Satisfactory net profit for VR Group

VR Group’s operating result in the first quarter of 2010 was a loss of M€ 22.1, compared to a loss of M€ -25.2 in the previous year. The net result for the first quarter was a loss of M€ 16.7, compared to M€ -18.6 in 2009. “The result can be regarded as satisfactory, considering that it includes one-time costs arising from the exceptionally harsh winter,” says VR Group CEO Mikael Aro .

The unusually cold winter with its heavy snowfall and the rail accident at Helsinki Central Station on 4 January 2010 resulted in almost M€ 10 in extra costs for VR Group. The strike by stevedores, however, had a smaller impact on the net result than had been forecast. VR Group’s programme of change progressing on schedule “Through the measures taken in the programme of change we have already succeeded in having a positive impact on the Group’s cost structure.

The programme will continue until 2012, when I believe that the new VR will be even better placed to respond to changes in its business environment and to intensifying competition,” says Mikael Aro. The programme of change that began in August 2009 and aims to improve profitability has progressed as planned. The Logistics division has improved its customer service, and one example of this is the central customer service centre that has started up in Kouvola. In the support functions, progress is being made in consolidating the human resources, IT and financial administration organizations into Group-level service centres.

Purchasing has been consolidated into a corporate-level unit and an extensive programme has got underway to raise efficiency in maintenance. The impact of the programme of change can be seen in terms of costs as well as increasing sales. Exceptional winter affected passenger services The total number of passenger journeys for rail and road services in the first quarter was 23.5 million, growth of 6.1 %. Most of this increase comes from bus services in the Greater Helsinki area, where the Group has won several new service routes. The number of journeys in rail services in the first quarter totalled 17.2 million.

It is estimated that the number of journeys in passenger services for the whole year will remain unchanged from the level in 2009. In February VR Group took the decision to invest M€ 150 in passenger rolling stock. The aim is to improve the level of service in rail services by speeding up the purchasing of new rolling stock. VR is purchasing 40 double decker InterCity coaches, 15 restaurant cars and 12 power cars. The investments will take place between 2011 and 2014. The power cars combine the features of a locomotive and an InterCity passenger coach. Trains can be driven from either end without having to change the locomotive, which saves marshalling yard capacity, of which there is a shortage, especially in Helsinki. Releasing marshalling yard capacity has an impact on the entire rail service and on overall punctuality. It also improves safety in the marshalling yard, since there is less changing of locomotives and connecting of rolling stock. After the end of the review period, on 26 April 2010, the final unit in a commuter train arriving at Helsinki Central Station went off the rails in the station area.

No-one was injured in the accident, but the derailment caused extensive damage to the track and to electrical equipment. The accident meant that VR had to make special arrangements for commuter and long-distance services. Carryings by logistics business increased Freight carryings totalled 9.6 million tonnes in the first quarter, an increase of 4.6 % from the previous year. One positive aspect was that freight traffic between Finland and Russia increased 11.3 %.

The outlook for freight services remains uncertain, although it has become somewhat easier to forecast developments in operations. At present there are no signs of a rapid recovery, and VR is continuing the projects it has planned to raise efficiency in its operations and transport systems. The volume of carryings and net turnover for freight services in 2010 is expected to be higher than in 2009.

Prospects for rest of year uncertain for track maintenance and construction VR-Track had a net turnover of M€ 40.3 in the first quarter. The largest jobs in progress are the track renovation work on the Seinäjoki–Kokkola and Lahti– Luumäki track sections. Most of the track maintenance work is that ordered by the Finnish Transport Agency.

The order book for track construction and maintenance in 2010 is turning out to be smaller than expected, which has a major impact on VR-Track’s prospects for the rest of the year.