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CFO's review

Outstanding Quarterly Performance – Goals Need To Be Reset

Financial performance

Finnlines achieved record-breaking quarters during the financial year 2015. Even though the revenues declined in 2015 by 4.1 per cent to EUR 511.2 million, due to the lower bunker surcharge and lower bareboat charter income resulting from divestment of vessels, the positive financial development continued. Earnings before interest, taxes, depreciation and amortisation, EBITDA, were EUR 126.9 million, representing 25 per cent of the turnover. Taking into account the slowdown in Europe’s economy and the sanctions on Russian trade as well as the dockings of several ships, the result for the reporting period, EUR 56.8 (41.7) million, was exceptional. The Company now owns the whole of its young and modern fleet and is thus not dependent on the volatile charter market. The majority of the fleet has been equipped with the most modern environmental technology, which enables us to reduce sulphur emissions and also reduce fuel consumption.

The Turnaround Programme

Finnlines’ cost-efficiency continued to improve through the implementation of the ongoing Turnaround Programme. Finnlines Group’s costs decreased from EUR 481.1 million to EUR 442.7 million. Additionally, through operational optimisation and the new technological investments in propulsion systems, fuel consumption was reduced by more than eight per cent in 2015. The ongoing Turnaround Programme has brought great results which reflect positively on our operational efficiency and business in the future as well. Finnlines will still continue to focus carefully on cutting costs and optimising operations to keep up the good pace and to improve the Company’s efficiency even further.

Capital structure

The Group’s capital structure is strong. The equity ratio improved markedly, to 45.7 per cent and despite the extensive investments in the fleet, the Company was able to reduce the interest-bearing debt by EUR 18.7 million to EUR 533.7 million. During 2014–2016, the Group has been implementing its EUR 100 million Environmental Technology Investment Programme which has included the installations of exhaust gas scrubbers on 15 vessels, while six vessels have been rebladed and equipped with rudder bulbs. On top of this, two vessels have undergone an anti-fouling treatment. Cash flow generated from operating activities was EUR 106 million compared to EUR 82 million in the previous year and regardless of higher capital expenditure the gearing fell to 97.1 per cent from 113.0 per cent. Also, net debt to EBITDA stood at 4.2 at year-end. All in all, our credit profile has strengthened markedly.

Shareholder value

The 2014 financial year already brought a great increase in the shareholder value through the outstanding share price development. In 2015, our financial performance and operational performance were even stronger and therefore the share price continued to increase further, by around 11 per cent, during the year. The market capitalisation of the Company was EUR 911.6 million at the end of the year and earnings per share (EPS) grew to EUR 1.1 from EUR 0.81. Through our Turnaround Programme, the long-term strategic decisions made in recent years, and through constantly reviewing and improving our operational planning, Finnlines has shown that even in this economic situation the Company can exceed its goals and reach outstanding results, which have positively impacted the shareholder value.

Tom Pippingsköld