Financial results improved despite economic challenges
VR Group's performance improved substantially from 2012
Comparable operating profit for 2013 increased significantly from the previous year. The improvements were a result of stronger turnover and higher cost-effectiveness.
In passenger services, the growth on the longer routes of long-distance services and in Allegro services to Russia are particularly positive details. Successful special offer campaigns helped to boost growth in long-distance services.
The demand for logistics services is highly dependent on domestic industrial production, which is why the domestic transport volumes were smaller than in 2012. Demand can be expected to pick up only in 2014. In international traffic, the tonnage conveyed increased substantially from the reference period and growth is expected to continue.
A strong order book helped infrastructure engineering to significantly boost its turnover. Cumulative operating profit turned positive in August, i.e. much earlier than in 2012.
The Group’s financial position remained in good shape thanks to the strong cash funds.
Competitive tendering for a large purchase of electric locomotives was completed in December. The tendering process involved 80 locomotives and the purchase includes an option for 97 additional locomotives. The first electric locomotives will begin operational services in 2017, and the entire fleet will be delivered to Finland by 2026. These locomotives will gradually replace the Soviet-made first electric locomotives acquired in the 1970s.
Responsible business also includes responsible financial management and operations
Responsibility is a VR Group value that provides a sound basis for financial management. Goal orientation is behind the Group’s efforts to operate competitively and profitably in order to finance the capital expenditure that serves customers.
The strategy for financial management at VR Group is to operate at a high standard and to work with the business divisions towards creating profitable growth. A strong balance sheet and cash flow financing obtained through growth create a firm foundation for extensive investments.
The goals, operating principles and risk management for financial management and security are defined in the financial management guidelines. Financial assets are managed in a productive and liquid manner with a low amount of risk.
Exceptionally large capital expenditure ahead
VR Group’s strategic goal is profitable growth. Growth and controlling costs and working capital will play a key role in the next few years in financing the largest single rolling stock purchases in the history of the VR Group.
Much of the VR Group’s rolling stock, including locomotives, is extremely old and has reached the end of its roughly 40-year working life. The need for capital expenditure has increased over the years and the rolling stock purchases worth several hundred million euros are essential if the Group is to continue transport services for both passenger and logistics services. For passengers, these purchases will mean improved punctuality and greater travel comfort. The new rolling stock will also support the goals of environmental friendliness thanks to their higher energy efficiency.
The locomotive purchase of December 2013 is part of the VR Group's major investments in rolling stock. VR Group is in the process of purchasing double-deck passenger cars suitable for fast services. In the near future, the VR Group will also prepare for the acquisition of new diesel locomotives.
To finance these investments, the VR Group must achieve better profitability and a higher cash flow from its operations. Fixed costs account for a large proportion of the VR Group’s cost structure, which means that adjusting costs quickly is difficult. The retirement of a large number of staff members in the next few years and a more efficient organisation of work will allow the VR Group to reduce its costs. Loan financing will probably be required for the capital expenditure programme. Planning the use of long- and short-term financial instruments and a review of the equity structure will play an important role in the coming years.
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|Track usage fee*, M€
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*) Includes infrastructure tax and investment charge