same period in 2009. During the fourth quarter, the Company continued to expand its connections to St. Petersburg. Besides the Bilbao-Antwerp-Helsinki service to St. Petersburg, Finnlines launched a new service between the United Kingdom and Russia. In addition, the number of weekly departures between Germany and Russia increased to three in the TransRussiaExpress liner service.
The cargo volumes transported during January-December totalled approximately 629,000 (596,000 in 2009) units, 56,000 (38,000) cars (not including passengers’ cars ) and 2,039,000 (2,001,000) tons of freight not possible to measure in units. In addition, some 648,000 private and commercial passengers were transported (around 533,000 in 2009), an increase of 22%. Compared to January-December of 2009, the number of private passengers (excluding lorry drivers) transported by the Company increased by 44%.
October – December 2010
The Finnlines Group recorded revenue totalling EUR 139.3 million (122.1), an increase of 14.0% compared to the same period in 2009. Shipping and Sea Transport Services generated revenue amounting to EUR 127.9 million (111.3) and Port Operations EUR 18.4 million (16.8). The internal revenue between the segments was EUR 7.0 million (5.9).
Result before interest, taxes, depreciation and amortisation (EBITDA) was EUR 16.0 million (9.3), an increase of 72.9%. Vessel lease expenses decreased by EUR 6.0 million. Other operating expenses totalled EUR -40.9 million (-43.0).
Result before interest and taxes (EBIT) was EUR 0.5 million (-5.5). Financial income was EUR 0.6 million (1.0) and financial expenses totalled EUR -5.9 million (-6.7). Result before taxes (EBT) was EUR -4.9 million (-11.2), an improvement of EUR 6.3 million compared to the same period in 2009. Earnings per share (EPS) were EUR -0,07 (-0.16).
January – December 2010
The Finnlines Group recorded revenue totalling EUR 561.1 million (494.4), an increase of 13.5% compared to the same period in 2009. Shipping and Sea Transport Services generated revenue amounting to EUR 513.7 million (444.9) and Port Operations EUR 72.3 million (73.2). The internal revenue between the segments was EUR 24.9 million (23.7). The Port Operations segment was affected by the stevedores’ two-week strike in spring.
Result before interest, taxes, depreciation and amortisation (EBITDA) was EUR 85.9 million (37.4), an increase of 129.8%. Vessel lease expenses decreased by EUR 27.3 million and amounted to 33.8 million (61.2). Other operating expenses totalled EUR -165.9 million (-199.1) and included EUR 3.1 million (2.8) reimbursement of fairway dues and refund on harbour dues EUR 2.7 million (See Chapter ‘Essential Legal Proceedings’).
Result before interest and taxes (EBIT) was EUR 25.6 million (-23.6). Financial income was EUR 3.8 million (3.9) and financial expenses totalled EUR -25.7 million (-31.7). Result before taxes (EBT) was EUR 3.7 million (-51.4), an improvement of EUR 55.1 million compared to the same period in 2009. Earnings per share (EPS) were EUR 0.05 (-0.96).
STATEMENT OF FINANCIAL POSITION, FINANCING AND CASH-FLOW
Interest-bearing net debt increased by EUR 8.5 million compared to end of 2009 and amounted to EUR 852.6 million (844.1). According to the consolidated statement of financial position the equity attributable to parent company shareholders equals to EUR 428.1 million at the end of the reporting period. Distributable funds included in the parent company’s shareholders’ equity on 31 December 2010 equals to EUR 114.2 million. The equity ratio calculated from the balance sheet was 29.1% (29.4) and gearing was 198.8% (198.3). Vessel lease commitments have decreased by EUR 38.6 million from the end of December 2009.
The Company is in complete compliance with the financial covenants of its loan portfolio. At the end of the period, cash and deposits together with unused committed working capital credits and the undrawn part of committed credits for newbuildings amounted to EUR 147 million. The Company has a commercial paper programme amounting to EUR 100 million of which the company had issued EUR 17 million at the end of 2010.
