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CFO's Review

The Group Delivered Outstanding Financial Results

Financial Performance

In terms of financial performance, Finnlines posted record results during the financial year 2016. The Finnlines Group’s result for the reporting period, EUR 68.1 million, was approximately 20 per cent better than in the previous year. Despite the challenging market environment, the Company’s earnings before interest, taxes, depreciation and amortisation, EBITDA, were EUR 139.1 million, representing a 29 per cent EBITDA margin of the turnover. Finnlines’ EUR 100 million Environmental Technology Investment Programme was initiated in 2014. The aim of the Programme was to improve the ships’ fuel economy and to reduce emissions by installing exhaust gas scrubbers, by reblading the vessels’ propulsion systems, and by treating the vessels with silicone anti-fouling for reducing hull friction. The successful implementation has led to a reduction in fuel consumption. Also, the share of inexpensive heavy fuel oil in Finnlines’ traffic is now greater than in 2015, which has considerably improved fuel economy. By finding new ways to even further increase fuel efficiency, we can further reduce bunker consumption and save costs. The lower operative costs in several other areas than in bunker costs also contributed positively to the overall result. The continued improvement in our profitability is a result of putting constant downward pressure on costs and implementing innovative energy-saving technologies.

Turnaround Programme

One of the key objectives of Finnlines’ Turnaround Programme, which was launched in 2013, was to implement cost savings in all main cost components, thereby ensuring Finnlines’ improved financial performance regardless of development in the European economy or its business environment. The Finnlines Group’s costs decreased from EUR 442.7 million to EUR 398.8 million. We have, indeed, faced a very tough task in this Programme, but with an experienced team of hard workers, we have turned challenges into opportunities one by one, with hard and diligent work combined with technological know-how. The quality of our staff, their cohesion, professionalism and enthusiasm, at all organisational levels, has been the secret of Finnlines’ success. In the future, we will continue to focus on our opportunities for profitable growth, on cost reductions, and on further optimising our operations.

Capital Structure

The Group’s capital structure strengthened further. The extraordinary result together with lower capital expenditure led to an improved cash flow compared to the previous year, which enabled us to markedly reduce the Group’s debt. The interest-bearing debt decreased by EUR 42.6 million and amounted to EUR 491.1 (533.7) million. Cash flow generated from operating activities was EUR 124.8 (105.8) million. In 2016, capital expenditure totalled about EUR 46.3 million, compared with EUR 64.1 million in the previous year. The gearing improved to 83.8 (97.1) per cent and the Group’s equity ratio stands now at the solid 48.9 per cent level. Finnlines’ solvency and liquidity remained, as in previous years, at an excellent level, which enabled us to implement the significant capital expenditure programme. Cash and deposits together with unused committed credit facilities amounted to EUR 130.5 (114.5) million and net debt to EBITDA dropped to 3.5 at year-end, from the previous year’s 4.2 level.

New Shareholder Structure

On 25 August 2016, the Grimaldi Group lodged a security approved by the Arbitral Tribunal in connection with the redemption of the minority shares in Finnlines Plc and thus acquired title to all the outstanding shares in Finnlines. This completed the Grimaldi Group’s acquisition of Finnlines Plc, and led to a subsequent decision to de-list the Company from the Helsinki Stock Exchange on the same date. The redemption price of a Finnlines share was EUR 18.00 per share. This brought the capitalisation of the Company to approximately EUR 927 million.

The new shareholder structure reinforces Finnlines’ existing strategy – enabling us to be the most efficient shipping company in the Baltic Sea as part of the Group with proven track record in highly profitable operations – the Grimaldi Group, Europe’s number one shipping company in the combined ro-ro/ro-pax segment.

Tom Pippingsköld