Finnlines Plc Annual General Meeting 12.4.2016 Tom Pippingsköld, CFO 1
Global Shipping Segments 1 Jan 2015 Source: http://www.statista.com/statistics/264024/number-of-merchant-ships-worldwide-by-type/ 2
General trends in shipping are also in the core of Finnlines Safety Safety at sea Crime prevention Training of personnel Environment Development of vessel technology Questioning traditional transport chain models Environmental factors also influence customers choices Customers Tailor-made solutions From industry-specific to locally arranged transportation solutions Development of information systems and data transfer Ever growing importance of reliability and accuracy 3
Breaking records against all odds 4
Finnlines Group Result in 2015 by Quarter In 2015 the best ever operative result in the company history and record breaking quarters throughout the year Finnlines Group Result for the Reporting Period, Quarterly MEUR 30 20 10 0-10 -20 9.9 8.5 4.0 5.75.3 6.1 1.2 0.9 0.3 0.6-4.6-3.1-5.8-5.3-10.9 18.1 14.7 15.8 24.7 2011 2012 2013 2014 2015 Q1 Q2 Q3 Q4 15.7 5
Finnlines Group Consolidated Income Statement, IFRS, 1.1. 31.12.2015 EUR 1,000 10 12 2015 10 12 2014 1 12 2015 1 12 2014 Revenue 120,894 119,077 511,167 532,889 Other income from operations 558 3,719 1,810 6,776 Materials and services -34,803-42,150-161,264-191,445 Personnel expenses -21,517-21,268-84,186-88,418 Depreciation, amortisation and impairment losses -14,835-13,459-56,590-56,843 Other operating expenses -33,000-35,469-140,654-144,396 Total operating expenses -104,155-112,345-442,694-481,102 Result before interest and taxes (EBIT) 17,298 10,451 70,284 58,563 Financial income 387 141 934 483 Financial expenses -4,099-5,231-18,064-22,412 Result before taxes (EBT) 13,586 5,361 53,153 36,634 Income taxes 2,146 3,169 3,675 5,079 Result for the reporting period 15,732 8,530 56,829 41,713 6
Finnlines Group Balance Sheet, IFRS 31 Dec 2015 EUR 1,000 31 Dec 2015 31 Dec 2014 ASSETS Non-current assets Property, plant and equipment 997,619 983,183 Goodwill 105,644 105,644 Intangible assets 3,758 5,500 Other financial assets 4,576 4,576 Receivables 1,258 1,434 Deferred tax assets 5,792 5,353 1,118,645 1,105,688 Current assets Inventories 4,333 5,926 Accounts receivable and other receivables 86,019 75,884 Income tax receivables 539 1 Cash and cash equivalents 6,468 2,680 97,359 84,490 Non current assets held for sale 15,121 20,297 Total assets 1,231,125 1,210,475 7
Finnlines Group Balance Sheet 31 Dec 2015 EQUITY Equity attributable to parent company shareholders Share capital 103,006 103,006 Share premium account 24,525 24,525 Translation differences 209 178 Fund for invested unrestricted equity 40,016 40,016 Retained earnings 393,313 335,876 561,070 503,601 Non-controlling interests 294 306 Total equity 561,363 503,907 LIABILITIES Long-term liabilities Deferred tax liabilities 52,712 56,102 Other long-term liabilities 113 163 Pension liabilities 3,919 4,705 Provisions 1,810 1,844 Loans from financial institutions 367,445 420,722 425,999 483,536 Current liabilities Accounts payable and other liabilities 59,191 71,565 Current tax liabilities 14 72 Provisions 345 81 Loans from financial institutions 176,736 142,967 236,287 214,685 Total liabilities 662,286 698,220 Liabilities related to long-term assets held for sale 7,476 8,348 Total equity and liabilities 1,231,125 1,210,475 8
Finnlines Group: Facts and Figures 2015 2014 2013 2012 Group Revenue (EUR million) 511.2 532.9 563.6 609.3 Average number of employees 1,597 1,701 1,861 2,023 Average number of employees on shore 698 759 918 957 Average number of employees at sea 899 942 943 1,066 Fleet Average number of vessels operated 22 24 24 24 Number of Finnlines owned vessels 21 21 22 25 Average age of Finnlines own fleet (years) 12 11 10 10 Total capacity of the fleet in lane meters 73,200* 75,400 75,400 80,000 Cargo volumes transported Units 624,000 638,000 632,000 628,000 Cars (not including cars of passengers) 156,000 99,000 66,000 72,000 Tons of freight not possible to measure in units 2,032,000 2,319,000 2,248,000 2,102,000 Passengers transported 575,000 561,000 556,000 598,000 * Including the lane meters of Finncarrier and Finnmaster as of 2.1.2016 9
