Agile cost control and financial strength enabled us to retain our profitability
The Finnish foreign trade is nearly completely dependent on sea connections as about 90% of Finland’s exports and 80% of its imports is shipped by sea. Finnlines has a vital role in transporting critical goods, such as medicines, foodstuffs and other consumer goods, which are essential for people and industry. Our services specialise in freight and play a key role in the smooth flow of supplies.
The Covid-19 pandemic continued to impact Finnlines, but after a drastic drop of revenues in the second quarter, cargo volumes started to pick up. We shipped 723,000 (738,000 in 2019) cargo units and carried 154,000 (166,000) cars (not including passengers’ cars). The coronavirus outbreak affected our passenger traffic and reduced our passenger volumes on all routes. The number of passengers carried on the Germany–Sweden route decreased by -35%, on the Finland–Germany route by -53%, and on the Finland–Sweden route by -68%. In total, 501,000 passengers travelled with us in 2020.
For decades, we have ensured that there is enough sea freight capacity and that cargo transports are functioning to and from Finland. Despite ensuring Finland’s emergency security of supply, we have not received maritime financial support from the State. The terms of both NESA’s EUR 45 million aid and Traficom’s EUR 24.7 million aid were such that we are not allowed to receive any aid because our financial result has remained profitable. Finnlines’ turnover and profitability has also declined due to economic slowdown and uncertain market conditions during the corona pandemic, yet we are excluded from receiving any maritime aid.
The Finnlines Group recorded revenue totalling EUR 484.0 (574.8) million in 2020, a decrease of 16% compared to the previous year. Shipping and Sea Transport Services generated revenue amounting to EUR 461.8 (550.9) million, of which passenger-related revenue was EUR 39.0 (59.9) million. The revenue of Port Operations was EUR 42.8 (45.4) million. The internal revenue between the segments was EUR 20.6 (21.5) million.
The result before interest, taxes, depreciation and amortisation, EBITDA, came to EUR 140.8 million against EUR 169.8 million after 2019. Net financial expenses decreased to EUR -5.6 (-7.5) million. Financial income was EUR 0.5 (0.3) million and financial expenses EUR -6.1 (-7.7) million. The Finnlines Group’s result for the reporting period decreased by EUR 28.6 million to EUR 69.7 million.
It is not surprising that the pandemic affected our 2020 bottom line, but still the results we posted in such a difficult year are proof that our strategy is paying off.
Finnlines turnover declined EUR 91 million due to the Covid-19 pandemic lowering our financial result.
The pandemic has increased uncertainty in global economy and still there are no major signs of recovery. The pandemic has affected our operations, but to mitigate the financial risk, we initiated a cost saving plan as early as April 2020. Despite the many challenges of 2020, we managed to maintain the profitability of our operations.
We remain focused on the fundamentals which are dedication to smart use of technology, digitalised and optimised processes across all of our operations, investments in energy efficiency to promote sustainability and effectively execute our strategy by our highly productive, skilled and committed employees. All the hard work we have done will increase the efficiency and effectiveness of our processes.
Over the years, we have made substantial investments in our existing fleet, both environmental and capacity-related. Even in the exceptional situation we are facing, our strategic focus has remained on improving our operational and financial position. With the organisational, operational, and financial optimisation we have ensured that Finnlines’ services have continued unaltered and we are fulfilling our important role in the logistics chain. The Finnlines Group’s return on capital employed (ROCE) was 7.0% (9.5%).
Investing for growth and sustainability
Environmental responsibility is part of Finnlines’ business strategy. Reducing fuel consumption and cutting harmful emissions have been key elements of our strategy for a long time. At Finnlines, we are continuously developing our operations and environmental aspects will continue to have a strong impact on all our actions. We will reduce our fleet’s carbon dioxide emissions by investing in energy efficiency and green technology and by reducing fuel consumption.
Our ongoing EUR 500 million newbuilding programme, which includes three ultra-green hybrid ro-ro vessels and two eco-efficient Superstar ro-pax vessels, will further increase our energy efficiency and cut emissions. In other words, we continue to deploy larger and larger vessels to benefit from economies of scale. The significant newbuilding investment will also give us the flexibility to remove some of the older vessels from the fleet in order to let new units enter, improving the green footprint of the Finnlines fleet.
The environmentally friendly vessels will be built with the latest technology and innovations available. In addition to lithium-ion battery systems and shore-side electricity connections, which enable zero-emission operations in port, they will be equipped with several advanced technologies to save energy and thus reduce emissions further.
The first ro-ro vessel is expected to start operation in 2021, and the other two in the first half of 2022. The Superstar ro-pax vessels are set to start operating in 2023.
Net cash generated from operating activities remained strong and was EUR 138.0 (173.6) million. The interestbearing debt decreased by EUR 40.5 million to EUR 331.7 (372.2) million, excluding leasing liabilities of EUR 17.7 (19.3) million. Net interest-bearing debt at the end of the period was EUR 329.8 (363.0) million. Net interest-bearing debt/EBITDA (rolling 12 months) ratio amounted to 2.3 (2.1) and the equity ratio calculated from the balance sheet was 60.7% (58.5%). Net gearing resulted in 45.5% (50.8%).
The Group has financial flexibility through its strong liquidity position which at the end of the period, with cash and cash equivalents together with unused committed credit facilities, amounted to EUR 226.8 (164.2) million. The Finnlines Group has a strong balance sheet, cost-efficient
operations and unused credit facilities, which all provide financial flexibility. Considering Finnlines’ investments in its energy-efficient fleet, we can expect the Company to maintain its strength during this extraordinary period.
Finnlines is fully owned by the Grimaldi Group, which is a multinational integrated logistics company specialising in the maritime transport of vehicles, rolling cargo, containers and passengers. The shareholder structure reinforces our strategy and enables 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, we have the required financial flexibility to invest close to EUR 0.5 billion in the ultra-green vessels. In addition, our network has expanded and via the larger Grimaldi Group network the world is accessible to our customers.
Finnlines has been, and continues to be, committed to secure vital sea transports on market terms. We are proud that Finnlines’ services in the Baltic and North Sea areas provide a backbone in transporting all the necessary goods to Finnish society.