annual report - finnlines · of the poland service. also in january, finnlines acquired two ro-ro...

2016ANNUAL REPORT

PASSENGER SERVICES, PAGE 15

CONTENT

Finnlines in 2016 270 Years of Experience in Shipping 3CEO’s Review 4CFO’s Review 6Business Concept, Values and Strategic Goals 9Business Environment 10Shipping and Sea Transport Services 12Passenger Services 15Port Operations 16Safety and Environment 19Human Resources 21Financial Statements Board of Directors’ Report 24 Consolidated Statement of Comprehensive Income 28 Consolidated Statement of Financial Position 29 Consolidated Statement of Changes in Equity 30 Consolidated Statement of Cash Flows 31 ProfitandLossAccount, Parent Company 32 Balance Sheet, Parent Company 33 Cash Flow Statement, Parent Company 34 Five-Year Key Figures 35 Calculation of Key Ratios 36 Quarterly Data 37 Board’s Proposal 38 Auditor’sReport 39Corporate Governance Statement 40Board of Directors 46Executive Committee and Board of Management 47Finnlines Fleet 48OperatingAreas 50Contact Information 52The Grimaldi Group 53

PORT OPERATIONS, PAGE 16

SHIPPING AND SEA TRANSPORT SERVICES, PAGE 12

4

With one of the largest ro-ro and ro-pax fleets, Finnlines is the leading operator in the ro-ro and passenger transport in the Baltic and the North Sea, offering an extensive network of Motorways of the Sea between Belgium, Denmark, Estonia, Finland, Germany, Spain, Sweden, the Netherlands, Poland, Great Britain and Russia. In synergy with the Grimaldi Group, the Finnish Company’s services are connected to the entire Grimaldi network and to the US East Coast via Atlantic Container Line. Finnlines’ passenger-freight vessels offer services from Finland to Germany and via the Åland Islands to Sweden as well as from Sweden to Germany. The Company has subsidiaries or sales offices in Germany, Belgium, Great Britain, Sweden, Denmark and Poland. In addition to sea transportation, the Company provides port services in Finland in Helsinki and Turku, which are the most important seaports in Finland.

2

Revenue 2012–2016 EUR million

700

600

500

400

300

200

100

0 12 13 14 15 16

Result before interest and taxes (EBIT) 2012–2016 EUR million

80

60

40

20

0 12 13 14 15 16

Breakdown of revenue 2016

Shipping and sea transportPort operations

95.8%4.2%

FINNLINES IN 2016

Finnlines Group’s result before taxes (EBT) improved by EUR 13.8 million and was EUR 67.0 million. Interest-bearing debt decreased by EUR 42.6 million and amounted to EUR 491.1 (533.7) million. The equity ratio calculated from the balance sheet improved to 48.9 (45.7) per cent and gearing dropped to 83.8 (97.1) per cent.

IFRS IFRS

EUR million 2016 2015Revenue 473.7 511.2Result before interest, taxes, depreciation and amortisation (EBITDA) 139.1 126.9Result before interest and taxes (EBIT) 81.5 70.3Result for the reporting period 68.1 56.8Equity ratio, % 48.9 45.7Interest bearing debt, MEUR 491.1 533.7Gearing, % 83.8 97.1

In January 2016, Finnlines improved its weekly liner services be-

tween West Finland and Germany by offering two direct sailings

from Turku to Travemünde and back and increasing the frequency

of the Poland service. Also in January, Finnlines acquired two

ro-ro vessels, MS Finnmaster and MS Finncarrier, in accordance

with the purchase agreement signed earlier. The vessels were put

into Finnlines’ liner services in February 2016.

The Annual General Meeting held in Helsinki on 12 April 2016,

decided that the number of Board Members be seven: Mr Christer

Backman, Ms Tiina Bäckman, Mr Emanuele Grimaldi, Mr Gianluca

Grimaldi, Mr Diego Pacella, Mr Olav K. Rakkenes, and Mr Jon-

Aksel Torgersen were all re-elected. The Annual General Meeting

elected KPMG Oy Ab as the Company’s auditor for the fiscal year

2016.

During spring 2016, Finnlines initiated an extensive refurbish-

ment programme of the passenger areas on six of its ro-pax ves-

sels. The vessels deployed on the FinnLink route were all upgrad-

ed before the summer season. On the HansaLink vessels, the

renovations were completed by November 2016. During 2016,

four ships were fitted with exhaust gas scrubbers and two were

also rebladed.

