VR Group improves its net result as it prepares for billions worth of investments

Key figures from the first quarter (Q1/2012)

• Earnings before interest and taxes (EBIT) in the initial quarter were EUR -3.0 (-18.9) million
• The group's turnover in the first quarter was EUR 310.4 million. Comparable turnover grew by 4.6 per cent
• VR Group is currently preparing for the largest investments in rolling stock in its history.
• VR Group is aiming at savings worth EUR 40 million in personnel costs through more efficient organisation of work

Despite its unprofitability, the net result of VR Group in the initial quarter showed an improvement compared to last year. The main reason for the losses is the result of infrastructure construction, which was caused by regular seasonal variation in the sector.

In addition to customer satisfaction and the punctuality of trains, also the financial situation of the company has taken a turn for the better.

"We are moving in the right direction, but the result is not sufficient. VR is facing the greatest investments in rolling stock in its history, necessitating significant improvements in net result and profitability," states Mikael Aro, CEO of VR Group.

VR Group is currently preparing measures for improving profitability. In addition to growth, the group will also pay close attention costs. Personnel costs constitute approximately half of the total costs of the company.

"Through more efficient organisation of work and by generating savings based on the large number of staff to retire in the next few years, we will be able to reduce our personnel costs by EUR 40 million per year, which will amount to 8 per cent by 2016. In the next new years, a total of 1,700 employees are expected to retire from the group, and approximately 700 new employees will be hired to replace them," Aro states.

The result for the whole year is expected to improve from 2012

A slight improvement in comparable turnover is expected for the whole of 2013 compared to the previous year. Cutting costs and increasing the efficiency of operations are expected to improve the operating profit.

In 2013, the company will initiate exceptionally large investments in locomotives, meaning that profitability and cash flow must be improved. The combined cost of these and other investments is expected to reach approximately EUR 2 billion in the next decade. This is evident both in increasingly rigid cash flow objectives of the company and in the structure of the balance sheet, as liabilities increase and liquidity is decreased.

Railways gain passengers from air traffic

Turnover for passenger traffic totalled EUR 133.9 (126.6) million. The increase in turnover was 5.7 per cent, and the number of journeys grew by 6.3 per cent. The growth focused particularly on long journeys in long-distance traffic and Allegro traffic in Russia. The result reflects a shift of air traffic passengers to rail traffic.

Over 310,000 Finns have joined the Veturi customer loyalty programme. In a survey conducted by TNS Gallup, Veturi was rated among the top customer loyalty programmes as concerns the attractiveness of the benefits offered. Veturi was also rated highly in a 2013 loyalty programme survey implemented by Loyalty House.

In early 2013, the proportion of long-distance trains that reached their destination as scheduled was 85.0 (81.4) per cent. For commuter trains, the figure was 95.5 (91.5) per cent.

Turnover in the logistics sector was EUR 107.5 (138.9) million. The drop in turnover is largely explained through business units sold in 2012. Comparable turnover grew by EUR 6.3 million mainly due to transports to Russia and increased train size in railway logistics. Customer satisfaction in the area of logistics was improved significantly and was 4.1 on a scale of 1 to 5 (3.7).

In the business area of infrastructure construction, the year began with a high backlog of orders and in accordance with the objectives set, but contracts lost in the first quarter will have some impact on the turnover for the rest of the year and 2014. Turnover for the quarter was EUR 44.9 (40.4) million, exceeding the the figure for 2012 by 11.3 per cent.