VTG Aktiengesellschaft, one of Europe’s leading wagon hire and rail logistics companies, became significantly more profitable in the financial year 2016.
Operating profit (EBITDA) rose from €336.5m ($361.8m) to €345.3m ($371.3), 2.6% up on the previous year, despite the fact that revenue declined by 4.0% from €1,027.5m ($110.4m) to €986.9m ($1.1bn).
This positive development is due partly to the ongoing realisation of synergies following the acquisition of AAE, but partly also to successful steps to improve efficiency in various Group divisions. Since profitability has improved sustainably in the wake of the AAE takeover, the Executive Board proposes that the dividend this year be increased from €0.50 ($0.53) to €0.75 ($0.80) per share.
The railcar division posted revenue of €517.2m ($556.1m) in the financial year 2016, a drop of 3.7% YoY year. Roughly a quarter of the decline in revenue was due to better capacity utilisation with internal production orders at the company’s own factories and had no effect on earnings. On top of slack demand in some wagon segments, however, weaker trading activity in Europe, low diesel prices and the decrease in truck tolls in Germany in particular placed a burden on intermodal business. Across the global fleet, capacity utilisation thus fell to 89.8%. On the other hand, synergies from the AAE acquisition, internal efficiency programmes and one instance of one-time income were more than enough to offset the decline in revenue, with the result that EBITDA improved by 2.6%, from €335.4m ($360.6m) in the previous year to €344.3m ($370.2) in the financial year 2016.
The rail logistics division saw revenue decline from €324.0m ($348.4) to €312.3m ($335.8), a 3.6% drop. Besides production outages at customers and lower demand for transportation in the agricultural sector, a further factor in this slight decline was the discontinuation of low-margin business. Despite the fall in revenue, EBITDA for the division improved sharply, climbing 71.2% to €5.8m ($6.2m), up from €3.4m ($3.7m) in the previous year. The main contributors to this development were a focus on higher-margin orders and the process optimisation measures completed in 2015.
While global transportation volumes at Tank Container Logistics remained stable YoY in the financial year 2016, lower freight rates caused the division’s revenue to decline from €166.3m ($178.8) to €157.4m ($169.2m), a 5.3% drop. This was primarily due to the elimination of one-time income totalling €1.5m ($1.6m) from the sale of an associated company in the first quarter of 2015, EBITDA slipped from €13.6m ($14.6m) to €11.2m ($12.0m) in the period under review. Adjusted for the one-time effect, this equates to a decline of 7.2%.
Revenue and EBITDA expected to increase
The Executive Board of VTG anticipates a mild positive trend in business development in 2017. In line with moderate growth prospects, especially for Europe, revenue at the VTG Group is expected to edge up. Despite the elimination of one-time income from the previous year, EBITDA too is expected to increase slightly.
The acquisition of AAE has nevertheless significantly increased the Group’s profitability – a fact which the Executive Board believes should be reflected in a similarly significant increase in the dividend. The Board therefore intends to propose to the Annual General Meeting that the previous year’s dividend of €0.50 ($0.53) per share be increased this year to €0.75 ($0.80) per share.
Based on a package of measures, the Board in September 2015 set itself the goal of improving earnings per share to €2.50 ($2.70) by 2018. In light of growing uncertainty about global economic development going forward and the current, rather weaker economic environment, the Board cannot at the present time rule out the possibility that the goal formulated for 2018 might only be reached a year later.
VTG partnered with Chart Ferox to design the first-ever tank wagon for transporting LNG which launched back in 2015.