The Company has implemented a vast range of improvement

measures and investment programmes, such as vessel optimisa-

tion, scrubber retrofits, hull silicone paint, new propulsion sys-

tems, cost reduction programmes and tonnage adjustments.

Through these, Finnlines is both operationally and financially in a

very advantageous position and can offer more environmentally

friendly and sustainable services. As a recognition of Finnlines’

commitment, the Company was selected as Ruban d’Honneur

recipient in the 2016 European Business Awards and participat-

ed as a finalist in the “Environmental & Corporate Sustainability”

category. To improve its operations further, Finnlines signed a

loan from EIB with guarantees from Nordea and Finnvera to fi-

nance part of the EUR 100 million Environmental Technology

Investment Programme in June 2016.

On 25 August 2016, Grimaldi Group S.p.A. gained title to all

the shares in Finnlines Plc and the shares were thus delisted from

the official list of Nasdaq Helsinki. The redemption price and in-

terest accrued was paid on 17 November 2016. Grimaldi Group

increased its controlling share in Finnlines determinedly, and

completed an acquisition process which started back in 2005.

3FINNLINES 2016

Finnlines has maintained a vital bridge to Continental Europe for

Finnish exporters and importers for 70 years. During the past ten

years, the Company has focused on developing business opera-

tions, renewed the fleet and invested in new efficient technology.

Finnlines stands now as a frontrunner in the Baltic Sea.

Oy Finnlines Ltd was founded in 1947 for the purpose of man-

aging the vessels and traffic of Merivienti Oy, a company owned

by the Finnish forest industry and trade sector. Finnlines became

an international shipping company, operating throughout the

Baltic Sea, the North Sea and the Bay of Biscay. For decades,

Finnlines also sailed routes to the United States up until 1976.

Finnlines started to provide passenger services in 1962,

when MS Hansa Express began sailing between Hanko, Gotland

and Travemünde. The first year clearly demonstrated the need for

this kind of new service – direct passenger and car ferry connec-

tion to Continental Europe. In those days, passenger traffic was

almost completely confined to the summer season. Nowadays

Finnlines’ passenger-freight vessels provide services from

Finland to Germany and via the Åland Islands to Sweden as well

as from Sweden to Germany.

Over the years, the Company has introduced several “next

generation” innovations, such as a new kind of gas turbine vessel

Finnjet in the mid-1970s, the “jumbo” ro-ro vessel Arcturus in

1982, the new ro-pax vessels Finnstar, Finnmaid, Finnlady and

Nordlink in 2006–2007, and last but not least the state-of-the-art

ro-ro vessels Finnbreeze, Finnsea, Finnsky, Finnsun, Finntide

and Finnwave in 2011–2012. In recent years, Finnlines has in-

vested considerably in environmental technology and the fleet

has undergone a large number of improvements: exhaust gas

scrubber installations, propulsion upgrades and rebladings and

silicone anti-fouling. All these measures improve ship efficiency

and have a positive, long-lasting impact on the environment. In

2016, Finnlines’ ro-pax vessels underwent a thorough refurbish-

ment in the public areas and now even better satisfy the passen-

gers’ needs.

The new era began in 2005, when the Italian Grimaldi Group

set foot in Finnlines. The Grimaldi Group has accumulated its

shares and voting rights to 30.5 per cent by July 2006 and deci-

sively increased its holding in the coming years. In August 2016,

the Grimaldi Group completed the acquisition of Finnlines thus

gaining control of 100 per cent of the Company and is now the

sole owner. As a result, trading in Finnlines shares on Nasdaq

Helsinki Ltd was terminated.

With more than 170 weekly freight departures and 80 pas-

senger departures, Finnlines today provides efficient shipping

services – stronger than ever.

70 YEARS OF EXPERIENCE IN SHIPPING

4

FINNLINES EXCELLED IN THE RESET GOALS – UNPRECEDENTED PERFORMANCE

CEO’S REVIEW

The Finnlines Group – once again – delivered a record financial

performance. For the fourth year in a row, we recorded an im-

provement in operating profit to date. Finnlines performed ex-

tremely well in an operating environment that can be described

as both demanding and challenging. Europe’s economic growth

has not yet picked up but remained subdued. In addition, the pre-

vailing sanctions and counter sanctions in Russian trade

continued to impact negatively on commercial activities across

the Baltic Sea region.