Finnlines Group Result Before Interest and Taxes (EBIT) Total and Per Segment MEUR 80 70 60 50 40 30 20 10 0-10 -20 70.3 58.6 72.2 61.6 25.6 23.7 21.0 39.3 18.1 34.0 30.8 27.9-3.1-1.9-9.8-10.4-9.8-13.7 2010 2011 2012 2013 2014 2015 Shipping and Sea Transport Services Port Operations 10
EUR 100 million Environmental Technology Investment Programme 11
New era of environmental investments By the end of 2013, new ambitious challenges appeared on the horizon for marine operators. Sulphur Emission Control Areas (SECA) were established by international authorities in the North Sea and the Baltic, obliging all shipping operators to reduce sulphur emissions down to 0.10% from the beginning of 2015. All options for emission reductions came with a risk of failure. Despite poor data regarding both fuel price trends and technology, the decision had to be taken by the beginning of 2014 in order not to miss the supply windows dictated by the marine technology market. In order to reduce the risks of opting for an unproven technology, the CEO teamed up with the world s three biggest scrubber manufacturers, diversifying the supply risk and shortening the leadtime for the delivery of equipment. All in all, the green plan amounted to a EUR 100 million investment. This was unprecedented in Finnlines and was a clear signal within the competitive Baltic shipping market. The green campaign was achieved without neglecting the company turnaround initiated in 2009. 12
EUR 100 million Environmental Technology Investment Programme 2014 2016 In 2014: order for exhaust gas cleaning systems (scrubbers) for 10 ro-ro vessels and 4 ro-pax vessels plus propulsion upgrading to 6 vessels Retrofits were finalised during winter/spring 2015 In March 2015: order for one additional scrubber for MS Finnmerchant The installation was finalised in September 2015 In July 2015: additional orders for exhaust gas cleaning systems for 2 more ro-ro vessels and 3 more ro-pax vessels Installations are expected to be finalised in beginning of May 2016 In August 2015: order for new propeller blades for 3 ro-pax vessels and special foul release coating (silicon paint) for 2 ro-pax vessels deployed on Sweden-Germany route The hull treatment of the ro-pax vessels was finalised in beginning of October 2015 13
EUR 100 million Environmental Technology Investment Programme 22 Scrubber Installations 14
EUR 100 million Environmental Technology Investment Programme 9 Ships re-bladed & 2 re-painted 15
Major investments yet excellent results 16
Finnlines Group Total Capital Expenditure MEUR 90 80 70 60 50 40 30 20 10 0 82.2 64.4 67.1 64.1 36.6 10.1 2010 2011 2012 2013 2014 2015 17
Going Against the Grain At the end of 2008 the health of the world economy took a nasty turn for the worse. The worst came to the worst in the winter of 2008/2009. By the end of March 2009, the value of Finnlines shares on the Helsinki stock exchange had plunged from EUR 17 to just above EUR 4, a record low. Stormy conditions compelled the company management to take action. The company was turned upside down: every stone was turned to find new ways to cut costs, gain volume and simplify corporate structures Plans laid down by the CEO were implemented, thereby consolidating the breakeven results and simplifying the Finnlines structure. This did not occur without friction. If doing the right thing sometimes means going against the grain, then managing Finnlines in those years was a case in point. 18
Turnaround Programme The prudent actions taken to reduce costs and increase efficiency: Every line, every vessel, every function and every cost item have been analysed whether there is room for further lowering of costs and therefore room for further improvement in efficiency. Certain vessels have been sold to cut overcapacity and changes in fleet/routes have increased capacity utilisation. Since 2008, the Finnlines fleet s fuel consumption has decreased by almost 35 per cent. Personnel in 2009 an average of 2,234 persons / in 2015 an average of 1,597 persons / end of the year 2015 1,588 persons. Higher cash-flow generation has enabled the reduction of interest-bearing debt from 2012 s EUR 879 million to EUR 533.7 million at the end of 2015. 19
