Viking Line reports weaker first quarter demand

2024-04-29T17:23:32+00:00 April 29th, 2024|Finance|

For the first quarter of this year, Finnish ferry operator, Viking Line reported sales of €93.2 mill, compared to 1Q23’s figure of €93.9 mill.

Income after taxes was a loss of €14.3 mill, compared with a negative €3.9 mill for the same period the year before.

Viking also gave a forecast for the full year saying that there continues to be significant uncertainty, due to the geopolitical situation and its impact on energy prices, inflation, interest rates and currencies, as well as the effects these uncertainty factors may have on people’s propensity to travel, demand, consumption patterns and costs.

Provided that energy prices remain at current levels and people’s propensity to travel is sustained, the Board expected that income before tax in 2024 will be on a par with the figure for 2023 if the €8.6 mill capital gain from the sale of’ ‘Rosella’ in 2023 is excluded, which is the same prediction as in the previous quarterly report.

President and CEO, Jan Hanses (pictured), said: “Earnings for the first quarter of the year, excluding extraordinary items, were somewhat weaker than expected. After year-end, a downturn in demand was discernible in the market. Weak economic growth in Finland and Sweden has led to increased consumer cautiousness.

“This is mostly reflected in weaker on-board consumption, compared to the same period last year. However, the good news is that we reached our targets for revenue generated from ticket prices in order to offset the cost of emission allowances introduced at the start of the year.

“Earnings for the quarter were affected by one-off costs in the joint venture Gotland Alandia Cruises for the launch of ‘Birka Gotland’. In addition, ‘Viking Cinderella’ underwent an extensive drydocking prior to being reflagged under the Finnish flag. Above all, the cabins on the vessel were upgraded, with nearly 300 cabins undergoing a total refurbishment. Various public spaces were also completely refurbished.

“On 8th March, ‘Viking Cinderella’ was launched in service on the Helsinki/Mariehamn/Stockholm route, which once again is now served by two vessels.

“In February, ‘Birka Gotland’ was drydocked prior to cruise service between Stockholm and Mariehamn, as well as to Visby on the Swedish island of Gotland. Service was launched on 20th March, 2024. This drydocking was also extensive, with a number of refurbishments carried out on board.

“As a result of these major redeployments, it was possible to reassign shipboard staff on ‘Viking Cinderella’ to new positions on ‘Birka Gotland’, as well as the company’s other vessels.

“Throughout these labour-intensive operational changes, staff performance has been excellent, and a high level of service has been maintained. It is gratifying in this context to note that, due to the redeployments and expansion in service to Helsinki, we have recruited new shipboard staff.

“Our operations are heavily impacted at present by increasingly stringent environmental standards.

“Starting in 2024, our operations are subject to the EU Emissions Trading System, which means that we are now obliged to shoulder the cost of emission allowances, which in the medium term, we can only partly offset through our continued energy efficiency work.

“Finally, I would like to note that the first quarter of 2024 has entailed changes in our operations, with expanded service to Helsinki and the launch of ‘Birka Gotland’ in partnership with Gotlandsbolaget,“ he said.

During most of 1Q24, the Viking Line Group provided passenger and cargo carrier services using five vessels in the northern Baltic Sea and the Gulf of Finland.

The total number of passengers carried by the Group’s vessels in 1Q24 was 871,828, compared to in 888,725 in 1Q23. The Group had a total market share in its service area of around 34.6% (35.4% in 1Q23).

Market demand for travel in the area as a whole weakened during the first quarter of this year. Some a softening in demand for services between Finland and Sweden was noted, while traffic between Finland and Estonia increased slightly.

Tighter household finances and a weak Swedish krona impeded the company’s chances of increasing occupancy rates and capacity utilisation during 1Q24.

The period includes disruptions in service caused by vessel drydockings for both Viking Line and its competitors, which affected comparative figures.

Viking’s total cargo volume was 32,993 cargo units (33,736 in 1Q23). The Group’s share of the cargo market was about 17.4% (17.5% in 1Q23). Due to uncertain economic conditions in the area, total cargo volume transported was at the same level as in 2023. As a result, the number of cargo units transported decreased, which was also due to political strikes occurring during this period in Finland.

The market share for passenger cars was around 29.9% (26.8% in 1Q23).

Passenger-related revenue decreased by 0.8% to €79.7 mill (€80.4 mill), while cargo sales were €12.7 mill (€12.7 mill in 1Q23) and other operating revenue was €0.8 mill the same as last year’s. Sales contribution was €71.7 mill (€71.3 mill in 1Q23).

The Group’s long-term interest-bearing liabilities as at 31st March, 2024, totalled €141.1 mill (€176.5 mill in 1Q23), while the debt/equity ratio was 50.5%, compared to 47.8% for the same period last year.

The Group’s cash and cash equivalents at the end of March totalled €65.7 mill (€79.8 mill in 1Q23). Unutilised credit lines in the Group totalled €0.1 mill.

Viking Line’s shareholding in Rederiaktiebolaget Eckerö has exceeded 20% since 22nd November, 2023, thus Eckerö has been recognised as a company with a participating interest undertaking using the equity method since then.

An initial positive income effect of €2.5 mill was accrued in the transition.