Over the years, Finnlines has diligently focused on improving

its operational and financial position. Despite the slow growth in

Europe, the Company has succeeded in improving its result year

after year. In 2016, the result for the period was EUR 68.1 million,

representing a 20 per cent increase over the 2015 financial year,

which was then the best ever result in Finnlines’ history. This

superb result development and yearly result improvement has

been achieved partly due to the successful implementation of the

EUR 1 billion Capex Programme in 2006–2016 targeted towards

fleet renewal, and partly due to our ability to react quickly to

changes in the market in order to optimise the use of vessels and

routes and prudently control our costs. We are running the big-

gest shipping line of the Baltic Sea, and we have made sure that

each route gets exactly the type and number of ships it requires,

with the right capacity, the right cargo flexibility and right speed.

5FINNLINES 2016

In addition, we have utilised modern IT and other technological

innovations and added good-quality, modern features into our

vessels, not to mention that also passengers on HansaLink,

NordöLink and FinnLink vessels will now enjoy beautifully refur-

bished ships and upgraded services. Thanks to our EUR 1 billion

Capex Programme, we now have a modern fleet, with an average

age of less than 12 years and consisting of 22 owned vessels,

almost all equipped with scrubbers, i.e. sulphur emission abate-

ment technology.

It is important to bear in mind that the global shipping industry

plays a tremendously important role in ensuring the steady flow of

both goods and people. The best companies within the industry

have always been geared towards sustainability in order to main-

tain long-term competitive industry prospects. The global ship-

ping industry’s carbon emissions account for a relatively small

part of the world’s carbon emissions. Even though the shipping

sector represents about 90 per cent of global trade, its carbon

emissions are approximately 2.2 per cent of global emissions.

For example, while the volume of cargo, in tonnes, increased by

over 14 per cent, during a period of high economic growth be-

tween 2007 and 2012, the total CO2 emissions produced by the

shipping industry dropped by 15 per cent. These figures show

how shipping is today rather a solution than a problem in terms of

climate change.

Our EUR 100 million Environmental Technology Investment

Programme, apart from installing scrubbers, also included new

propulsion systems and silicone anti-fouling – all are measures

that also improve vessel efficiency and reduce emissions. As a

result of a successful scrubber strategy, 20 out of 22 ro-ro and

ro-pax vessels are equipped with scrubbers, 9 have been reblad-

ed and 2 repainted with silicone anti-fouling. Scrubbers, new

propellers and the reduced hull friction have improved fuel effi-

ciency further, which in turn has also reduced overall fuel con-

sumption over the years, leading to a reduction in the CO2, NOX

and SO2 emissions. Since 2008, the Finnlines fleet’s fuel con-

sumption has decreased by almost 35 per cent, which has re-

duced emissions and thus contributed to sustainable operations.

During 2016, Finnlines installed, for the first time, a pair of flexible

hybrid open/closed loop scrubbers from the world top producers

onboard two of its Sweden–Finland vessels, marking a step to-

ward leadership in the domain of environmental friendly shipping.

The programme is continuing in 2017 onboard a further vessel.

To improve efficiency further and thus to contribute more to

global sustainability, we are currently planning to lengthen six of

the ships built in Jinling yard. This process, called “jumboisation”,

will increase vessel capacity by around 1,000 lane metres which

will enable us to generate profitable growth and improve shipping

efficiency through use of bigger transport units. The technical

specification (i.e. concept study) was prepared during autumn

2016 and the work is scheduled to begin in 2017.

The Grimaldi Group has had a long-lasting and strong sense

of responsibility for the preservation of the environment. In addi-

tion to complying with regulatory requirements, the Group has

invested and will continuously invest in environmentally sustain-

able technology. Therefore, in Finnlines, we put a lot of emphasis

on environmental issues and safety matters. Finnlines prides

itself on being a responsible and reliable partner and a shipping

industry operator providing high-quality, environmentally sound

and sustainable sea transport services. The Company’s work for

sustainability has also been recognised internationally: last year

Finnlines was awarded a Ruban d’Honneur by the European

Business Awards. Competition for sustainability is fierce, and

being ranked among the most sustainable companies in Europe is

a significant achievement. We have continued our hard work over

the years and are committed towards the new even more stringent

regulatory requirements on ballast water treatment and continu-

ously improve our energy savings and environmental impact.