In April 2009, Finnlines’ subsidiary Hanseatic Shipping sold MS Finnhansa to Grimaldi Group at the market price of EUR 40 million with a call option to repurchase the vessel at the same price. This call option was exercised. MS Finnhansa (renamed Transrussia) was bought in July by Finnlines Deutschland GmbH and started plying in TransRussiaExpress traffic between Lübeck, Germany and St. Petersburg, Russia.
Gross capital expenditure in the review period totalled EUR 82.2 million (28.0), and consists mainly of prepayments for newbuildings (EUR 31.4 million) and the purchase of Finnhansa vessel (EUR 40.0 million). Depreciation amounted to EUR 60.1 million (61.0). Finnlines sold the associated company Simonaukion Pysäköinti Oy in April and also the investment properties in Turku were sold in 2010.
The delivery timetable of the six vessels under construction in China has been adapted to meet scheduled further redeliveries of the chartered tonnage. The new delivery times are: vessels Nos. 1 and 2 at the end of the first quarter of 2011, vessels Nos. 3 and 4 during the fourth quarter of 2011, vessel No. 5 at the end of the third quarter 2012 and vessel No. 6 during the fourth quarter of 2012.
The Group employed an average of 2,096 (2,050) persons during 2010, consisting of 1,141 (1,086) persons on shore and 954 (964) persons at sea. The increase in the average number of shore personnel was due to two main reasons:in 2010 there were less temporary layoffs both in the ports and in the offices than in 2009, and the passenger department’s personnel has increased considerably.
The average number of employees has been calculated by converting the regular working hours performed during the reporting period to correspond to a full-time employee. The average number of employees was recalculated accordingly for 2009.
In the middle of December 2010, the Group’s port operations companies Finnsteve Oy Ab, Containersteve Oy Ab and FS-Terminals Oy Ab started employer-employee adaptation negotiations in the Port of Helsinki according to the collective agreement of FinnishTransport Workers’ Union. Finnsteve and Containersteve had already earlier started similar negotiations in the ports of Turku and Kotka. These negotiations concern all personnel groups in all three ports. Finnsteve-companies employ 700 persons in Helsinki, Turku and Kotka. Finnlines Plc is the parent company of these stevedoring companies. The co-operation negotiations with the personnel, which started late 2010 in the ports of Kotka, Turku and Helsinki, resulted in the termination of about 160 employments in total.
In 2009, the Group started a significant restructuring process mainly by merging group companies with an aim to gain efficiencies and a more transparent group structure. This process continued in 2010: Finnlines Plc acquired all the shares in the Swedish subsidiary Finnlines Ship Management AB from AB Finnlines Scandinavia Ltd and Oy Finnlink Ab sold all the shares in its Swedish subsidiary Finnlink AB to AB Finnlines Scandinavia Ltd. In addition, Oy Finnlink Ab and Oy Hanseatic Shipping Ab were merged with Finnlines Plc’s Shipping and Sea Transport Services segment. In the Port Operations segment, Containersteve Oy Ab and Finncare Oy Ab were merged with TBE System Oy Ltd followed by the rename of the TBE System Oy Ltd to Containersteve Oy Ab, which continues container handling operations. Further, some smaller subsidiaries were dissolved.
As a result of the restructuring process the Group consisted of the parent company and 21 subsidiaries at the beginning of 2011, whereas at the beginning of 2009 there were 49 subsidiaries.
RESEARCH AND DEVELOPMENT
The aim of Finnlines' research and development work is to find and introduce new practical solutions and operating methods, which enable the company to better and more cost-efficiently meet customer needs. In 2010, the focus of system development has been on passenger traffic and procurement.
The new state-of-the-art IT system for day-to-day marketing and sales in Passenger Services is aimed at enhancing efficiency and improving purchasing experience for customers. Development of procurement procedures and systems is done under the Grimaldi Group framework. Best practices of Grimaldi Group’s wide procurement are available, which with local application ensures efficient local and global sourcing.
