VR Group's net profit remained satisfactory

VR Group’s operating profit increased in the second quarter. VR Group’s operating profit amounted to M€ 13.0 (8.2) in the second quarter and M€ -9.2 (-14.8) in the first half of the year. VR Group’s net result for the second quarter was M€ 11.1 (5.7) and from the beginning of the year M€ -5.8 (-11.3).

Major factors in the growth in operating profit were the increase in net turnover and the lighter cost structure. The recovery in exports and consumption affected freight carryings in particular. VR Group’s CEO Mikael Aro considers the positive net result in the second quarter and the overall net result for the first half of the year as satisfactory.

“The programme of change we began in autumn 2009 is progressing as planned, and is already having a visible impact on the cost structure. Although the net result has improved significantly from the previous year, profitability has still not reached a satisfactory level. To improve profitability it is essential to continue the programme of change. During the quarter VR also negotiated with personnel organisations in a spirit of positive cooperation and signed new, long-term collective bargaining agreements that support the programme of change,” states Mr Aro.

The cumulative net result for the first six months of the year was weakened by additional costs totalling some M€ 11 arising from the severe winter and the accident in the marshalling yard on 4 January 2010. During the second quarter rail services were disrupted by the record amount of frost damage, which was caused by the long, cold winter and mainly affected track sections in the north of the country.

Rail services were also considerably disrupted by the derailment of a commuter train in the Helsinki marshalling yard and deliberate vandalism to electrical equipment on the rail network in Rekola. Mr Aro says that he is extremely concerned about the increase in vandalism to railway lines. Passenger services – bus services are growing The combined total number of passenger journeys for rail and road services increased 5.5 % in the quarter from the previous year.

Some 21 million journeys were made in VR Group’s rail and road services in the second quarter, with 16 million of these being rail journeys. Most of the increase in passenger volumes comes from bus services, where VR has won new service routes in the Greater Helsinki area that were put out to competitive tendering. During the quarter VR signed an agreement with Transtech Oy for 40 double decker InterCity passenger coaches, which will be delivered in 2011–2012.

This purchase is linked to the decision taken in February to make investments of M€ 150 to replace railway passenger rolling stock. Growth in logistics continued in second quarter – programme of change has visible impact Freight carryings by the Group’s Logistics division increased significantly in the second quarter, and growth is expected to continue at its current rate. Carryings in the quarter were 23.4 % more than in the previous year, and for the first six months totalled 21.0 million tonnes.

Factors in the positive developments in Logistics’ net result were not only the growth in carryings but also the lighter cost structure achieved in accordance with the goals of the programme of change. During the quarter the major decision was taken to renovate 200 goods wagons, and this will take place in 2010. Uncertain outlook for track construction and maintenance VR Track’s net turnover declined somewhat from last year, totalling M€ 67.4 compared to M€ 81.9 in 2009.

The largest jobs in progress are the track renovation work on the Seinäjoki–Kokkola and Lahti–Luumäki track sections and the renovation of the Ilmala marshalling yard. The agreement with the Finnish Transport Agency signed in the second quarter to finance track maintenance work for some M€ 40 improves VR Track’s employment situation in the final part of the year.