VR Group’s financial results reach an all-time high

• Net sales increased by 5.5 per cent to EUR 1,251 (1,187) million.
• Operating profit was EUR 110.3 (43.3) million, or 8.8 (3.3) per cent of net sales.
• The number of journeys in passenger service increased by 7.6 per cent, with a total of 126.9 million journeys made.
• VR Transpoint’s transport volumes increased by 5.8 per cent to 43.7 million tonnes.
• VR Track’s net sales increased by 2.6 per cent to EUR 302.1 million.
• VR-Group Ltd’s Board of Directors proposes a dividend of EUR 100 million to the state.

“We are delighted that net sales continued to grow throughout 2017 after several years of decline. Net sales in all business operations increased, with good financial performance in all businesses. The popularity of railways increased in both passenger and freight traffic. As a result, the entire VR Group’s financial result reached an all-time high,” says Rolf Jansson, VR Group’s President and CEO.

The growing popularity of rail travel improved the financial result of passenger service

The popularity of rail travel continued its strong growth in 2017. Compared to alternative modes of transport, the market share of train travel increased due to lowered prices, shortened travel times for popular routes and increased supply.

Net sales for VR’s passenger service increased by 9.2 per cent to EUR 548 (502) million. Respectively, operating profit was EUR 54.0 (16.6) million. Net sales for rail traffic increased by 8.5 per cent, whereas for bus service the increase was 13.7 per cent. The net sales of Avecra, which provides restaurant services on trains and at stations, increased by 6.0 per cent and amounted to EUR 37.2 million.

The number of journeys in passenger service increased by 7.6 per cent, with a total of 126.9 million journeys made. For rail travel, a total of 12.5 million journeys were made in domestic long-distance traffic, with travel increasing by 8 per cent. The main routes experienced the largest growth in the number of journeys: growth exceeded 14 per cent, with the growth on the route between Helsinki and Oulu being as much as 42 per cent. The number of journeys in VR’s commuter traffic also experienced strong growth of 10.6 per cent. In addition, the service volume related to the HSL commuter traffic increased, with the transport supply provided to the customer being 3.0 per cent more than in 2016. In bus service, a total of 41.2 million journeys were made and the number of journeys increased by 15.2 per cent year-over-year. The growth was accelerated by the city transport service bids won in 2016 and the replacement transport services provided in Espoo due to the delayed completion of the western extension of the Helsinki metro.

The increase in demand improved the capacity utilisation rate of trains. In 2017, the capacity utilisation rate of trains in domestic long-distance traffic was 41.6 (40.2) per cent, and the capacity utilisation rate in market-based traffic was 44.9 (41.7) per cent.

As demand has increased, VR has added more train car capacity. The amount of rolling stock in fast traffic (over 200 km/h) increased by approximately 8 per cent, as new and fast control cars were taken into use. In addition, the supply of long-distance traffic was increased by adding a total of 65 new weekly departures. Similarly, the supply of VR commuter traffic was increased by 219 new departures.
Increase in VR Transpoint’s transport volumes

The good general market situation and investments in the company’s ability to compete in pricing had a positive effect on VR Transpoint’s rail logistics volumes in Finland and in eastbound traffic. Furthermore, the general economic development has strengthened the market in domestic road transport despite the continuing tough price competition. The capacity in international road transport has been fully used at times, and this has helped achieving a healthier price level.

VR Transpoint’s net sales increased by 3.2 per cent and was EUR 393 (381) million. Rail Logistics’ net sales increased by 3.4 per cent, with the corresponding figure being 2.4 for road transport.

VR Transpoint’s operating profit was EUR 32.4 (34.5) million.

In 2017, VR Transpoint’s transport volumes increased by 5.8 per cent to 43.7 (41.3) million tonnes. VR Transpoint’s transports are mainly related to the transport of raw materials and products for the forest, metal, chemical and construction industries. The volumes of Rail Logistics’ transports increased especially in domestic and transit traffic. The import volumes of foreign trade decreased somewhat, but export volumes increased. The improved balance of return transports for international road logistics had a positive effect on VR Transpoint’s financial performance. Investments have been made in the transport reliability and timetable accuracy of domestic road transport, and we have received good feedback on this.

VR Transpoint’s operative efficiency improved again in 2017. There was further positive development in the average size of trains and the share of electrically driven traffic, which have an effect on cost and energy efficiency. The underlying driver for this is the long-term development of the transport system. Electrification and energy efficiency are growing trends in the transport sector, and they support railway transports compared to traffic after summer 2016.

Strong development in the planning and maintenance of VR Track

In VR Track’s main business of lifecycle services for rail infrastructure, railway line investments in Finland were at the same level as in previous years, whereas investments grew somewhat in Sweden. Investments in rail infrastructure are expected to grow in both main markets.

VR Track’s net sales grew by 2.6 per cent year-over-year, amounting to EUR 302.1 (294.3) million. Earnings before interest and taxes were EUR 16.8 (-14.1) million. The significant improvement in earnings before interest and taxes was due to the successful change programme implemented in order to reverse the poor financial performance in Sweden. Additionally, the maintenance business in Finland was able to significantly improve the quality and profitability of operations. Our consulting business continued to grow in Finland and Sweden.

During this accounting period, the most important events for VR Track’s construction business included the start of the Tampere tramway alliance work and the project for replacing the safety equipment on the section between Riihimäki and Tampere. The railway project related to the transport connections of the Äänekoski bioproduct mill was completed on schedule. In maintenance business, VR Track won the contract for the track maintenance area 4, the alliance for area 2 entered the implementation phase and the validity period of the agreement with the Finnish Transport Agency for the maintenance area 1 was extended to March 2020. At end of the year, VR Track won the bid for the maintenance of the electric supply stations for the tramways and metro in Helsinki. The alliance formed by VR Track and its partners was selected as the designer and constructor of the Raidejokeri project in the capital region.

Investments and purchases of rolling stock

The Group’s total investments in 2017 amounted to EUR 120.7 (123.1) million. Of the total investments, the share of leasing agreements amounted to EUR 2.1 (21.5) million. Investments in rolling stock amounted to EUR 77.5 (59.0) million. IT investments amounted to EUR 15.9 (19.0) million, whereas property investments amounted to EUR 17.3 (20.3) million.

For the rolling stock, the largest investments included the control cars for passenger service, the new double-decker cars ordered in August and the Sr3 electric locomotives, of which the first ten locomotives are already in use in commercial traffic. Other investment expenditures were primarily related to the replacement of fixed assets.

The Board of Directors proposes a dividend of EUR 100 million

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 100 million be paid by VR-Group Ltd. The distributable funds of the parent company were EUR 502.4 million, of which the profit for the accounting period was EUR 109.5 million.

VR-Group Ltd paid EUR 90 million in dividends in April 2017. In addition, in an extraordinary general meeting in December 2017, based on the Board of Directors’ proposal, VR-Group Ltd decided on distributing EUR 100 million as a return of capital to its owner, the state of Finland. Furthermore, the general meeting decided to transfer to the state the remaining balance sheet value of various railway line projects, a total of EUR 49.5 million, as a return of capital and with related rights.

Key figures

Report of the Board of Directors and Financial Statements 2017 (only in Finnish)

Review by the President and CEO (only in Finnish)