Mixed fortunes for Baltic freight ferry operators

The LNG-fuelled Viking Grace sports its new rotor sail on the Turku–Stockholm route. Credit: John Pagni
The LNG-fuelled Viking Grace sports its new rotor sail on the Turku–Stockholm route. Credit: John Pagni

The year’s first-half results appear to indicate that being a cargo shipper is more lucrative than being a passenger ferry. Viking Line’s results, posted on 16 August, showed that the company’s fortunes are heading in the wrong direction.

Viking Line’s sales for 1H18 were down by EUR10 million (USD11.4 million) to EUR225 million, as passenger expenditure fell by EUR10 million to EUR202 million and traveller totals slipped by nearly 200,000. This left a bottom line of EUR1.1 million after taxes, which was lower than the EUR2.9 million posted in the same period in 2017.

“Competition in Viking Line’s service area remains tough and implies continued pressure on prices and volumes. Volume and price developments during the remainder of the financial year will be crucial to the group’s earnings,” the company said in a stock exchange release.

“The organisational change implemented in spring 2018 is expected to have a positive effect on results. The board of directors believes that, overall, operating income for 2018 will be better than, or on a par with, operating income for 2017. The board’s previous assessment was that operating income for 2018 would improve compared with operating income for 2017.”

While reporting a spike in passenger numbers to 4.6 million and a 9.2% increase in cargo, Estonia’s biggest listed company, Tallink, recorded a 2.6% drop in income to EUR440 million, creating an unaudited net loss of EUR4.6 million.

Tallink’s new chief executive officer (CEO), Paavo Nõgene, said, “The results were significantly impacted by the increase in fuel prices compared with the same period last year.” Nõgene also took a swipe at the Estonian government’s policy of raising excise duties on alcohol products – a significant factor in attracting Finnish and Swedish customers.

Competition has heated up on the world’s largest international ferry route, Helsinki–Tallinn. In January, the third operator, Eckerö Line, added a third daily return crossing, which by the end of July had considerably boosted its passenger and rolling cargo numbers. However, as the company is unlisted, the bottom line is unknown.

All this contrasts with the freight sector, which despite rising US tariffs and EU–Russia sanctions, is roaring ahead, led by Grimaldi-owned Finnlines. “Our performance for 1H18 has continued very strongly as revenue climbed by 11.5% to EUR289 million and the result increased by 20% to EUR42 million,” said Emanuele Grimaldi, Finnlines’ CEO.

Finnlines has invested EUR1.2 billion in newbuildings, supported by environmental and efficiency upgrades. Scrubbers have been fitted on vessels across the fleet so it can continue to burn heavy fuel oil. Finnlines claims to be the most profitable shipping company in the Baltic, but customers can have their goods forwarded via the Grimaldi network much further afield.

For 1H18, Finnish shortsea box carrier Containerships posted a 14.5% rise in revenue to EUR126.5 million and its bottom line zoomed from EUR100,000 to EUR1.8 million.

“This increase was attributable to the positive development in net sales, which grew by 14.5% during the first half of the year and by 16.5% during the second quarter.

“The group has updated its estimation for the future outlook. In 2018, net sales are expected to grow by 10% and EBITDA for the full year is expected to improve on the previous year,” said Containerships CEO Kari-Pekka Laaksonen.

Laaksonen highlighted the main risk as being a possible escalation in political tension in its areas of operation, the Baltic and Mediterranean seas. By the end of 2018, container ships will welcome the first two of four liquefied natural gas (LNG) box ships to its fleet. It will offer clients a door-to-door green delivery as the company has also invested in LNG trucks.

However, Laaksonen admitted to IHS Markit “I’d like to know when the LNG ships will come from China, as the original delivery date was 2Q just gone.”

Rounding off the cargo news was ESL Shipping’s figures for the first half of 2018. Part of the listed Aspo conglomerate, the company’s sales grew by a healthy 12% to EUR43 million as its bottom line reached almost EUR7 million. A carrier of dry bulk commodities, mainly to steelworks and power stations, ESL Shipping shared a positive outlook on the region’s market.

“The economic situation in Russia and eastern markets will improve, while political risks and international sanctions imposed on Russia have increased risks in the market area, meaning that future development is difficult to predict,” it said in its interim report.

ESL Shipping’s EUR30 million purchase of Sweden’s AtoB@C in June has been approved by the competition authorities in both countries and the combined entity already has a strong presence in northern Europe.

“The expanded ESL Shipping will be a more balanced shipping company with more diversified risks, and it will have better possibilities to develop environmentally friendly and efficient transport solutions for its customers’ future needs,” the company said.

As part of this strategy, ESL Shipping will also welcome two new LNG-fuelled bulkers from China later this year as shipping companies, with the exception of Finnlines, rush to offer their clients greener alternatives.

For instance, Viking Line has ordered an LNG-fuelled cruise ferry with environmentally friendly extras from China. The vessel is scheduled to arrive in 2020.