During 2016, the parent company Grimaldi Group, concluded

the redemption of the remaining Finnlines shares and Grimaldi

Group Companies became a 100 per cent shareholder of

Finnlines Plc. This led to a logical decision to delist the Company

from the Helsinki Stock Exchange in August, bringing one histori-

cal chapter to an end. Finnlines became an integral part of the

world’s premier roll-on roll-off specialist – the Grimaldi Group.

In my role as the CEO, I have always sought to be as transpar-

ent as possible. This will not change now even though Finnlines

Plc is no longer a Stock Exchange listed company. Transparency

in our operations generates trust among our stakeholders, and

the trust of our customers, our employees, our financial institu-

tions and investors, and other stakeholders, has always been a

key tenet of the Grimaldi Group’s business philosophy.

Finnlines celebrates an important milestone in 2017 – 70

years has passed since its foundation. We must, however, look

forward to the next chapter in Finnlines’ future. Again, with your

support, I will ensure that we will remain a very strong competitor

in the market and continue to provide you all with safe, reliable,

efficient and environmentally sound services – with an eye to

further improvements.

I thank all our customers, our stakeholders and our employees

for their long-term support. Through our seamless co-operation,

once again, Finnlines was able to excel – in an unprecedented

way – in both operational and financial performance.

Emanuele Grimaldi

“Finnlines performed extremely well in an operating environment that can be described as both demanding and challenging.”

6

THE GROUP DELIVERED OUTSTANDING FINANCIAL RESULTS

CFO’S REVIEW

FINANCIAL PERFORMANCE

In terms of financial performance, Finnlines posted record results

during the financial year 2016. The Finnlines Group’s result for

the reporting period, EUR 68.1 million, was approximately 20

per cent better than in the previous year. Despite the challenging

market environment, the Company’s earnings before interest, tax-

es, depreciation and amortisation, EBITDA, were EUR 139.1 mil-

lion, representing a 29 per cent EBITDA margin of the turnover.

Finnlines’ EUR 100 million Environmental Technology Investment

Programme was initiated in 2014. The aim of the Programme was

to improve the ships’ fuel economy and to reduce emissions by

installing exhaust gas scrubbers, by reblading the vessels’ pro-

pulsion systems, and by treating the vessels with silicone anti-

fouling for reducing hull friction. The successful implementation

has led to a reduction in fuel consumption. Also, the share of in-

expensive heavy fuel oil in Finnlines’ traffic is now greater than in

2015, which has considerably improved fuel economy. By finding

new ways to even further increase fuel efficiency, we can further

reduce bunker consumption and save costs. The lower operative

costs in several other areas than in bunker costs also contributed

positively to the overall result. The continued improvement in our

profitability is a result of putting constant downward pressure on

costs and implementing innovative energy-saving technologies.

TURNAROUND PROGRAMME

One of the key objectives of Finnlines’ Turnaround Programme,

which was launched in 2013, was to implement cost savings

in all main cost components, thereby ensuring Finnlines’ im-

proved financial performance regardless of development in the

European economy or its business environ-

ment. The Finnlines Group’s costs decreased

from EUR 442.7 million to EUR 398.8 million.

We have, indeed, faced a very tough task in this

Programme, but with an experienced team of

hard workers, we have turned challenges into

opportunities one by one, with hard and diligent

work combined with technological know-how.

The quality of our staff, their cohesion, profes-

sionalism and enthusiasm, at all organisational

levels, has been the secret of Finnlines’ success.

In the future, we will continue to focus on our op-

portunities for profitable growth, on cost reduc-

tions, and on further optimising our operations

CAPITAL STRUCTURE

The Group’s capital structure strengthened further. The extraor-

dinary result together with lower capital expenditure led to an im-

proved cash flow compared to the previous year, which enabled

us to markedly reduce the Group’s debt. The interest-bearing

debt decreased by EUR 42.6 million and amounted to EUR 491.1

(533.7) million. Cash flow generated from operating activities

was EUR 124.8 (105.8) million. In 2016, capital expenditure to-

talled about EUR 46.3 million, compared with EUR 64.1 million in

the previous year. The gearing improved to 83.8 (97.1) per cent

and the Group’s equity ratio stands now at the solid 48.9 per

cent level. Finnlines’ solvency and liquidity remained, as in previ-

ous years, at an excellent level, which enabled us to implement

the significant capital expenditure programme. Cash and depos-

its together with unused committed credit facilities amounted to

EUR 130.5 (114.5) million and net debt to EBITDA dropped to

3.5 at year-end, from the previous year’s 4.2 level.