Finnlines has ordered six ro-ro vessels from Jinling shipyard in China. For these newbuildings the R&D engineered a design, which allows substituting the present vessels with new ones which not only have an average of 1,000 lane metres of additional capacity but also 9,000 m2 more car capacity thanks to hoistable decks. These modern ships are being built to ice-class 1A, are capable of 20 knots, and have capacity for 3,245 lane metres of rolling cargo. The first two ships will enter Finnlines traffic during spring 2011 and the rest of the newbuildings later in 2011 and during 2012.
THE FINNLINES SHARE
The Company’s registered share capital on 31 December 2010 was EUR 93,642,074 divided into 46,821,037 shares. A total of 2.9 (2.7) million shares were traded on the NASDAQ OMX Helsinki during the period. The market capitalisation of the Company’s stock at the end of December was EUR 373.2 (323.1) million. Earnings per share (EPS) were EUR 0.05 (-0.96). Shareholders’ equity per share was EUR 9.14 (9.07). At the end of the year, Grimaldi Group’s holding and share of votes in Finnlines was 65.84%.
DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING
The Annual General Meeting of Finnlines Plc held in April 2010 approved the Financial Statements.
The Meeting approved the Board of Directors’ proposal not to pay any dividend.
The Annual General Meeting decided that the Board of Directors shall have six members. The following were re-elected to the Board: Mr Emanuele Grimaldi, Mr Diego Pacella, Mr Gianluca Grimaldi, Mr Antti Pankakoski, Mr Olav Rakkenes and Mr Jon-Aksel Torgersen. The Board elected Mr Emanuele Grimaldi Chairman and Mr Diego Pacella Vice-Chairman.
The Authorized Public Audit Firm Deloitte & Touche Oy was appointed as the Company’s auditors for 2010.
The Annual General Meeting authorised the Board of Directors to decide on the issuance of new shares in one or several tranches so that the total number of shares issued based on the authorization is 20,000,000 at maximum. The authorization is valid until the next Annual General Meeting.
The Group’s business, financial conditions and results could be materially affected by various risks.
The main business risk in shipping is overcapacity of tonnage. Overall the global ro-ro market looks better than other maritime transport sectors, where newbuildings are further increasing the imbalance of supply and demand of tonnage. For the ro-ro sector this does not apply. Moreover, around 50% of the current global ro-ro fleet is over 25 years old and needs to be scrapped for environmental reasons.
Finnlines constantly monitors the stability and the payment behaviour of its customers and currently there are no significant risks related to this.
Other significant risk factors, which may affect our business are listed below. The presentation order of the risk factors is not intended to be an indication of the probability of their occurrence or of their potential impact on our business.
- Macroeconomic development
- Changes in laws and regulations
- Relations with the trade unions
- Increase in the interest rates
- Increase in the fuel prices
- Market behaviour
Wherever possible, the Company has taken all the measures needed for minimizing the risks.
ESSENTIAL LEGAL PROCEEDINGS
The Helsinki District Court rendered on 3 March 2010 its judgment in the action initiated by Mutual Pension Insurance Company Ilmarinen against Finnlines Plc. The District Court approved Ilmarinen’s claim to have the resolution of the Annual General Meeting 2008 amended so that the minimum dividend instead of EUR 180,216.39 should have been EUR 17,181,000. In addition, the District Court ordered Finnlines to compensate Ilmarinen’s legal costs by an amount of EUR 300,035.15 together with interest at statutory rate. As Finnlines has assessed Ilmarinen’s claim not being justifiable, no amount relating to the claim has been recorded. Finnlines filed an appeal with the Helsinki Court of Appeal against the judgement by the Helsinki District Court in April 2010 and the case is under process.
