VR Group’s financial statements bulletin 1 January–31 December 2022

VR-Group Plc, Financial Statement Release, 7 March 2023 at 9:00

VR Group’s financial statements bulletin 1 January–31 December 2022  

High energy prices and the discontinuation of Eastern traffic weighed down the result; the new strategy aims for profit improvement

VR Group’s net sales, long-distance traffic journeys and logistics volumes in the fourth quarter were on a par with the preceding quarter. Full-year net sales increased by 32.1% and comparable operating profit (EBIT) was EUR 6.0 million, or 0.5% of net sales. VR Group’s new strategy aims for profit improvement measures of EUR 250 million by the end of 2027 to ensure our competitiveness and to finance investments.

October–December 2022 in brief:

• The Group’s net sales increased by 43.1% to EUR 327.6 (229.0) million.
• The Group´s comparable net sales excluding the impact of the acquisition from Sweden increased by 11.5% and were EUR 255.2 (229.0) million.
• Comparable operating result (EBIT) was EUR 0.1 (-1.7) million, or 0.0% (-0.8%) of net sales.
• Operating result (EBIT) was EUR -19.9 (-12.3) million, or -6.1% (-5.4%) of net sales.
• Cash flow from operating activities was EUR 76.2 (58.7) million.
• The number of journeys on long-distance trains increased by 28.2% in October–December, to 3.8 (2.9) million journeys.
• The railway transport volumes of VR Transpoint decreased by -23.1% and were 7.4 (9.6) million tonnes.
• In October, the Group decided to purchase 20 electric multiple unit trains from Stadler Bussnang AG for EUR 250 million.
• The business structure in line with the new strategy entered into effect at the beginning of 2023.

January–December 2022 in brief:

• The Group’s net sales increased by 32.1% to EUR 1,107.0 (838.3) million.
• The Group´s comparable net sales excluding the impact of the acquisition from Sweden increased by 14.0% and were EUR 956.0 (838.3) million.
• Comparable operating result (EBIT) was EUR 6.0 (-14.1) million, or 0.5% (-1.7%) of net sales.
• Operating result (EBIT) was EUR -58.4 (-22.7) million, or -5.3% (-2.7%) of net sales.
• Cash flow from operating activities was EUR 179.9 (138.1) million.
• The number of journeys on long-distance trains increased by 55.7% compared to the previous year and came to 13.2 (8.5) million journeys.
• The railway transport volumes of VR Transpoint decreased by -20.5% and were 29.7 (37.4) million tonnes.
• VR Group acquired the Swedish bus and rail operator Arriva Sverige. The transaction was completed on 1 July 2022 and the company’s name was changed to VR Sverige AB.
• Due to Russia’s war of aggression, the Group discontinued its Eastern business operations in 2022.

Key figures	10-12/2022	10-12/2021	1–12/2022	1–12/2021
Net sales, M€	327.6	229.0	1 107.0	838.3
Comparable operating result, M€	0.1	-1.7	6.0	-14.1
% of net sales	0.0	-0.8	0.5	-1.7
Operating result (EBIT), M€	-19.9	-12.3	-58.4	-22.7
% of net sales	-6.1	-5.4	-5.3	-2.7
Net result for the period, M€	-23.8	-7.2	-47.4	-13.7
Operating cash flow, M€	76.2	58.7	179.9	138.1
Investments, M€	95.7	49.5	219.8	168.8
Capital employed at the end of   the accounting period, M€	1 862.5	1 583.1	1 862.5	1 583.1
Comparable return on capital employed, %	-0.2	0.1	2.0	0.0
Return on capital employed (ROCE), %	-1.3	-0.5	-1.6	-0.5
Net interest-bearing debt at the end of the accounting period, M€	341.9	238.1	341.9	238.1
Gearing ratio, %	27.4	18.6	27.4	18.6
Average number of personnel	7,994	5,593	6,846	5,620
The financial statement figures presented in this release are based on the company's audited financial statements. The auditor's report was issued on 6.3.2023.

CEO Elisa Markula: 

“VR Group’s net sales increased by 43% in the fourth quarter. The growth in net sales was supported particularly by the increase in the number of journeys in long-distance traffic, pricing changes due to high energy prices, and VR's expansion to Sweden through acquisition. The shutdown of Eastern traffic had a negative effect on net sales. Comparable operating result (EBIT) was weak and close to zero, due to high energy prices, general inflation, and the discontinuation of Eastern traffic.

