Review by the President and CEO
VR Group’s Business Review January-March 2023 (28 April 2023):
CEO Elisa Markula:
"In the first quarter, VR’s net sales increased by 49.9% to EUR 302.9 (202.1) million, boosted by the increased number of journeys and the acquisition carried out in Sweden. Comparable operating profit (EBIT) was negative, amounting to EUR -0.2 million, or -0.1% of net sales. High energy prices and inflation increased production costs and weakened profitability, as did the industrial action at the end of the quarter.
In VR Long-distance Traffic, 3.4 million journeys were made in Finland, which translated to a +2% increase from the corresponding period in 2019. Demand was also boosted by the temporary VAT rate reduction for public transport, which VR passed on directly to the prices of train tickets. Leisure travel has increased and now accounts for more than half of all long-distance journeys, and commuting has also recovered to the pre-pandemic level. In long-distance traffic, the customer experience was at an all-time high during the first quarter. The Net Promoter Score (NPS) was as high as 53, compared to 33 in the corresponding period the previous year. Customers were particularly satisfied with punctuality, conductor services and digital services. Punctuality was 86% in the early part of the year, which is a good result in the winter months.
VR City Traffic comprises competitively tendered contract traffic in regional bus and rail transports in Finland and Sweden. As expected, the result for city traffic was negative due to the long-term contracts in Finland, which were concluded before the exceptional changes in the operating environment last year. The accelerated inflation caused by Russia’s war of aggression has a significant impact on the cost structure of city transport, and it will take a while for the index-based increases in contracts to affect the profitability of our operations. The industrial action that affected bus and rail traffic in March also had a negative impact on the profitability of city traffic. As expected, VR Sweden’s operating result was positive, despite the costs of integration related to the acquisition completed in July. In line with its growth strategy, VR actively participates in regional competitive tendering for contract traffic in Sweden.
In January–March, VR Transpoint transported 7.0 million tonnes of goods by rail and road. Transport volumes decreased by -22% compared to the same period last year, as VR’s Eastern freight traffic was completely discontinued by the end of 2022. However, higher domestic demand and price increases have partly compensated for the loss of Eastern traffic.
Our sustainability efforts were recognised in March when VR was selected as Finland’s most sustainable brand in the transport sector in the Sustainable Brand Index survey. Investments in the energy efficiency of train traffic, in accordance with VR’s energy saving programme, saved approximately 7% in energy costs during the quarter.
In line with its revised strategy, VR is seeking EUR 250 million profit improvement measures by 2027 that will enable the financing of its billion-euro rolling stock investments and ensure its continued competitiveness. The goal is to identify profit improvement measures through additional sales, the development of commercial models and cost-effectiveness to cover the additional costs arising from inflation and improve the company’s profitability. Meanwhile, we will continue our investments in the continuous improvement of customer experience. In the first quarter, VR announced the purchase of nine sleeping cars and eight car-carrier wagons from Škoda Transtech Oy for use on night trains starting in 2025.
VR expects the new government to take measures to reduce the railway network’s current maintenance backlog of more than one billion euros and to increase track capacity. As half of the delays are due to the poor condition of the rail infrastructure, properly targeted and adequate infrastructure investments are a prerequisite for increased rail traffic, improved passenger experience, industrial competitiveness, green transition and security of supply. VR is in favour of increasing competition in climate-friendly rail traffic, which would increase the market as a whole. In passenger train services, municipalities and joint municipal authorities should be allowed to organise regional contract traffic in accordance with the Swedish model. A public rolling stock company leasing equipment for publicly funded rail transport could strengthen competition and the supply of contract traffic. Competition in long-distance and freight transport must be further developed on market terms, to avoid using taxpayers’ money for rolling stock or transport."
