Operail got through a difficult financial year by divested businesses

Added on 31.05.2023

Last year, the Operail group of railway companies earned an operating income of 61 million euros and EBITDA of 10 million euros, which is a good result considering the extremely difficult economic environment. The 47 per cent drop in the volume of goods transported in Estonia was mainly mitigated by the rental of wagons, and freight volumes in Finland increased at the end of the year. From 2023 onwards, these lines of business no longer exist.

Last year, the combined turnover of all businesses of Operail amounted to 61 million euros (73 million euros in 2021). Earnings before interest, taxes, depreciation, and amortization or EBITDA was 10 million euros (17 million euros in 2021). The net loss after the revaluation of assets amounted to 16 million euros.

“Due to the war and sanctions that started in 2022, the volume of goods transported in Estonia fell by 47 per cent. This was compounded by the additional ban on Russian cargo from January 2023, which also affected the company’s and its assets’ value. At the operational level, the result was good, with the losses being caused by asset revaluations for the above reasons,” explained Raul Toomsalu, Chairman of the Management Board.

The expenses of Operail were also one million euros higher than usual due to redundancies and advisory expenses on the sale of wagons and the Finnish business.

“However, these are good financial results in extremely difficult circumstances, as both turnover and EBITDA remained strong, but this is thanks to the non-strategic business lines that were still in place last year and which Operail no longer operates this year,” Toomsalu noted. In Q1 2023, Operail sold its last leased wagons and its freight transport subsidiary in Finland.

EBITDA or operating profit before depreciation and amortisation of the divested business lines, i.e., rental of wagons and Finnish freight transport in 2022, amounted to 11 million euros in the reporting period, while net profit before the revaluation of assets amounted to 4 million euros. The remaining business lines had an EBITDA of –1 million euros and a net loss of 10 million euros in 2022.

“This year, Operail will only be able to continue with Estonian rail freight transport as a loss-making business thanks to the proceeds from the sale of profitable businesses, but this is a short-term solution,” Raul Toomsalu said.

In 2021, the volume of goods of the Operail group was 12.9 million tonnes; in 2022, 7.2 million tonnes; and the forecast for 2023 is around 2.2 million tonnes.

“In the longer term, cooperation between the public sector, the infrastructure manager, and all carriers is necessary to reform the railways to avoid the demise of the Estonian railway sector. The demise of rail freight transport in Estonia and the concentration of rail transport in neighbouring countries would harm the Estonian economy, the business environment, competitiveness, and Estonian society as a whole, as the railway is the only sensible way to transport bulk goods and the safest and most environmentally friendly mode of transport,” Toomsalu said.

Operail is an Estonian state-owned railway company active in freight transport and the maintenance, repair, and construction of rolling stock in Estonia. Operail employs around 250 people. Until the beginning of 2023, Operail was also active in international wagon rental and freight transport in Finland. At the direction of the owner, Operail withdrew from these lines of business, as they are not strategically necessary activities for the Estonian state.

Photo: C30-M locomotive, built in Operail’s Tapa depot, carrying freight. Author: Tanel Meos