Increased net sales and operating profit
Fourth quarter
· Consolidated net sales increased by 16.6 percent to SEK 149.3 million (128.0).
· Operating profit (EBIT) increased to SEK 13.2 million (6.7).
· Earnings per share before and after dilution amounted to SEK 0.25 (0.14).
Full year 2023, January-December
· Consolidated net sales increased by 13.5 percent to SEK 564.2 million (497.0).
· Operating profit (EBIT) increased to SEK 67.9 million (52.4).
· Earnings per share before and after dilution amounted to SEK 1.81 (1.52).
· The Board of Directors intends to propose that the Annual General Meeting approve a dividend of SEK 0.70 (0.60) per share for the 2023 financial year.
Significant events in the fourth quarter
· Railcare was awarded another five-year contract for standby locomotives worth a total of SEK 403 million, corresponding to SEK 80 million annually. The work will begin in 2025.
CEO comments
Net sales in the fourth quarter were SEK 149.3 million (128.0) and operating profit was SEK 13.2 million (6.7). This corresponds to an operating margin of 8.8 percent.
We delivered a stable fourth quarter, despite winter coming early which led to some cancellations of planned contracting work. The year can be summed up as a very strong period of sustained growth and positive operating margins. We achieved this despite a challenging surrounding world with turbulent events and high inflation, but also in the sector where a new traffic planning system was introduced which required quick problem solving on our part.
Winter came early this year, with temperatures dropping as early as November and significant snowfall in several locations. On the one hand, this meant that we needed to delay some planned lining and construction work in central and southern Sweden. On the other, our efficient snow machines operated at full capacity, illustrating the ongoing need for contingency snow clearing.
Volumes in the UK contracting operations remained low. We are approaching the end of control period 6, CP6, and have previously experienced low volumes towards the end of control periods in line with allocated funds coming to an end. The new control period, CP7, starts on 1 April 2024 and the work to renew the framework agreement with our customer Network Rail is currently underway.
The locomotive workshop remains at high capacity utilization, although problems with components delivery have delayed the completion of TB locomotives for Infranord. The final delivery of the locomotives will take place in Q1 2024. The transport operations continued according to plan until mid-December, when a train transporting iron ore derailed on Malmbanan, which implied stoppages to some of our transport assignments.
The derailment on Malmbanan highlights the need for robust and reliable railways
On 17 December, one of LKAB’s fully loaded train transporting iron ore from Kiruna to Narvik derailed at Vassijaure station, close to the Norwegian border. The initial assessment was that there would be enough time to repair the track and for traffic to resume before year-end. However, the work took longer than expected, partly due to bad weather but also as a result of the extensive damage, and the stoppage has now lasted almost two months.
For Railcare’s part, the stoppage did not have a significant financial impact, due to the structure of the agreement with the affected customers. LKAB estimated their income shortfall to SEK 100 million per day, which would imply losses of close to SEK 6 billion before the track opened up to traffic again. This was just one of several derailments over the years, and it is unlikely to be the last. Malmbanan is the most heavily trafficked route in Sweden, and is critical to the logistics of the mining companies operating in the north of Sweden.
New agreement for contingency clearing locomotives
At the end of October, we signed a new 5-year agreement relating to locomotives for contingency clearing inoperative vehicles. This is the second largest contract signed by Railcare, and the agreement contributes to ensuring the long-term viability of the transport operations. The total value of the contract is just over SEK 400 million, with an option to extend it for 2 years, corresponding to a further SEK 160 million. The new agreement means that Railcare can contribute to speeding up clearing, which minimizes the impact of unplanned rail stoppages. The derailment on Malmbanan provides a clear example of the financial values associated with these rail transports, and the importance of getting tracks back to working order without delays.
Railcare’s vacuum technology presented at rail fair in Sydney
In mid-November, we participated in the AusRail trade fair in Sydney, the largest railway fare in the Asia-Pacific region. Our surrounding world analysis has concluded that Australia’s railways also have extensive maintenance requirements. What distinguishes the Australian railways from those in Sweden and the UK, is that the railways are privately owned to a greater extent. Large mining companies such as BHP Billiton and Rio Tinto own their own tracks between mine and port. This means that these companies are also responsible for maintenance.
It is exciting and promising to continue to explore what the contacts we have initiated could lead to. Our hope is that there will also be demand for our efficient vacuum technology in Australia.
Winner of Company of the Year and Sustainable Company of the Year
At the Skellefteå business gala, Alvargalan, Railcare was awarded Sustainable company of the year and Company of the Year, with the latter being the most prestigious prize awarded by the Municipality of Skellefteå. Gala host Fredrik Lindström put it extremely well: “It must feel great to be awarded Sustainable Company of the Year in a municipality as sustainable as Skellefteå.” Yes, we are really proud, and both awards are recognition of the work we carry out, and our contribution to a sustainable society.
New financial targets
The Board of Directors of Railcare Group AB has adopted new financial targets for the period up until the end of 2027. The new targets are sales of SEK 1,000 million and operating margin of 13 percent.
Over the past year, a number of significant events have taken place that strengthen our positive view of the future. We won a major contract relating to clearing locomotives that contributes to the long-term viability of operations, while we are also seeing growing demand for our contracting and transport services. We also intend to sharpen our focus on machine sales. Overall, this justifies more aggressive targets.
Mattias Remahl
CEO
