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2013-10-25 08:30:06 CEST 2013-10-25 08:30:10 CEST REGULATED INFORMATION Finnair Oyj - Interim report (Q1 and Q3)Finnair Group interim report 1 January – 30 September 2013Unit costs continued to decline in Q3, but the operational result was hurt by the weaker yen. Finnair Plc. Interim report 25 October 2013 at 09:30 This is a summary of Finnair's January-September 2013 Interim report. The Finnair Group Interim report 1 January - 30 September 2013 is attached to this release in pdf format and is also available on the company's website at www.finnairgroup.com. The historical comparative financials presented in the interim report include certain changes to previously reported information. These changes result from retrospective application of an amendment to IFRS accounting standard IAS19 Employee Benefits. The changes are described in detail in notes 2 and 17 to the interim report. Key figures 7-9 7-9 Change 1-9 1-9 Change 2012 2013 2012 % 2013 2012 % -------------------------------------------------------------------------------- Turnover and result -------------------------------------------------------------------------------- Turnover, EUR million 636.9 650.3 -2.1 1,839.8 1, 0.2 2,449.4 836.5 Operational result, 38.4 50.4 -23.7 26.9 43.1 -37.7 43.2 EBIT, EUR million* Operational result, % 6.0 7.7 -1.7%- 1.5 2.3 -0.9%- 1.8 of turnover p. p. Operating result, 35.2 72.6 -51.5 9.7 37.3 -74.1 33.8 EBIT, EUR million EBITDAR, EUR million 82.4 99.3 -17.0 162.0 191.4 -15.3 240.2 Result before taxes, 31.3 68.8 -54.5 33.9 20.1 68.6 14.8 EUR million Net result, EUR 23.5 51.9 -54.7 24.7 14.0 76.9 10.5 million Balance sheet and cash flow -------------------------------------------------------------------------------- Equity ratio, % 32.9 33.3 -0.4 35.4 %-p. Gearing, % 9.9 26.1 -16.2 18.0 %-p. Adjusted gearing, % 63.0 90.3 -27.3 77.8 %-p. Capital expenditure, 3.6 7.4 -51.2 30.6 17.7 72,9 41.4 CAPEX, EUR million Return on capital employed, ROCE, 12 months rolling, % 3.9 0.3 3.5 2.8 %-p. Return on equity, 2.8 -2.4 5.2 1.4 ROE, 12 months %-p. rolling, % Net cash flow from 29.7 44.5 -33.3 108.3 136.8 -20.9 154.7 operating activities Share -------------------------------------------------------------------------------- Share price at end of 3.12 2.07 50.7 3.12 2.07 50.7 2.38 quarter, EUR Net result for the 0.18 0.41 -54.9 0.19 0.11 78.5 0.08 period per share** Earnings per share 0.16 0.39 -58.8 0.12 0.06 107.3 0.01 (EPS) Traffic data, -------------------------------------------------------------------------------- unit costs and revenue -------------------------------------------------------------------------------- Passengers, 1,000 2,565 2,361 8.6 7,121 6,693 6.4 8,774 Available seat 8,275 7,810 6.0 23,732 22,799 4.1 30,366 kilometres (ASK), million Revenue passenger 6,982 6,352 9.9 19,174 17,871 7.3 23,563 kilometres (RPK), million Passenger load factor 84.4 81.3 3.0%-p 80.8 78.4 2.4%-p 77.6 (PLF), % Unit revenue per available seat kilometre, (RASK), cents/ASK 6.44 6.93 -7.1 6.30 6.53 -3.5 6.49 Unit revenue per revenue passenger kilometre, yield, cents/RPK 6.74 7.54 -10.7 6.86 7.33 -6.4 7.30 Unit cost per available seat kilometre, (CASK), cents/ASK 6.29 6.60 -4.6 6.49 6.59 -1.5 6.58 CASK excluding fuel, 4.16 4.43 -6.2 4.37 4.51 -3,1 4.50 cents/ASK Available tonne 1,264 1,187 6.5 3,578 3,511 1.9 4,647 kilometres (ATK), million Revenue tonne 864 801 7.9 2,378 2,295 3.6 3,029 kilometres (RTK), million Cargo and mail, 39,611 37,338 6.1 108,670 112,084 -3.0 148,132 tonnes Cargo traffic unit revenue per revenue tonne 23.99 24.41 -1.7 24.42 25.12 -2.8 25.45 kilometre, cents/RTK Overall load factor, 68.4 67.5 0.9%-p 66.5 65.4 1.1%-p 65.2 % Flights, number*** 24,955 23,915 4,3 73,712 71,742 2,7 95,097 Personnel -------------------------------------------------------------------------------- Average number of 5,913 6,966 -15.1 6,784 employees * Operational result: Operating result excluding changes in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves, non-recurring items and capital gains. ** Before hybrid bond interest. *** The number of flights also includes Finnair's purchased traffic. Numbers for the comparison periods have been changed accordingly. CEO Pekka Vauramo: Finnair's turnover decreased slightly in the third quarter of the year from the corresponding period in 2012 and totalled 637 million euros. Turnover was affected especially by the year-on-year decline in euro-denominated revenue, driven by the weak yen. Demand for air traffic developed well, but not enough to compensate the decrease in unit revenues, which was reflected both in turnover and in operating profit. As the third quarter is seasonally our strongest, the operational result of 38.4 million euros is disappointing. The bright spot during the period was the continued decline in our costs: airline unit costs excluding fuel decreased by 6.2 per cent year-on-year. Due to the weakening unit revenue development and the weakened