VR Group Business Review 1 July to 30 September 2024: Revenue increased and profitability improved

 VR Group Business Review 1 July to 30 September 2024: Revenue increased and profitability improved

VR-Group Plc, Interim Report, 30 October 2024 at 5.00 pm EET

VR's profitability clearly improved in the third quarter. Net sales growth was boosted by increased freight traffic volumes and the long-distance acquisition in Sweden. The implementation of the strategy and profit improvement programme proceeded as planned.

July-September (Q3) 2024 in brief:

• Group net sales increased by 12.1% to EUR 331.0 (295.3) million. Net sales excluding the impact of the acquisition in Sweden in May  increased by 8.4% to EUR 320.2 million.
• Comparable operating result (EBIT) was EUR 41.0 (27.8) million or 12.4% (9.4%) of net sales.
• Operating result (EBIT) was EUR 43.8 (52.6) million, or 13.2% (17.8%) of net sales.
• Cash flow from operating activities was EUR 51.3 (53.2) million.
• The number of journeys on long-distance trains in Finland decreased by -2.7% in July-September, to 3.9 (4.0) million journeys.
• Railway transport volumes in freight traffic increased by 20.5% to 6.4 (5.3) million tonnes.

January-September 2024 in brief:

• Group net sales increased by 5.3% to EUR 959.1 (910.9) million. Net sales excluding the impact of the acquisition in Sweden in May increased by 3.6% to EUR 944.1 million.
• Comparable operating result (EBIT) was EUR 58.5 (43.2) million or 6.1 % (4.7%) of net sales.
• Operating result (EBIT) was EUR 54.5 (59.6) million or 5.7 % (6.5 %) of net sales.
• Cash flow from operating activities was EUR 153.7 (143.9) million.
• Political strikes had a negative impact of close to EUR 20 million on the operating result.
• The number of journeys on long-distance trains in Finland increased by 0.9% to 11.3 (11.2) million journeys.
• The railway transport volumes of VR Transpoint decreased by -0.6% to 17.1 (17.2) million tonnes.
• VR Group acquired Swedish rail operator MTR Express (Sweden) AB. The transaction was completed on 30 May 2024 and the company now operates as VR Snabbtåg Sverige AB.

Key figures	7-9/2024	7-9/2023	1-9/2024	1-9/2023	1-12/2023
Net sales, M€	331.0	295.3	959.1	910.9	1,224.1
Comparable EBITDA, MEUR*	87.5	73.7	198.9	187.0	251.0
% of net sales	26.4	25.0	20.7	20.5	20.5
Operating result (EBIT), MEUR	43.8	52.6	54.5	59.6	81.5
% of net sales	13.2	17.8	5.7	6.5	6.7
Comparable operating result (EBIT), MEUR*	41.0	27.8	58.5	43.2	59.9
% of net sales	12.4	9.4	6.1	4.7	4.9
Net profit/loss for the period, MEUR	28.9	36.7	34.9	37.5	52.4
Cash flow from operating activities, MEUR	51.3	53.2	153.7	143.9	203.8
Investments, MEUR	54.2	41.9	174.3	121.1	186.9
Capital invested at the end of the period, MEUR	1,795.6	1,812.4	1,795.6	1,812.4	1,823.6
Comparable return on capital employed, %	9.5	6.5	4.8	3.7	4.0
Comparable return on equity, %	3.8	3.8	1.5	1.5	2.5
Net interest-bearing debt at the end of the period, MEUR	447.7	315.5	447.7	315.5	330.8
Gearing, %	36.1	25.1	36.1	25.1	26.1
Employees on average, FTE	7,741	7,640	8,046	7,768	7,747
* VR Group presents comparable EBITDA and operating result (EBIT) as an alternative performance indicators. The aim of comparable performance indicator is to improve comparability between reporting periods.
The calculation formulas for the figures are disclosed in VR Group’s Annual Report for 2023.
The figures are unaudited.
The comparative figures in brackets refer to the corresponding time period in the previous year, unless otherwise stated.

