CEO Review

Financial Statements Release 1 January to 31 December 2023

CEO Elisa Markula: 

“VR’s comparable operating result improved significantly in 2023 and amounted to EUR 59.9 million. Our profitability was improved by the growth in the number of long-distance journeys and the determined execution of our turnaround improvement programme, as well as the decrease in energy costs. At the same time, the profit development was slowed down by weak volumes of freight traffic and changes in city traffic contract portfolio. Comparable net sales remained at the previous year’s level.

In early 2023, we updated our strategy to strengthen our competitiveness. In line with our strategy, we are seeking growth in other market areas as well. After a few loss-making years, we are now focusing on profitability, growth and the development of a work culture based on our values. The direction is right, but the journey to improve our competitiveness continues.

The popularity of trains as a means of transport continued to grow, and in 2023, a record number of more than 15 million train journeys were made in long-distance traffic in Finland. The increase in the number of journeys was influenced by the reform of dynamic pricing and, in particular, the addition of lower price points. We have also succeeded well in enhancing the customer experience, with the Net Promoter Score (NPS) being 49 (38). The NPS was particularly impacted by the ease of buying a ticket, as well as improved travel comfort and information provided during the trip. We also developed our offering of additional services. These were well received by our customers, accelerating the improvement of profitability.

In city traffic, profitability remained weak due to the current low profitability of the long-term contract-traffic agreements signed before the pandemic, an expired contract-traffic agreement in Sweden, and integration expenses associated with business operations in Sweden. In city traffic, we seek growth through the continued electrification of our bus services. We have won new contracts in regional rail and bus tenders in Finland and Sweden.

In freight traffic, the challenging environment for heavy industry further reduced freight volumes that have already weakened as a result of the termination of Eastern traffic. In 2023, the total volume of domestic freight traffic decreased by -2% from the previous year. However, as industrial volumes decreased, we were able to respond to the challenges of the operating environment by developing new custom service and pricing models for our customers. It was necessary to adjust railway freight operations and have temporary layoffs throughout the autumn.

In accordance with the updated strategy, we are seeking EUR 250 million of profit improvement measures by 2027 that will enable the financing of our billion-euro rolling-stock investments and ensure the company’s continued competitiveness in the future. The goal is to identify profit improvement measures through additional sales, develop commercial models and achieve cost-effectiveness to cover the additional costs arising from inflation. Together these measures are aimed at improving the company’s profitability. Meanwhile, we will continue our investments in the continuous improvement of the customer experience. We will also improve profitability by further developing our operational efficiency and conducting critical assessments of our fixed costs.

We continue to be actively involved in reforming our industry and contributing to the implementation of the Government Programme items relating to rail transport. We will focus on our core business as a service company in passenger traffic and logistics. In order to create a neutral competitive environment, we will divest station properties and other rail infrastructure still under VR ownership. In 2023, we created the prerequisites for market-based traffic competition by selling 11 Sm2 commuter trains to Suomen Lähijunat Oy and announcing that we will put approximately 10 railworthy diesel locomotives, 29 IC single deck cars and 22 “blue cars” up for sale. VR promotes the establishment of a rolling stock company for contract traffic, which would create a framework for completely new tendered commuter traffic. Our goal is to promote the growth of regional contract traffic subject to competitive tendering, and simultaneously to create the conditions for the growth of market-based traffic under the Open Access principle. Adequate and appropriately targeted infrastructure investments are the most important prerequisites for the growth of rail traffic, increased competition and the achievement of emission-reduction targets for the transport sector.

Sustainability is at the core of all of our operations. In terms of occupational safety, the year 2023 was the best on record. The overall number of accidents decreased, and the number of safety observations made by the personnel increased. We raised the level of our sustainability efforts and committed to the Science Based Targets initiative in December 2023. Together with our train drivers, we have also implemented an energy saving programme based on how drivers operate the trains. The programme improved the energy efficiency of train traffic by approximately 8% in 2023.

I want to thank our personnel for their commitment to our strategy and profit improvement targets. Together, we will build the sustainable VR of the future. Our values – we care, we work together, we drive improvement – guide us in moving together towards a better world.”