Challenging weather affects profit
FIRST QUARTER
· Consolidated net sales increased by 16.6 percent to SEK 129.4 million (111.0).
· Operating profit (EBIT) increased to SEK 13.8 million (13.1).
· Earnings per share before and after dilution amounted to SEK 0.37 (0.36).
SIGNIFICANT EVENTS IN THE FIRST QUARTER
· Railcare increases its financial targets for the period until 2027. The new targets are net sales of SEK 1,000 million and operating margin of 13 percent.
CEO’s COMMENTS
Net sales in the first quarter were SEK 129.4 million (111.0) and operating profit was SEK 13.8 million (13.1). This corresponded to an operating margin of 10.7 percent.
“The first quarter was negatively impacted by the long winter, which meant that we needed to postpone planned work in the contracting operations. We nevertheless presented a stable quarter thanks to the transport operations, where we continued to deliver according to agreements with Kaunis Iron, LKAB and clearance locomotives for The Swedish Transport Administration throughout the quarter.”
The cold and long winter generated a lot of work with our snow clearance machines, but also meant that the Relining operations in particular were forced to postpone most of its work scheduled for the first quarter. The high volume of snow clearance did not compensate for the fact that we needed to postpone contracting work; under the snow clearance contract we are paid for contingency provision plus increased costs that arise when carrying out snow clearance.
Volumes remained low in the UK contracting operations. The final months of Control Period 6, CP6, have now been concluded. The new Control Period, CP7, started on 1 April and the framework agreement with Network Rail has been extended by a year. We are currently in talks with Network Rail regarding their future needs.
Shortcomings in Sweden’s railways jeopardize major industrial initiatives
The fact that there is a significant maintenance deficit on Swedish railways has been known for some time. The shortcomings present several challenges and the need for robust and reliable railways has never been greater. The clearest example is provided by the two derailments on Malmbanan this winter, which brought traffic to a standstill for 76 days. In the short term, this had major financial consequences for the affected companies, including LKAB and Kaunis Iron, who are entirely dependent on Malmbanan for delivering products to customers. At present there are no alternatives to rail transport. This summer, the period allocated for track work is longer and more extensive than previously, and covers throughout the entire period from May to September. This means even less capacity on Malmbanan, at a time when stocks are huge following the derailments.
In the long term, the challenges presented are even greater. The major industrial initiatives currently underway require transport of significantly higher volumes than at present. Railway transport is the only realistic option, both with regards to volume and from a sustainability perspective. For many of these major industrial projects, financing has already been secured and the project planning for investments and associated facilities completed. The need for infrastructure remains to be addressed, i.e. power supply and transport solutions. It is fully justified that there are significant concerns that the infrastructure issues will not be addressed in time. Confidence in Sweden’s green industry is at stake. It is both serious and urgent that these matters are resolved. New methods for increasing the efficiency of planning and maintenance are required.
For this purpose, Railcare has coined the phrase “Formula 1 pit stops”. This means that once maintenance stoppages take place, they need to be carefully prepared and synchronized, so that as much work as possible is carried out in as short a time as possible. With our knowledge and experience, we intend to make this a reality.
Test run of next generation MPVs
In the first quarter, we started test runs of the new generation MPVs, one of our innovative machines for efficient and sustainable railway maintenance. The machine will be operated using a pantograph that charges the unit directly from overhead lines, which increases the efficiency of the MPV. The batteries can also be charged with the same pantograph, and we are probably amongst the first in the world to develop this solution and implement it for a machine of this size and capacity. The next step is for The Swedish Transport Agency to approve the machine for use on Sweden’s railways. Once this has been achieved, we will start training Railcare’s machine operators with the aim of commencing use of the machine in contracting operations from autumn 2024 onwards.
Mattias Remahl
CEO
