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CEO's review 2020

Finnlines invests EUR 0.5 billion in Green vessels and for long-term growth
– Safeguarding National Emergency Supply with emission-free technology

2020 was operationally an extremely challenging year, and the global Covid-19 pandemic demanded extraordinary response and efforts from all of us. International trade fell throughout the business segments and passenger travel has plummeted due to the travel restrictions imposed to hinder the virus’ spread. The Covid-19 pandemic has changed the world, and like any other shipping operator, Finnlines also suffered from the slowdown in global trade.

According to the Finnish sea transport statistics, Finland’s total sea freight volumes amounted to 101.3 million tonnes in 2020. Total shipping decreased by 5.3 million tonnes compared to the previous year’s figures. Exports decreased by 5.8%, totalling 50.2 million tonnes. Imports decreased by 4.5% to 45.8 million tonnes on the previous year.

The Finnlines Group’s turnover was EUR 484.0 (574.8) million in the reporting period, a decrease of 16% compared to the same period in the previous year. Result before interest, taxes, depreciation and amortisation (EBITDA) was EUR 140.8 (169.8) million, a decrease of 17%. At the end of the first quarter, Finnlines reacted promptly to the first signs of the widespread economic fallout of the ongoing crisis and initiated a cost saving plan to mitigate the Covid-19 impact. We were not, of course, immune, but our flexibility and agility, which are based on an in-depth industry knowledge, allowed us to successfully implement the cost savings plan. As a result, we maintained a feasible profitability throughout the latter part of the year and the result for the reporting period was EUR 69.7 (98.3) million, which we are very proud of.

Despite these exceptional times, the shipping sector as a whole has guaranteed reliable transport links globally between markets and continued to keep essential supply lines open. Likewise, Finnlines has maintained critical sea bridges between Finland and Sweden and between Finland and Continental Europe, Russia and the UK as well. Finnlines has since 1947 played a vital role in supporting national exporters and importers. It has become evident that carriers like us, provide a lifeline to both the private and the public sector in Finland. Finnlines alone transports more than a third of the one million rubber-tyred units, i.e. trucks and trailers, which move annually across Finland’s three main sea bridges, Finland–Estonia, Finland–Sweden and Finland–Germany. Finnlines is a critical player in transporting medicines, foodstuffs and other commodities to Finland. Furthermore, Finnlines is an important carrier of industrial products, spare parts, machinery and equipment. As an example, Finnlines’ Naantali–Långnäs–Kapellskär route is the most important western maritime route in safeguarding the security of supplies for Finland. Finnlines is the market leader in maritime transport between Finland and Sweden.

Finnlines has been operating regularly for many years on Finland’s most critical maritime routes and has always safeguarded
Finland’s security of supply and is able to provide the service in an environmentally friendly way, under marketbased terms and without public support.

In 2020, we reached an important milestone in our EUR 0.5 billion green newbuilding programme. All three ultra green hybrid ro-ro vessels are now undergoing different construction stages and the investment programme continues as planned, on schedule and as budgeted. The vessels will be built with the latest technology available to ensure the lowest carbon dioxide and other emissions. In addition to lithium-ion battery systems that will allow zero-emissions at port, the vessels will also be fitted with emission abatement systems, solar panels, and an air lubrication system to help cut emissions further. Deliveries of all three recently named vessels in the series, Finneco I, Finneco II and Finneco III, are expected between November 2021 and April 2022.

In addition to these three ro-ro vessels, we have also ordered two eco-efficient Superstar ro-pax vessels, which are scheduled to start operating in 2023. Superstar ro-pax vessels will bring new innovative solutions to our services and the environmental perspective is taken into account everywhere. Onshore power supply will provide an alternative source of energy enabling emission-free operations in port. Light management and ventilation will be designed to enhance energy efficiency even in changing conditions. Moreover, two-speed reduction gears will improve propulsion efficiency. To meet customers’ demands, Finnlines will deploy a new vessel type especially designed for its Sweden–Finland traffic. The new ships will have a full intake up to 5,100 lane metres and 1,100 passengers. In other words, the vessels have the capacity to carry approximately 200 cars and 290 trailers or 250 trucks per voyage. These most environmentally friendly vessels in the world show our superior role as forerunners in sustainable shipping.

With our environmental strategy, we are able to meet the needs of our customers and society even better, and at the same time, we can guarantee safe and high-quality sea transport services. Today’s and tomorrow’s society, customers and stakeholders expect more, and, therefore, responsible actions and sustainable investments are becoming more and more important each year when choosing a commercial partner. At Finnlines, we consider it important to continuously develop the quality and efficiency of our operations and improve the vessels both from a technological  and environmental point of view. We have been committed in the past and we will be committed in the future to carry out long-term efforts for the environment because sustainability is the cornerstone of our strategy and thus embedded in our everyday actions. We are committed to the IMO  target to reduce carbon dioxide emissions by 50% by 2050 and in the last ten years, we have already been able to reduce vessels’ carbon dioxide emissions more than 30%.

As is the case in other shipping companies, Finnlines’ and profitability have also declined due to the economic slowdown and uncertain market conditions during the corona pandemic. Yet, we did not lay down any vessels but were operating normally throughout the whole year, thus safeguarding the biggest share of Finland’s security of supply of medicines, goods, machinery, components and other vital products.

It would be important that the Finnish Government recognises the role of Finnlines as a first rank maritime carrier of Finland with a key role in security of supply, also when it comes to public aid distributed to maritime companies. Indeed, it is understandable that public aid to maritime actors are needed in a challenging situation when authorities have imposed restrictions which complicate normal operations and market-based operations are at risk. But, if state aid is distributed, it should be distributed in the proportion in which a company takes responsibility for Finland’s security of supply. Unfortunately this was not the case during the pandemic crisis and about EUR 70 million were exclusively distributed to companies competing with Finnlines, on same routes and on same types of service, but not to Finnlines. This of course is causing distortion of free competition to the detriment of penalized companies, of national economy and of consumers. In a moment where Finnlines is serving loyally the nation without subsidies, without service cuts and with important sustainable investments in green ships ongoing, operating and competing against subsidised  companies during the biggest pandemic experienced in the last century has become more tiresome and more difficult.

Alternative ways of support from the State to all shipping companies could be possible, more horizontal, more equal, less distortive, cleaner, more viable and more sustainable than the present one, such as public coverage of standard carriers’ costs, i.e. port costs, seamen costs, shore personnel costs or pension costs. This alternative fashion would be also in accordance with existing EU State Aid rules.

I would like to take this opportunity to thank our customers and our stakeholders for their confidence in Finnlines. Looking into 2021, regular high frequency traffic between Finland and the rest of Europe will continue to be the foundation of Finnlines’ operations as well as continued investments in sustainability. By constantly renewing and developing the fleet for our customers, using the latest technology and innovations, we can proudly say that we are Finland’s premier seafreight operator and also a large transporter of passengers. I would also like to extend my sincere gratitude to all our personnel onboard, in terminals and offices for their persistence in delivering good results in such an exceptional and very demanding year of 2020.

Emanuele Grimaldi