Finnlines, the shipping operator of ro-ro and passenger services in the Baltic and North Seas, reports that profit before interest, taxes, depreciation and amortisation (EBITDA) for the second quarter was up 16.6 percent to EUR 39.4 million, up from EUR 33.8 million in 2015. Profit before interest and taxes (EBIT) was EUR 25.3 million, up from EUR 20.1 million.
Profit before interest, taxes, depreciation and amortisation (EBITDA) for the first half of 2016 increased 25.6 percent to EUR 64.7 (51.5) million. Profit before interest and taxes (EBIT) was EUR 36.7 (24.0) million. Finnlines explained that this year most of its vessels were operated using less expensive fuel oil, which in turn had a positive impact on the result.
Meanwhile, revenue declined by 7.1 percent in the second quarter of 2016 to EUR 125.6 million, down from EUR 135.2 million the previous year.
Explaining the reason for the decrease, Finnlines said it "was almost entirely due to the reduction in cargo-related bunker surcharge which is a compensation passed to our clients" - a reason that was also given for the 8.5 percent decline in revenue for the first six months of the year, from 252.0 million in 2015 to this year's figure of EUR 230.7 million.
Capital Expenditure
In 2015, Finnlines launched the second phase of the environmental investment programme which covered scrubber orders for its remaining ro-ro vessels and a further three of its ro-pax vessels. Moreover, additional energy efficiency investment was initiated by extending its propulsion upgrading programme.
As mentioned last month, Finnlines recently signed a EUR 50 million loan agreement to be used to fund its EUR 100-million Environmental Technology Investment Programme. The loan, from the European Investment Bank (EIB), is guaranteed by Nordea Bank Finland Plc (Nordea), a Swedish financial services group, and a subsequent counter guarantee covering 80 percent is issued by Finnish Export Credit Agency Finnvera Plc (Finnvera), the Finnish state-owned financing company.
The second phase of the Environmental Technology Investment Programme is underway, with all ro-ro vessels in the Finnlines fleet now equipped with state-of-the-art scrubber systems. The first out of three ro-pax vessels to be re-bladed and equipped with scrubbers, M/V Finnclipper, returned to traffic on 19th May 2016 with new scrubber systems and propeller blades installed. The remaining ro-pax vessel installations are scheduled to continue after the summer peak season.
By the end of June 2016, 18 out of 22 ro-ro and ro-pax vessels fully owned and operated by Finnlines are equipped with scrubbers. These cleaning systems are designed to enable the vessels to operate cost-efficiently in compliance with the new stricter environmental regulations for the fuel sulphur limit that came into force as from 1st January 2015.
Risk Management
Commenting on the issue of risk, the shipping firm explained: "Finnlines operates mainly in the Emissions Control Areas (ECAs) where the emission regulations are stricter than globally. The sulphur content limit for heavy fuel oil was reduced to 0.10 per cent as from 1 January 2015 in accordance with the MARPOL Convention. This increases costs of sea transportation. However, with one of the youngest and largest fleets in Northern Europe and with investments in engine systems and energy efficiency, Finnlines is in a strong position to greatly mitigate this risk."
The Helsinki-headquartered company added: "Finnlines is exposed to business risks that arise from the capacity of the fleet existing in the market, counterparties, prospects for export and import of goods, and changes in the operating environment. The risk of overcapacity is reduced scrapping of aging vessels, on the one hand, and the more stringent Sulphur Directive requirements, on the other.
"The effect of fluctuations in the foreign trade is reduced by the fact that the Company operates in several geographical areas. This means that slow growth in one country is compensated by faster recovery in another. Finnlines continuously monitors the solidity and payment schedules of its customers and suppliers. Currently, there are no indications of imminent risks related to counterparties but the Company continues to monitor the financial position of its counterparties. Finnlines holds adequate credit lines to maintain liquidity in the current business environment."
