Finnlines Plc Annual General Meeting 12.4.2016 Tom Pippingskld, CFO - - PowerPoint PPT Presentation

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Finnlines Plc Annual General Meeting 12.4.2016 Tom Pippingsköld, CFO

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Source: http://www.statista.com/statistics/264024/number-of-merchant-ships-worldwide-by-type/

Global Shipping Segments 1 Jan 2015

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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

General trends in shipping are also in the core of Finnlines

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Breaking records

against all odds

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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

• 4.6
• 5.8
• 10.9

0.3 0.6 1.2 5.7 0.9 14.7 15.8 4.0 5.3 6.1 18.1 24.7

• 3.1
• 5.3

9.9 8.5 15.7

• 20
• 10

10 20 30 2011 2012 2013 2014 2015 Q1 Q2 Q3 Q4

MEUR

Finnlines Group Result for the Reporting Period, Quarterly

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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

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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

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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

Finnlines Group Balance Sheet 31 Dec 2015

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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

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Finnlines Group Result Before Interest and Taxes (EBIT) Total and Per Segment

39.3 30.8 34.0 27.9 61.6 72.2

• 13.7
• 9.8
• 10.4
• 9.8
• 3.1
• 1.9
• 20
• 10

10 20 30 40 50 60 70 80 2010 2011 2012 2013 2014 2015 Shipping and Sea Transport Services Port Operations

MEUR 21.0 23.7 18.1 25.6 58.6 70.3

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EUR 100 million Environmental Technology Investment Programme

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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.

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 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

EUR 100 million Environmental Technology Investment Programme 2014–2016

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EUR 100 million Environmental Technology Investment Programme – 22 Scrubber Installations

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EUR 100 million Environmental Technology Investment Programme – 9 Ships re-bladed & 2 re-painted

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Major investments

– yet excellent results

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Finnlines Group Total Capital Expenditure

MEUR

82.2 64.4 67.1 10.1 36.6 64.1 10 20 30 40 50 60 70 80 90 2010 2011 2012 2013 2014 2015

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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.

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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.

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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

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200 000 250 000 300 000 350 000 400 000 450 000 500 000 2008 2009 2010 2011 2012 2013 2014 2015

Finnlines fuel consumption 2008–2015

• 15.2%
• 16.1%
• 8.3%

ton fuel consumed

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Finnlines Group Operating Expenses

540 587 591 551 481 443 100 200 300 400 500 600 700 2010 2011 2012 2013 2014 2015

MEUR

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during the sluggish EU growth

Finnlines: a true success story

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EBITDA and Equity Ratio

37.4 85.9 84.5 89.8 83.7 115.4 126.9

29.4 29.1 29.1 29.1 35.7 41.7 45.7 5 10 15 20 25 30 35 40 45 50 20 40 60 80 100 120 140 2009 2010 2011 2012 2013 2014 2015 EBITDA Equity ratio

MEUR %

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Finnlines Group Interest-bearing Liabilities* and Shareholders Equity

MEUR

853 855 879 671 553 534 429 428 430 463 504 561 100 200 300 400 500 600 700 800 900 1000 2010 2011 2012 2013 2014 2015 Interest-bearing liabilities Shareholders equity attributable to equity holders of the parent

* Excluding leasing liabilities

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Finnlines Group Net Debt/EBITDA Development

9.2 22.5 9.9 10.1 9.9 8.0 4.8 4.2 5 10 15 20 25 100 200 300 400 500 600 700 800 900 1000 2008 2009 2010 2011 2012 2013 2014 2015 Net debt Net debt/EBITDA

Net debt/EBITDA EUR million

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Finnlines Group’s Key Credit Strengths (2015)

High EBITDA percentage Strengthened capital structure Most modern fleet with scrubbers (IMO compatible) Strong market share Higher cash flow generation to reduce debt Strong majority

• wner with

proven track record in shipping

 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.

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Creating the best value

by strategic decisions and optimised solutions

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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.

Finnlady, Europalink, Nordlink Scrubbers & reblading & silicon-painting Finntide & Finnwave Finnsky & Finnsun Finnbreeze & Finnsea Vuosaari Harbour Finnstar & Finnmaid Finnmill, Finnpulp, Finnkraft, Finnhawk

EUR 1 Billion Capex Programme 2006–2016

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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

1−5 years 6−15 years 15−20 years

New ro-ro vessels Star-class ro-pax vessels & older ro-ro vessels Hansa-class & Clipper-class vessels

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Finnlines Fleet Evolution: Long-Term Strategic Decision

FLEET

10 20 30 40 50 2008 2015

Finnlines fleet evolution 2008–2015

Owned Chartered in

Average unit: 3,200 lm Average unit: 2,000 lm

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Targets need to be reset for the future

.

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50

Countries

110

Owned vessels

The largest in Europe in combined ro- pax and ro-ro segment

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CONNECTING THE WORLD

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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.

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