outlook for the rest of the year especially in cargo and leisure traffic, we lowered our financial guidance regarding turnover and operational profit for 2013. In this situation the full implementation of our structural change and cost-reduction programs is absolutely essential for securing Finnair's future vitality and achieving profitable growth. A significant part of the ongoing 60 million euro cost-reduction program is targeted at personnel-related costs. During the autumn, Finnair has engaged in negotiations on collective labour agreements with several key personnel groups. Going forward, we must also focus on ways to improve unit revenues. Work on revising our commercial strategy began in the third quarter and will continue in the coming months. I am also confident that the organisational changes we implemented during the period under review will promote the further development of our service products as well as our operations. Our strong balance sheet is an important resource for future investments in our fleet. The good situation in the aircraft financing market facilitates the implementation of sales and leaseback arrangements on very competitive terms. In the third quarter, we successfully carried out a number of financing arrangements, which is evidence of investor trust in Finnair. Business environment in the third quarter There were no significant changes in Finnair's business environment in the third quarter of the year and the market remained difficult. European network carriers, Finnair included, continued to implement structural change and cost-reduction programs to improve their competitiveness in the prevailing tight competitive situation. Despite many European economies remaining in recession, demand for passenger traffic in Europe continued to grow. Combined with the conservative stance airlines have taken towards increasing their capacity, this led to improved load factors. Measured in passenger volume, the market for flights between Helsinki and Finnair's European destinations grew by 4.0 per cent, while the market between Finnair's Asian and European destinations increased by 3.8 per cent.* Finnair was successful in increasing its market share in both markets.*The demand for air cargo in traffic between Asia and Europe grew year-on-year. The price of the largest individual cost factor of airlines, i.e. jet fuel, remained at a high level. The euro appreciated by one third against the Japanese yen and approximately six per cent against the US dollar compared to the corresponding period last year. The yen is an important income currency in Finnair's operations, while the dollar is a significant expense currency. Progress of the structural change and cost-reduction programs By the end of June, Finnair had achieved the cost-reduction target of 140 million euros set for structural change and cost-reduction program commenced in August 2011. During the period under review, Finnair continued to seek cost reductions in all of the program's cost categories, with the primary focus being on personnel and maintenance costs, two categories in which progress has lagged behind the original cost reduction targets. Regarding the supplementary cost-reduction program of 60 million euros commenced in October 2012, Finnair made an announcement in August stating its aim to reduce flight crew costs by approximately 35 million euros and technical services and customer service personnel costs by approximately 8 million. In the review period, Finnair continued negotiations with personnel and their trade union representatives regarding the solutions and schedules for achieving these cost reduction targets. The objective is to achieve the level of market wages and labour costs in the industry, primarily by implementing changes to wage structures and working hours. As of the third quarter of the year, Finnair has monitored the progress of its cost-reduction programs against a combined total target of reducing annual costs permanently by 200 million euros. The point of reference for the cost reduction target is the company's cost level in 2010. By the end of September 2013, Finnair had achieved a total cost reduction of 150 million euros, which was reflected in decreased airline business unit costs during the period under review. At the same time, the company has been able to move a significant share of fixed costs to volume-based variable costs. Achieving the targets of the cost-reduction program is essential for improving the company's competitiveness, as high fuel prices, cost reduction measures taken by competitors, intensified competition and fleet investments in the coming years require a substantial improvement in profitability. The long-term return objective set for the company by Finnair's Board of Directors is an operating profit margin of six per cent. Financial performance in July-September 2013 Finnair's turnover in July-September declined slightly year-on-year, amounting to 636.9 million euros (650.3), while capacity