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CEO's review 2018

Finnlines invests in sustainability – over EUR 500 million in green shipping

Our strategy, to grow together with our customers, to increase the efficiency of the capital employed on our fleet and to continue investing in sustainable development, is paying off. We are growing with the market and for the market. The 2018 result is a continuation of our successful track record over the past few years. The Finnlines Group’s 2018 result for the period improved to EUR 95.1 million (EUR 82.6 million in 2017).

The Finnish economy continued to grow last year. According to the Finnish Customs’ preliminary data, the value of Finnish goods exports increased by 7 per cent and imports by 6 per cent in 2018. According to the official Finnish transport statistics, total shipping volumes increased by 5 million tonnes, compared to the previous year’s figures. Exports increased by 3 per cent, totalling 53 million tonnes. Imports increased by 8 per cent compared to the previous year to 51 million tonnes. In line with the general market development of the Finnish sea freight sector, our revenue increased by approximately 10 per cent, to EUR 589.4 million. We grew with our customers and we also delivered well against all our core operational KPIs.

When it comes to investing in our fleet, i.e. our core assets, timing can often be of great importance. We can say that the lengthening of six of our ro-ro vessels, whereby each vessel’s capacity was increased by 30 per cent, was definitely done at the right time. In addition to vessel lengthening, we also bought the Star class ro-pax vessel, MS Europalink, a 4,200-lane-metre vessel from our parent company, the Grimaldi Group, for the Malmö–Travemünde line. From that route, we transferred the Star class ro-pax vessel MS Nordlink, renamed MS Finnswan, to the Finland–Åland–Sweden route. With its large cargo capacity, MS Finnswan now enables us to also offer more space for our customers on the Finland–Sweden traffic. In other words, Finnlines has deployed larger and larger vessels in both the ro-pax and ro-ro segments, creating economies of scale, and has also enhanced route and vessel optimisation. All this has improved the utilisation of our fleet assets.

Shipping is global business and undoubtedly the most sustainable way of transportation. Shipping companies play an important role in developing solutions to reduce emissions. Within our industry, the International Maritime Organization has set a very high target – a 50 per cent reduction in the key greenhouse gas emissions by 2050, compared with the 2008 levels. There are also other harmful emissions which the shipping sector as a whole has agreed to reduce. Apart from CO2, sulphur dioxide emissions (SO2) must be reduced. Therefore, regulators have set a stringent deadline for SO2 from 2020 onwards at 0.5 per cent sulphur content in fuel from 3.5 per cent, which means that shipping companies are bound either to install emissions abatement technology or run on cleaner lower sulphur fuel. The current allowed content is 0.10 per cent in SECA area where Finnlines operates. Therefore, Finnlines began installing emission abatement systems several years ago and 19 of our 21 vessels have been fitted with these systems. At that time, we also invested in new propulsion systems and reblading, and silicone anti-fouling in order to reduce emissions. Therefore, we can wholeheartedly say that reducing fuel consumption and cutting harmful emissions have been one of the key elements of our Group’s strategy for a long time.

We will continue to implement our strategy with determination and with consistency. In early 2018, we initiated a EUR 200 million Green Ro-ro Investment Programme. This programme includes three new green 5,800-lane-metre ro-ro vessels that will be a new kind of hybrid ro-ro vessels. They will still use fossil fuel during sailing but only electricity restored in batteries while in port, and hence guaranteeing ‘zero emissions in port’. The vessels will have a lithium-ion battery bank, which will be recharged during sailing and will provide electricity to the ship while at berth but there will be no emissions during the port stay. In addition, an innovative air lubrication system under the keel will create bubble layers which will reduce friction and hydrodynamic resistance and, consequently, reduce fuel consumption and emissions as well. Optimised energy efficiency is ensured with the hull lines and propellers, including the most advanced integrated propeller-rudder systems.

Looking into the future, we will from 2021 onwards take delivery of these three ice-class green ro-ro vessels. Their design and size mean they will be among the most fuel-efficient on the market. But that is not all – we are currently designing and developing a new ro-pax class concept for Finnlines. These Superstar ro-pax vessels will meet the highest technical and environmental standards. These vessels will also be equipped with emission abatement and other advanced fuel consumption and emission reduction systems. We are also considering LNG as an alternative fuel. As is the case with the three green ro-ro vessels already ordered, these Superstar ro-pax vessels will also be much larger in size and more efficient than the existing Star class ro-pax vessels.

These major investments will further contribute to reducing fuel consumption and CO2 and other emissions. Our target is to set a new standard in the sector for reducing CO2 emissions per transported tonne. It has become clear that in order to reach this ambitious sustainability target, among others, we are looking into both hybrid solutions and LNG as fuel, batteries and use of electricity while in port, known as ‘cold ironing’. According to the latest forecasts, the world economy continues to support long-term growth in Finland, even amid a slightly weakened global economic outlook. When looking into 2019 and beyond, we are confident that the Finnish economy will continue to grow, although at a more moderate pace than in recent years and more slowly than before. But being an export-driven country, it will grow along with the global economic growth. We have invested over EUR 1 billion in the past decade and will continue to invest over EUR 500 million more. We will invest in new technology, in digitalisation and in green shipping for our customers who will grow together with us.

I would like to take this opportunity to thank all our customers and our stakeholders for your support and close co-operation. In the coming years, we will continue to put all our efforts in being the best partner we can be. With our enlarged and sustainable fleet, we will work hard to further improve our efficiency in order to achieve our strategic goals – both financial and environmental. I would also like to thank all our employees for your hard work and dedication.

Emanuele Grimaldi