NEW SHAREHOLDER STRUCTURE

On 25 August 2016, the Grimaldi Group lodged a security ap-

proved by the Arbitral Tribunal in connection with the redemption

of the minority shares in Finnlines Plc and thus acquired title to all

the outstanding shares in Finnlines. This completed the Grimaldi

Group’s acquisition of Finnlines Plc, and led to a subsequent de-

cision to de-list the Company from the Helsinki Stock Exchange

on the same date. The redemption price of a Finnlines share

was EUR 18.00 per share. This brought the capitalisation of the

Company to approximately EUR 927 million.

The new shareholder structure reinforces Finnlines’ existing

strategy – enabling us to be the most ef-

ficient shipping company in the Baltic Sea

as part of the Group with proven track

record in highly profitable operations – the

Grimaldi Group, Europe’s number one

shipping company in the combined ro-ro/

ro-pax segment.

Tom Pippingsköld

7FINNLINES 2016

EBITDA and Equity Ratio

EUR million %

50

40

30

20

10

0

12

10

8

6

4

2

0

140

120

100

80

60

40

20

0 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16

Net Debt/EBITDA Development

EUR million %

Gearing

%

Interest-bearing Debt and Shareholders Equity

EUR million

EBITDAEquity Ratio

Interest-bearing debt, excluding leasing liabilitiesShareholders equity

Net debtNet debt/EBITDA

900

800

700

600

500

400

300

200

100

0

1,000900800700600500400300200100

0

200

150

100

50

0

9FINNLINES 2016

BUSINESS CONCEPT

Finnlines promotes international commerce by providing

efficient, high-quality sea transport and port services,

mainly to meet the requirements of the European industrial,

commercial and transport sectors and private passengers.

FINANCIAL GOALS

Finnlines’ objective is to guarantee long-term profitability

through high-quality operations, to generate added value

for its shareholders and to maintain a healthy capital struc-

ture. The Board of Directors bases its annual dividend pro-

posal on the Company’s capital structure, future outlook,

and investment and development needs.

VALUES

CUSTOMER FOCUS

Our customers choose us thanks to our competence, ex-

pertise and reliability. Satisfied customers are the basis for

Finnlines’ enduring success. By identifying its cargo cus-

tomers’ and passengers’ needs, the Company can contin-

uously develop its service products and generate concrete

added value for its customers.

RESPONSIBILITY

We adhere to the principles of sustainable development.

Environmental responsibility forms part of our Company’s

everyday operations. We take safety issues into considera-

tion in all our operations.

PROFITABILITY

We achieve our objectives. Through the quality of our busi-

ness operations, we are able to guarantee long-term profit-

ability and generate added value.

EMPLOYEE SATISFACTION

Finnlines is a reliable and motivating employer, which

treats its employees with fairness and equality, rewarding

the merit.

STRATEGIC GOALS

A stronger position in the Baltic Sea and the North Sea

cargo traffic

• We invest in the operational efficiency of our current

transport areas.

• We will open new routes according to market

opportunities.

• We are actively involved in the growing consolidation of

the sector.

• We increase Group-wide network synergies beyond

the core of today.

A stronger position in the Baltic Sea passenger traffic

• We offer quick and effortless travel between Finland,

Sweden and Germany to our passengers on our large

and efficient ro-pax vessels.

A stronger position in Russian freight traffic

• We are the leading shipping company in transit traffic.

• We actively develop and market direct transport routes

between Central Europe and Russian Baltic ports.

Growing profitability

• We strive to improve our productivity. One of the main

ways of doing this is to focus on routes where the ves-

sels’ capacity utilisation is as high as possible in both

directions.

• We will increase the efficiency of our operational sys-

tems and information management.

• We take proper care of environmental and safety

issues.

• We invest in staff competence.

BUSINESS CONCEPT, VALUES AND STRATEGIC GOALS

10

FLEET

The last two vessels that were bought in 2015 were delivered

in January 2016. Scrubbers to remove excess sulphur were in-

stalled on both of them.

The heavy investment programme in environmental technology

that was undertaken in 2014 was completed in 2016. It included

rebladings and sulphur scrubber installations and also re-paint-

ing hulls with silicone paint. All this enabled the fleet to be oper-

ated in a more environmentally friendly manner, both in terms of

saving fuel and decreasing sulphur dioxide emissions.

