The ongoing COVID-19 coronavirus pandemic has caused a serious deterioration in Viking Line’s operating conditions, the company said in an update.
Passenger volumes were negatively affected in February this year and fell sharply in March. As a result of the Finnish authorities’ decision on 16th March, 2020 to close the country’s borders and restrict passenger traffic, the company’s passenger-related revenue has basically stopped.
Passenger traffic was described as marginal, since only the transport of people between the Finnish mainland and Åland is allowed. Given the circumstances, quick measures to cut costs have been necessary. Basically the entire staff has been furloughed. Group management has also taken salary cuts, and the Board will not take any fees.
Backed by Finland’s National Emergency Supply Agency’s decision to aid cargo traffic to ensure the security of supply, four of the Group’s vessels are serving the Turku/Långnäs (Åland) /Stockholm, Mariehamn/Kapellskär and Helsinki/Tallinn routes.
Viking Line’s three other vessels are no longer in service. While the current cargo traffic generates revenue for each vessel to cover variable costs and a small portion of fixed costs, it does not generate positive operating income for the vessels in service.
Viking Line claimed it had a strong balance sheet and low leverage, but the Group’s liquidity must be secured given present circumstances. Available credit lines have been used.
To strengthen liquidity and safeguard the future of the company if the coronavirus pandemic is long-lasting, Viking Line has begun negotiations for additional funding. The intention is to use Finnish state guarantees proposed in a supplementary budget submitted to the Finnish parliament.
If this negative trend continues, it could mean that the terms of the Group’s financing agreements are no longer met. For that reason, the company has begun negotiations with its current financiers.
Since consideration has been given to ongoing negotiations to boost working capital and ensure sufficient liquidity and funding, Viking Line’s financial accounts have been prepared according to the going concern principle, the company explained.
President and CEO, Jan Hanses, said; “We look forward to being able to resume service, with the hope that this can happen in time for our peak season in July and August. As always, our peak season is critical to results. Taking a holiday locally is something we expect to be very attractive given the spread of coronavirus across the world. The pandemic will most likely affect travel patterns in the future. We shall be prepared for this and believe trips to our destinations and primarily to and through the Baltic archipelagos will experience a renaissance.”
Consolidated sales of the Viking Line Group for the first quarter of this year were €75 mill, compared with €95.8 mill for 1Q19. Operating income totalled minus $21.5 mill, compared to minus €14.2 mill for the same period last year.
Passenger-related revenue for 1Q20 was €63.2 mill, compared to €83 mill in 1Q19, while cargo revenue amounted to €11.3 mill, compared to €12.3mill. Net sales revenue was €54.9 mill, compared to €70.1 mill in 1Q19.
Viking Group’s investments amounted to €7 mill, of which €2.7 mill was primarily for vessels under construction. The construction of the ‘Viking Glory’, is progressing in China. The vessel is still expected to enter service in 2021.
On 31st March, 2020, the Group’s non-current interest-bearing liabilities totalled €92.6 mill. The equity/assets ratio was 48.4%, compared to 46.8% recorded a year earlier. Current interest-bearing liabilities increased by €14.4 mill in the form of utilised credit lines.
At the end of March, the Group’s cash and cash equivalents amounted to €34.2 mill. Net cash flow from operating activities amounted to minus €28 mill.
In an earlier update, Viking Line said freight traffic was heavy and this demand has grown since Easter.
During the prevailing exceptional circumstances, Viking Line has maintained both goods transport and the related logistic services in order to safeguard the security of supply in Finland.
“The utilisation rate of the ships’ cargo capacity has been 100% on several occasions. Our staff has done an especially good job loading the cargo,” said Harri Tamminen, Viking Line’s Freight Director.
Tamminen also said that the busy freight traffic during the Easter holidays was a particularly positive surprise. The traffic volume has continued to grow since and the market shows no signs of any volume reductions in the future.
At the moment, of the five Viking Line ships operating under the Finnish flag, ‘Viking Grace’, ‘Amorella’, ‘Rosella’ and ‘Gabriella; are in operation and transporting cargo with the emphasis on the guarantee of supplying food and medicines.
“We have been able to optimise the schedule to be followed during this exceptional period, both in terms of timetables and traffic frequency, through good co-operation with our customers and by taking into account the transport needs of the market. This way, we can do our part to help maintain the security of supply in Finland in the best possible way,” said Tamminen.