Taxation of internal vessel sales carried out in 2007 by Finnlines’ Swedish subsidiary includes uncertainties. The decision of the tax authorities was that a SEK 97.2 million (EUR 9.5) tax debt should be paid. The Company appealed against this decision and requested postponement of the payment of the tax debt, which was granted. The Appeal Court rendered its decision on 10 January 2011 in favour of the tax authorities and the tax debt became payable. The Company submitted on 8 February 2011 the leave for appeal at the Administrative High Court and extension of the postponement of the payment of the tax debt. Both submissions are under process. As the Company recorded a deferred tax liability due to the temporary timing difference in the tax year in question, this matter does not have any significant effect on the Company’s result.
Finnlines addressed material appeals to the Finnish Customs and the Port of Helsinki for rectification of the paid fairway and port dues based on incorrect tonnage certificates of the Star-class vessels issued by the Swedish and Finnish maritime authorities. The Port of Helsinki has refunded the excess paid harbour dues entirely totalling EUR 2.7 million and Finnish Customs EUR 3.1 million.
Two former and 37 current employees of the Company, represented by the Union of Salaried Employees, have brought an action against the Company at the District Court of Helsinki. They claim that the Company is to adhere to the general increases of the collective agreement and to pay the increases accordingly retroactively and in the future. The Company considers the claims groundless. The process is under way.
Finnlines’ port operations subsidiaries received summons on 2 February 2011 from 16 employees on weekly resting times and compensation thereof. The claims derive from years 2008 and 2009. The claims might be amended with claims arising from 2010 but this is yet uncertain. The claimants also claim penalty interest and legal expenses. The Company considers the claims groundless. The process is under way.
Finnlines received information on the last day of January 2010 that the Finnish Transport Workers' Union (“Union”) has filed legal actions against Finnlines’ port operations subsidiary for compensation of weekend work. The legal actions are handled in three District Courts in Finland and concern 393 employees of the port subsidiary represented by the Union. The claim is based on weekly resting times and compensation thereof. The employees claim that they have not received sufficient weekly rest/ compensation from 2008-2009. The case raised in the District Court of Kotka resulted in a judgement by default in favour of the defendant company. The total amount of all the claims is not firmly specified by the Union but could now be estimated to be about EUR 0.5 million in maximum. The Company considers the basis of the actions groundless.
In 2008, the Administrative Court of Helsinki rendered decisions based on which it can be argued that the Finnish Act on Fairway Dues in force until 1 January 2006 has contained provisions which according to EU law were discriminatory. The Company has been charged excessive fairway dues during 2001–2005. The Company has been refunded the fairway dues only for 2005, amounting to EUR 2.8 million by the Finnish Customs. The Company is preparing the claim for damages and restitution against the Finnish State for the years 2001-2004 at the District Court of Helsinki. The amount of the claim is approximately EUR 8.5 million and has not been recognised as revenue. The Company has also filed applications for reversals in the Supreme Administrative Court concerning the fairway dues decisions of the Finnish Customs. Any amounts received as a result of a successful application to the Supreme Administrative Court would be deducted from the claim for damages or restitution.
ENVIRONMENT AND SAFETY
The objectives of Finnlines' environmental policy are to provide safe, top-quality services while taking into account the environmental impacts in every aspect of operations.
Transports and routes are regularly optimised to achieve the highest possible utilisation rate on both southbound and northbound voyages, which minimises environmental stress per transported cargo unit. Finnlines is in the process of looking at effective and technically feasible solutions for reduction of emissions. The six new ships to be delivered from China in 2011-2012 will be equipped with a rudder/propeller combination technology that is designed to achieve a significant decrease in fuel consumption.
Sulphur content of marine fuel has reduced step by step. As of 1 January 2010, there has been a maximum 0.1 per cent sulphur limit on all marine fuel used in EU ports while the ship is at berth for at least two hours. Finnlines’ ships have complied with this regulation for many years. In the Emissions Control Areas, i.e. the Baltic Sea, North Sea and English Channel, the sulphur content limit for heavy fuel oil was reduced from 1.5 per cent to 1.0 percent on 1 July 2010. Finnlines’ ships run on low-sulphur fuel also when operating outside the Emissions Control Areas.