Optimisation Key to Operational Cost Reduction Targeted optimisation of the existing tonnage Cutting of the vessel overcapacity Optimising the speed of the ships and technological improvements Route and trade flows planning, thereby ensuring that the ships are completely full on both legs (NB-SB, EB-WB) Personnel adjustments Use of annual profit/cash flow for capex and for reduction of interest-bearing debt Cost controlling and cost cutting 20
ton fuel consumed Finnlines fuel consumption 2008 2015 500 000 450 000 400 000-15.2% 350 000 300 000 250 000 200 000-16.1% 2008 2009 2010 2011 2012 2013 2014 2015-8.3% 21
Finnlines Group Operating Expenses MEUR 700 600 500 400 540 587 591 551 481 443 300 200 100 0 2010 2011 2012 2013 2014 2015 22
Finnlines: a true success story during the sluggish EU growth 23
EBITDA and Equity Ratio MEUR % 140 120 100 80 60 40 20 0 35.7 29.4 29.1 29.1 29.1 85.9 84.5 89.8 83.7 37.4 41.7 115.4 45.7 126.9 2009 2010 2011 2012 2013 2014 2015 EBITDA Equity ratio 50 45 40 35 30 25 20 15 10 5 0 24
Finnlines Group Interest-bearing Liabilities* and Shareholders Equity MEUR 1000 900 800 700 600 500 400 300 200 100 0 853 855 879 429 428 430 671 463 553 504 534 561 2010 2011 2012 2013 2014 2015 Interest-bearing liabilities Shareholders equity attributable to equity holders of the parent * Excluding leasing liabilities 25
EUR million Net debt/ebitda Finnlines Group Net Debt/EBITDA Development 1000 900 22.5 800 700 600 500 400 9.9 10.1 9.9 9.2 8.0 300 200 4.8 4.2 100 0 2008 2009 2010 2011 2012 2013 2014 2015 Net debt Net debt/ebitda 25 20 15 10 5 0 26
Finnlines Group s Key Credit Strengths (2015) Strong majority owner with proven track record in shipping Higher cash flow generation to reduce debt High EBITDA percentage Strong market share Strengthened capital structure Most modern fleet with scrubbers (IMO compatible) Strong EBITDA : EUR 126.9 (115.4 in 2014) million due to efficiency improvements Higher Equity ratio 45.7 (41.7)% Finnlines fleet is young and flexible: double ramps, high range ice class and varied access to decks mean we can compete for all types of cargo. Finnlines has invested in scrubbers, new propulsion systems and special paint. Young, efficient and environmentally safe ro-pax/ro-ro vessels in the Baltic Sea. Financially strong Grimaldi Group is the biggest shareholder of Finnlines Plc. Finnlines is powering ahead after a raft of vital changes and improvements. 27
Creating the best value by strategic decisions and optimised solutions 28
EUR 1 Billion Capex Programme 2006 2016 Scrubbers & reblading & silicon-painting Finntide & Finnwave Finnsky & Finnsun Vuosaari Harbour Finnbreeze & Finnsea Finnmill, Finnpulp, Finnkraft, Finnhawk Finnlady, Europalink, Nordlink Finnstar & Finnmaid 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 5 ro-pax vessels ordered in 2003 2004. The total cost of investment some EUR 500 million. 6 ro-ro vessels ordered in 2007. The total cost approximately EUR 240 million. 4 ro-ro vessels bought in 2008 (all before under time-charter in Finnlines traffic). Total cost EUR 121 million. Cargo port operations in Helsinki were concentrated to the new Vuosaari Harbour in the end of November 2008. Finnlines invested on the project nearly EUR 100 million. EUR 100 million Environmental Technology Investment Programme 2014 2016. 29
Finnlines Group has a Young Fleet: Average Age is about 12 Years The average age of fleet was about 12 years in 2015. Age of fleet Hansa-class & Clipper-class vessels New ro-ro vessels 1 5 years Star-class ro-pax vessels & older ro-ro vessels 6 15 years 15 20 years 30
Finnlines Fleet Evolution: Long-Term Strategic Decision 50 FLEET Finnlines fleet evolution 2008 2015 Average unit: 2,000 lm 40 30 20 10 0 Average unit: 3,200 lm 2008 2015 Owned Chartered in 31
Targets need to be reset for the future. 32
1 The largest in Europe in combined ropax and ro-ro segment 110 Owned vessels 50 Countries 33 CONNECTING THE WORLD
Generating long-term shareholder value 2015 was a historic year for Finnlines: Result for the reporting period EUR 56.8 (41.7) million Earnings per share (EPS) were EUR 1.10 (0.81) The Company s market capitalisation increased to EUR 911.6 (824.1) million Already in 2014 the share price increased significantly, by over 113 percent and in 2015 it increased even further with 11 per cent. 34
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