VR Group’s operating profit improves

• VR Group's operating profit from January to was EUR 1.2 million; an improvement on the previous year of EUR 2.2 million.
• The increased number of trips on passenger services have increased passenger train load factors, particularly on the main connecting services.
• VR Transpoint’s transport volumes increased by 7.5 per cent from the comparison period and totalled 20.4 million tonnes.
• VR Track’s order book for construction and design in Finland showed a healthy increase as the result of contracts won.

‘We are particularly pleased with the increase in passenger numbers and the volume of freight transported. The revised pricing for passenger traffic has worked and attracted more passengers onto trains. The trains are now running fuller than previously’, says President and CEO Mikael Aro.

The reduction in prices for passenger services that took effect in February has increased the popularity of train travel. The load factor in trains has improved. Because of the increased popularity of the ring rail line, people travelling to the airport have switched from buses to local trains and then they often continue onto the long-distance network. VR Transpoint has found new business activities with its customers and transport volumes have increased significantly. VR Track has been a ground-breaker in alliance projects and won several contracts in Finland and Sweden.

Group operating profit improved

VR Group’s turnover from January to June was EUR 562.7 million (593.1 million). Turnover fell by 5.1 percent from the previous year. Operating profit for the period was EUR 1.2 million; an improvement on the previous year of EUR 2.2 million. Profit for the period was EUR -2.6 (-0.9) million.

Number of journeys on VR’s passenger services increasing

Turnover for passenger services was EUR 243.0 (267.5) million and fell by 9.1 percent during the January to June period. The decline in turnover was mainly the result of the lower prices for domestic long-distance traffic. A revision of prices for passenger service’s long-distance traffic was implemented in February and as a result, passenger numbers started to increase. The basic price level was cut by 25 per cent.

The increased number of journeys have resulted in increased load factors on passenger trains, particularly on the main connecting services. The average load factor was 37.6 (33.6) per cent. For example, the load factor on the Turku Express service, that was launched in March, was over 80 per cent. The demand for restaurant services has also increased and since the summer, restaurant services have been provided on all long-distance trains. In June, speeds on the routes from Helsinki to Tampere, Seinäjoki, Oulu, and Vaasa among others, were increased.

A total of 56.4 (57.1) million trips were made by rail and road. The number of trips in the January to June period fell by 1.2 per cent compared with the same period last year.  The number of road transport trips fell by 13.1 percent and the number of trips by rail traffic increased by 4.4 per cent. The number of long-distance trips increased by 0.7 per cent and commuter trips by 5.0 per cent. The passenger traffic operating loss for the period was EUR 1.2 million, less than that in the comparison period (EUR -2.1 million).

VR Transpoint's freight volumes clearly improved

VR Transpoint’s turnover for the January to June period was EUR 190.4 (193.0) million; a reduction of 1.3 per cent from the comparison period. Operating profit improved and was EUR 14.2 (9.2) million. There was a significant increase in transport volumes (7.5 percent) over the comparison period which amounted to 20.4 (19.0) million tonnes.

Growth has been achieved in particular by actively developing more efficient business concepts with new and current customers. We have been successful in creating new transport flows, and this can be seen partly in how the January to June period has developed, but it is expected to support increases in volumes in the near future in particular. Systematic improvements in efficiency have continued and this positive development can be seen in the operational indicators. In spite of a challenging situation in the markets, development of profitability has been good.

VR Track's order book grew well

VR Track’s order book for construction and design in Finland showed a good increase as the result of contracts won. Among the most important were the basic refurbishing and superstructure contract between Oulu and Kontiomäki, and subcontracting for the Suonenoki railway yard. In Sweden, we won the design commission for electrification of the track in the port of Gävle as well as for the foundations and superstructure for an increase in axle load. In maintenance, we won the first alliance project for maintenance area 2.

The implementation phase of the Jyväskylä–Äänekoski alliance project was signed in April and the construction phase started at the beginning of May. The Kokkola-Riipa double track project that started in 2012 was completed on schedule at the end of June. The contract is a major part of the Finnish Transport Agency’s extensive Oulu - Seinäjoki basic refurbishing project.

In Sweden, the volume of business of the past four years has grown four-fold measured by turnover. There is a lot of investment in Sweden in the railway network, which provides VR Track with good opportunities for growth in accordance with its strategy. Because of the rapid growth, the company’s profitability is still facing challenges and the start of the year was loss-making.

VR Track’s turnover declined by 0.8 per cent from the comparison period and was EUR 124.5
(125.6) million. The order book remained strong. Operating profit from January to June was EUR -7.7 (2.5) million.

Outlook for the rest of the year

At the beginning of 2016, the VR Group started reporting its long term financial leasing liabilities as debts on the balance sheet. The passenger traffic carriages that are financed through leasing contracts were transferred to fixed assets on the balance sheet and their depreciation period was extended to 30 years to correspond to the actual economic life of carriages.

The Ministry of Transport and Communications cut the contract traffic and increased the public service obligation from the beginning of 2016. These changes reduced the VR Group’s profit for the start of the year by about EUR 6 million compared to 2015. The changes are expected to reduce the full year’s profit by about EUR 16 million.

Turnover and operating profit for the full year are expected to fall a little from last year’s figures. A loss-making maintenance project related to VR Track’s business means there is some uncertainly about the financial result and negotiations to amend the project are underway.