Long-distance traffic and commuter traffic developed favourably in relation to pre-pandemic levels. In long-distance traffic, the number of journeys increased and was 2% below the pre-pandemic level. Long-distance traffic has been heavily reliant on weekend and leisure travel. In VR’s commuter traffic, the number of journeys developed favourably compared to the early part of the year and was only 2% lower than before the pandemic. As in the case of long-distance traffic, leisure travel also represented a larger proportion of commuter traffic than before. 
 
Freight traffic volumes were approximately 20 per cent lower than in the previous year due to the planned discontinuation of Eastern traffic. VR’s Eastern freight traffic was shut down entirely by the end of the year. In domestic freight traffic, the demand for transport services has grown, which compensates for part of the lost volume of Eastern traffic. Growth has been accelerated particularly by the increased roundwood transport volumes in Finland, which grew by 8.7% compared to the third quarter.  

In long-distance traffic, the Net Promoter Score during travel remained at a good level (NPS 39), also in the fourth quarter. In spite of the early start to the winter, punctuality in long-distance traffic in the fourth quarter was on a par with the preceding quarter, with track-related causes representing 41% of all delays. 

During the period under review, we continued to make rolling stock investments due to the ageing of our fleet. In October, we made the decision to purchase 20 new commuter train units from Stadler for approximately EUR 250 million.

Challenges in the operating environment had a negative impact on VR’s business for the third consecutive year – this time in the form of high energy prices, rising inflation, the effects of the pandemic in the early part of the year, and the Russia’s invasion of Ukraine. Passenger traffic on Allegro trains between Helsinki and St. Petersburg was suspended, and VR Group shut down its Eastern freight traffic operations in their entirety. In freight traffic, the decrease in transport volumes was partially compensated for by higher domestic transport volumes. In addition, the higher oil and electricity prices driven by accelerating inflation led to increased production costs, which had a negative effect on the company’s profitability. 

In line with our revised strategy, we seek a profit improvement that will enable the financing of our billion-euro rolling stock investments and ensure our continued competitiveness in the future. By the end of 2027, we aim to carry out profit improvement measures amounting to EUR 250 million to cover the additional costs arising from inflation, and to improve the company’s profitability while continuing our investments in the continuous improvement of the customer experience. The measures will include additional sales, the development of commercial models and the improvement of cost-efficiency by, for example, streamlining operating models and enhancing procurement.

I want to take this opportunity to thank our personnel for their strong commitment to achieving our shared goals and continuously improving the customer experience in the challenging conditions that characterised the past year.”

Outlook for the new year

VR Group expects that the comparable operating result (EBIT) for 2023 will improve compared to 2022.

The general economic situation in Finland is marred by high inflation, risen energy prices, higher interest rates and low consumer confidence in the economy. The underlying factors are Russia’s invasion of Ukraine and geopolitical uncertainty. The economic situation is significantly reflected in VR Group’s business operations, profitability, and near-term outlook. In particular, the high price of electricity has a negative impact on VR Group’s profitability. 

VR Group discontinued Eastern freight traffic completely in 2022 due to Russia’s war of aggression, which will reduce total rail logistics volumes this year. VR Group expects volumes to grow in domestic transport, particularly in the case of roundwood transport. This will also be affected by new investments in the forest industry, such as the Kemi bioproduct mill that is set to be commissioned. The general economic development is reflected in Finnish industry and, consequently, transport needs and volumes. 

Train travel has recovered as the COVID-19 pandemic has abated. Nevertheless, the pandemic has changed the way people work and, as a result, their mobility patterns. Remote work has become increasingly common, and travel demand has been driven by leisure travel. The total number of long-distance journeys is expected to increase from the previous year. These increases will mainly take place in the early part of the year, as the pandemic reduced travel volumes particularly in early 2022. The temporary VAT deduction for public transport for the first four months of the year has been fully passed on to ticket prices by VR Group. In city traffic in Sweden, net sales and profitability will decline compared to 2022 due to some of the existing agreements expiring and the next new agreement not starting until late 2023. 

The Finnish parliamentary elections and the next government programme will also influence the operating conditions for rail transport. Investments in the condition and capacity of the state’s railway network are a prerequisite for the growth of environmentally friendly rail traffic. For regional contract traffic in which publicly subsidised traffic is put up for tender, VR Group has proposed a public rolling stock company. In long-distance services and freight traffic, the benefits to customers and society can be maximised by the Open Access model of competition that is already in use in Finland, which involves operators competing on market terms using their own rolling stock and on the routes they choose.

This release is a summary of VR-Group Plc's Financial Statements Release 1 January–31 December 2022. The complete Financial Statements Release is available as an attachment to this release.

VR-Group Plc 
Board of Directors

More information:
VR Group Media Desk, tel. +358 (0)29 434 7123