CFO's review

FINNLINES WITH STRONG FINANCIAL PERFORMANCE –
PROFIT JUMPS UP 21.5 PER CENT

Financial Performance

The Finnish sea freight industry last year amounted to 99 million tonnes. Total shipping increased, compared to the previous year’s figures, by 4 million tonnes. Exports increased by 6 per cent, totalling 52 million tonnes. Imports increased by 2 per cent compared to the previous year to 47 million tonnes. Looking to 2018, the latest forecast estimates the world’s economic growth rate to accelerate in 2018–2019.

Favourable trading conditions increased our cargo volumes. We transported 709,000 cargo units, shipped 147,000 cars (not including passengers’ cars) and carried 619,000 passengers: all comfortably up on the previous year.

  

The Finnlines Group’s result for the reporting period increased by EUR 14.6 million to EUR 82.7 million. Earnings before interest, taxes, depreciation and amortisation, EBITDA, came to EUR 152.4 million against EUR 139.1 million after 2016. Revenue increased EUR 62.6 million to EUR 536.3 million. The strong results we posted again are a proof that our strategy is paying off. Overall, 2017 was a strong year for Finnlines.

To maintain this positive development, we have continued to invest in Finnlines’ fleet. We completed the EUR 100 million Environmental Technology Investment Programme to reduce the sulphur, CO2 and other harmful emissions. This included the installation of scrubbers, investments in propulsion and reblading, and silicone anti-fouling. In 2017, we launched a EUR 70 million Energy Efficiency and Emission Reduction Investment Programme to respond to the growing demand by increasing vessels’ cargo capacity. Under this programme we will lengthen four of our Breeze series ro-ro vessels with options for another two vessels. Each vessel will have 30 per cent additional capacity, meaning they will be able to carry up to 4,200 lane metres of rolling cargo. In addition to improving the customer service, we aim toward increased energy efficiency and reduced emissions.

The investments have been enabled by solid, consistently improving cash flow from our operations. Return on equity improved markedly and was 13.8 (11.9) per cent. Our equity ratio has increased from 48.9 per cent to 51.1 per cent, meaning we are today less reliant on debt. 

Turnaround Programme

Our Turnaround Programme, launched in 2013, is based on our cost saving strategy. We started with the basics, focused on constant downward pressure on costs and implemented innovative energy-saving technologies. The strategic focus was on improving our operational and financial position, investing in the environmental technology and the decision to own all our vessels. With the operational, organisational and financial optimisation we achieved our targets and ensured improvement in Finnlines’ financial performance regardless of development in the European economy or its business environment. As a result, we increased our operational leverage on multiple levels. By reducing costs and increasing competitiveness, we passed a substantial part of our efficiency gains onto our clients.  Our mission is to focus on cost reductions, and on further optimising our operations to improve our efficiency further. The Finnlines Group’s return on capital employed (ROCE) increased over the previous year to 8.7 (7.4) per cent.

Capital Structure

The Group’s capital structure is strong. Despite the significant investment programmes, the extraordinary result 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 32.9 million and amounted to EUR 458.2 (491.1) million.  Cash flow generated from operating activities was EUR 122.5 (124.8) million. In 2017, capital expenditure totalled about EUR 48.9 million, compared with EUR 46.3 million in the previous year. The gearing improved to 68.9 (83.8) per cent and the Group’s equity ratio increased slightly to 51.1 per cent compared to 48.9 per cent in the previous year. 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 192.0 (130.5) million and net debt to EBITDA dropped to 2.8 at year-end, from the previous year’s 3.5 level.

New Shareholder Structure

Finnlines is part of Italy’s Grimaldi Group, which is a multinational integrated logistics company, specialising in the maritime transport of cars, rolling cargo, containers and passengers. Group-wide network synergies with the Grimaldi Group enable us to be the most efficient shipping company in the Baltic Sea.

Moreover, Finnlines is also a Finnish company as it owns 21 vessels, of which 18 fly the Finnish flag and close to 70 per cent of the Group’s sea personnel is working on these vessels. Also 70 per cent of the Group’s approximately 1,600 employees are based in Finland.

Tom Pippingsköld