CEO Elisa Markula:

“VR net sales grew by 12% in the third quarter compared to the previous year. This growth was driven by increased freight traffic volumes, due to the recovery in industrial demand. New city traffic contracts and the acquisition of long-distance traffic operator in Sweden impacted positively to our net sales too. Comparable EBIT clearly improved to EUR 41.0 (27.8) million. Profitability was also improved due to the growth in net sales and implementation of the profit improvement programme, according to our strategy.

In the third quarter, the number of long-distance train trips in Finland decreased by 3%. This decline was mainly due to extensive track work on the main railway lines and coastal railways. However, net sales increased due to the acquisition in Sweden as well as growth in ancillary services sales. Customer experience is at the core of everything we do. Factors that have received special praise from our customers include ease of buying tickets through digital channels, our new 5x faster on-board Wi-Fi, and positive interactions with train conductors. Our customer satisfaction, measured by the Net Promoter Score (NPS), was at a solid 48 in Q3. The number of journeys on the Stockholm-Gothenburg route – operated by VR Snabbtåg, the new long-distance acquisition – was at a very good level. VR's green brand identity is now visible in Sweden on trains, through ticket sales channels, and in marketing activities.

Net sales in city traffic were boosted by new contracts started in both Finland and Sweden. In 2024-2025, a record number of regional tenders are underway in the Swedish contracted rail and bus traffic, with VR participating too. Competition for regional traffic contracts is tight. As a result, there are changes in our contract base due to won or lost contracts. We won the Swedish rail traffic contracts for Norrtåg in July and Öresundståg in October, and we will start operating in both areas in December 2025.

Growth in net sales of logistics was boosted in the third quarter by forest industry demand picking up. Profitability was improved by increased operational efficiency, pricing changes, and an energy savings programme that has successfully reduced energy consumption in rail transport. At the end of Q3, the outlook weakened for industrial demand for logistics.

We continued to implement our strategy with a determined focus on profitability, growth and creating a value-based VR culture. To finance upcoming investments of EUR 1 billion and improve our competitiveness, we aim for EUR 250 million in profit improvement measures by the end of 2027. We invest heavily in improving the customer experience, while also developing operational efficiency and critically reviewing our fixed costs.

VR supports the implementation of the motions concerning rail transport in the Finnish Government Programme. Free-market-based competition in passenger transport is complemented by publicly subsidised and competitive regional purchasing traffic, which many regions want to develop over the next few years. A political guideline has now been drawn up on the establishment of an outsourced rolling stock company. According to this guideline, the starting point for the outsourced company is to be the current purchased traffic entity. Rolling stock related to market-based routes will not be transferred to the rolling stock company, and these routes will not be put out to tender as purchased traffic. Freight rolling stock will not be transferred to the rolling stock company either. The establishment of an outsourced rolling stock company supports the creation of competition in both purchased and market-based traffic by lowering the threshold for entering the market. VR is cooperating with the authorities to promote the rolling stock company project.

Our journey towards being a modern and increasingly profitable travel and logistics service company continues. I would like to warmly thank all our employees for their commitment to our strategy, and for the important and valuable work we do together for our customers every day."

Outlook for the full-year 2024

VR expects the comparable operating result for 2024 to improve compared to 2023.

The number of long-distance train trips is estimated to increase from the previous year. The volumes of freight rail transport are expected to remain at the previous year's level. In city traffic, the negative impact on profitability of long-term contracts signed before the pandemic is expected to continue. Efficiency measures and renewal of contract base are aimed at improving profitability, but the profitability challenges of city traffic are expected to continue.

This stock exchange release is a summary of VR Group’s Business Review July-September 2024. The complete report is attached to this release.

VR-Group Plc
  
More information: 
VR Group Media Desk
viestinta(a)vr.fi
tel. +358 (0)29 434 7123