increased by 6.0 per cent. The depreciation of the Japanese yen by one third year-on-year had a negative effect on euro-denominated revenue. Operational costs excluding fuel remained largely unchanged from the comparison period and stood at 418.8 million euros (422.4). Fuel costs, including hedging and costs incurred from emissions trading, were 185.1 million euros (179.6). Personnel costs declined by 10.0 per cent to 86.6 million euros (96.2) due to the personnel reductions implemented after the comparison period, but part of the personnel costs in the comparison period are now seen in the form of higher costs for outsourced catering and maintenance services. Euro-denominated operational costs amounted to 603.9 million euros (602.0). The operational result, which refers to the operating result excluding non-recurring items, capital gains and the change in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves, was 38.4 million euros (50.4). Finnair's income statement includes the change in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves that took place during the period under review but will fall due later. This is an unrealised valuation result based on IFRS, where the result has no cash flow effect and which is not included in the operational result. The change in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves amounted to -0.7 million euros (7.7). Non-recurring costs during the period totalled -3.5 million euros (-6.8) and the operational result was 35.2 million euros (72.6). The operational result for the comparison period was increased by capital gains of 21.3 million euros, of which approximately 15 million euros were related to a catering arrangement implemented with LSG Sky Chefs in August 2012. Finnair's result before taxes for July-September was 31.3 million euros (68.8) and the result after taxes 23.5 million euros (51.9). Unit revenue per available seat kilometre (RASK) declined primarily due to the depreciation of the Japanese yen by 7.1 per cent compared to the corresponding period in 2012 and amounted to 6.44 euro cents (6.93). Excluding the effect of exchange rate fluctuations, passenger unit revenue declined by 0.2 per cent from the comparison period. Unit cost per available seat kilometre (CASK) decreased by 4.6 per cent and amounted to 6.29 euro cents (6.60). Unit cost excluding fuel (CASK excl. fuel) decreased by 6.2 per cent and totalled 4.16 euro cents (4.43) as a result of successful cost-reduction measures. Outlook for 2013 Finnair lowered its financial guidance regarding turnover and operational profit for 2013 due to the weakening unit revenue development on 24 October 2013. Current outlook (given on 24 October 2013): The weak visibility of air traffic development continues due to the uncertain economic outlook in Europe and slower growth in Asia. Fuel costs are expected to remain high in the last quarter of 2013, and the demand for air traffic is estimated to grow moderately. Due to the continuing negative effect of the weak yen on unit revenue in Japanese sales, and the deterioration of cargo and leisure traffic revenues, Finnair expects its turnover in 2013 to be below the 2012 level. Unit costs excluding fuel (CASK excl. fuel) are expected to decrease compared to 2012. If the strong deterioration of unit revenues continues in the last quarter of the year, it is possible that Finnair will not reach a profitable operational result in 2013. Previous Outlook (given on 14 August 2013): The uncertain economic outlook in Europe, weakened consumer demand and slower growth in Asia increase the uncertainty of the future development of air traffic. Fuel costs are expected to remain high in 2013 as well, and the demand for air traffic is estimated to grow moderately. Due to the negative effect of the weak yen on unit revenue in Japanese sales, Finnair expects its turnover in 2013 to be largely unchanged from 2012. Unit costs excluding fuel (CASK excl. fuel) are expected to decrease compared to 2012. Finnair estimates that its operational result will show a profit in 2013. Finnair's financial statements bulletin for 2013 will be published on Tuesday 11 February 2014. FINNAIR PLC Board of Directors Briefings Finnair will hold a press conference on 25 October 2013 at 11:00 a.m. and an analyst briefing at 12:30 p.m. at its office at Tietotie 9. An English-language telephone conference will begin at 3:30 p.m. Finnish time. The conference may be attended by dialing your local access number +358 800 770 306 and using the PIN code 255856# Finnair Plc Communications 25 October 2013 For further information, please contact: Chief Financial Officer Erno Hilden Tel. +358 9 818 8550 erno.hilden@finnair.com Financial Communications and Investor Relations Director Mari Reponen Tel. +358 9 818 4054 mari.reponen@finnair.com Investor Relations Officer Kati Kaksonen Financial Communications and Investor Relations Tel. +358 9 818 2780 kati.kaksonen@finnair.com |
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