In 2010, all Finnlines-owned ro-pax and ro-ro ships were incorporated into the environmental certificate issued by LRQA (Lloyd's Register Quality Assurance). Finnsteve has also started to build up an environmental system in accordance with the ISO 14 001 standard.
All vessels have been certified in accordance with the International Safety Management Code (ISM code). All ships and port facilities also comply with the requirements of the International Ship and Port Facility Security Code (ISPS).
In its annual report Finnlines publishes a report of environmental and safety issues.
Finnlines applies the Finnish Corporate Governance Code for listed companies updated in autumn 2010. The Corporate Governance Statement can be reviewed at the corporate website (www.finnlines.com)
MAIN EVENTS AFTER THE REPORTING PERIOD
Finnsteve-companies (Finnsteve Oy Ab, Containersteve Oy Ab and FS-Terminals Oy Ab) started co-operation negotiations in the ports of Kotka, Turku and Helsinki with all personnel groups during the last quarter of 2010. These negotiations have resulted in the termination of about 160 employments in total.
FINNLINES PROSPECTS FOR 2011
In 2010 import and export volumes started to recover which influenced positively the performance of the Company. For 2011 the Company expects that this positive trend will continue.
The tough competition in the port of Helsinki has negatively influenced the volumes and the price levels of port operations services.The Port Operations segment has made significant losses since the opening of the new Vuosaari Harbour in autumn 2008. The port operation companies have been compelled to cut the number of personnel, of which considerable savings are expected. However, substantial part of them will realise in 2012 due to long notice periods.
During 2011 the Company will take the delivery of major part of its newbuildings and will during the year have a modern optimized fleet to meet future demand and challenges. The Company has during 2009 and 2010 been reshaped and optimized both with respect to efficiency and cost. Based upon the expected market development and the state of the Company the Board of Directors expects improved result in 2011.
DIVIDEND DISTRIBUTION PROPOSAL
The Board of Directors will propose to the Annual Shareholders’ Meeting that no dividend be paid out for 2010 due to the still uncertain financial business environment and the ongoing investment programme. However, the Board expects dividends to be paid from the financial year 2011 onwards on the condition that there are no negative surprises in the Company’s business environment.
ANNUAL GENERAL MEETING
Finnlines Plc’s Annual General Meeting will be held from 12.00 on Tuesday 19 April 2011 at the Radisson Blu Royal Hotel Helsinki, Runeberginkatu 2, Helsinki.
A shareholder has the right, by virtue of the Limited Liability Companies Act, to put matters that fall within the competence of the General Meeting on the agenda of the General Meeting, provided the shareholder makes a written request to the Board of Directors in time for the matter to be included in the notice of the meeting.
Possible requests from shareholders to put matters on the agenda of Finnlines Plc’s 2011 Annual General Meeting shall be sent to Finnlines Plc’s Board of Directors not later than 16 March 2011. The request, together with an explanation or a draft resolution, shall be sent in writing to Finnlines Plc, Legal Matters, POB 197, 00181 Helsinki, Finland or by e-mail to email@example.com.
The financial statements, the Board of Directors’ Report and the annual report for 2010 will be published on 28 March at the latest and will be available at www.finnlines.com or at Finnlines’ headquarters, Porkkalankatu 20 A, Helsinki.
The first interim report of 2011, for 1 January – 31 March, will be published on Thursday, 19 May 2011.
The Board of Directors
- Consolidated statement of comprehensive income, IFRS
- Consolidated statement of financial position, IFRS
- Consolidated statement of changes in equity, IFRS
- Consolidated cash flow statement, IFRS
- Revenue and result by business segments
- Property, plant and equipment
- Contingencies and commitments
- Revenue and result by quarter
- Shares, market capitalisation and trading information
- Calculation of ratios
NASDAQ OMX Helsinki Ltd.
The information is unaudited.
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