The average age of the Group’s vessels was about 12 years.

ROUTE NETWORK

During 2016, Finnlines retained its position as a leading ro-ro

shipping company in the Baltic Sea area.

Finnlines’ ro-ro services in the Baltic and North Sea areas

provide a backbone to Finnish industries’ and trade’s transporta-

tion needs. The services covered the Finnish ports of Rauma,

Uusikaupunki, Turku, Helsinki and Kotka, offering connections

with Russian, Estonian, Polish, German, Danish, British, Dutch,

Belgian and Spanish ports.

The route network also enabled cargo flows between

Continental and British ports and Russia, as well as offered the

wide Grimaldi network for Finnlines’ customers’ use.

The high frequency ro-pax lines cover the services between

Finland and Sweden (FinnLink), Finland and Germany

(HansaLink) and Sweden and Germany (NordöLink).

TransRussiaExpress had a weekly sailing from St. Petersburg

to Lübeck and vice versa.

BUSINESS ENVIRONMENT

11FINNLINES 2016

12

SHIPPING AND SEA TRANSPORT SERVICES

Customers today need digitalised and individualised solutions

and now they are able to pick the most suitable channel for

them – mobile application, extranet, e-mail or phone. In the au-

tumn of 2016, Finnlines launched its first mobile application,

Finnlines Cargo, to provide an ever more flexible and state-of-the-

art service to its freight customers.

The Shipping and Sea Transport Services segment’s rev-

enues totalled EUR 453.6 (492.9 in 2015) million, and it em-

ployed 1,372 (1,317) people on average.

During January–December, the transports totalled about 629

(624) thousand cargo units, 119 (156) thousand cars (not includ-

ing passengers’ cars) and 1,611 (2,032) thousand tons of non-

unitised freight. In addition, some 602 (575) thousand private and

commercial passengers were transported.

The Finnish consumer market was still fairly slow, but the in-

dustrial investments made and decided on show encouraging

signs although their effect is not yet reflected in traffic flows.

THE BALTIC SEA AND NORTH SEA SERVICES

Ro-ro services’ routes are ideally located for servicing freight

customers in the Baltic Sea and North Sea areas. Traffic was

operated with some ten modern ro-ro vessels catering for lorries,

trailers, other mobile cargo, containers and break bulk.

HANSALINK

HansaLink consisted of three Star-class ro-pax vessels plying

between Helsinki and Travemünde. HansaLink retained its strong

position as the largest carrier for unitised cargo volumes be-

tween Germany and Finland. For passengers it was the only di-

rect connection by sea between Finland and Continental Europe.

The traffic was operated with six weekly departures in both direc-

tions with a fast sailing time of less than 30 hours.

Finnlines is one of the industry’s leading players in the Baltic Sea, the North Sea and the Bay of Biscay. The strong position derives from the outstanding service which is based on the needs of our customers. High frequency, cargo capacity and information services offered by Finnlines contribute to flexibility, reliability and predictability to customers.

NORDÖLINK

NordöLink runs a ro-pax service between Malmö and

Travemünde. The three vessels, MS Finnpartner, MS Finntrader

and MS Nordlink, made 19 weekly departures in both directions

with an average intake capacity of about 110,000 lane metres per

week. The non-freight passenger traffic’s turnover continued its

positive trend and improved by 6 per cent.

FINNLINK

FinnLink between Naantali and Kapellskär operated mainly with

two Clipper-class ro-pax vessels. These vessels served unitised

cargo traffic with a total of 14 weekly departures in each direc-

tion. The fast eight-hour voyage and the service’s schedule,

tailored to the needs of freight customers, have maintained the

competitiveness of the route. The calls at the port of Långnäs in

the Åland Islands were continued throughout the year, and were

even increased during the summer high season, with duty-free

shopping onboard. The line’s number of passengers was 10 per

cent higher than the year before.

TRANSRUSSIAEXPRESS

TransRussiaExpress (TRE) runs a regular direct liner service

between Germany and Russia (Lübeck–St. Petersburg), offer-

ing one weekly departure in each direction. Throughout the year,

the line operated with pure ro-ro vessels. The calls at the port of

Kotka on the westbound leg continued throughout the year on a

weekly basis. As from October 2015, a slot charter agreement

was agreed with DFDS, thus increasing the utilisation of the ship

for the whole roundtrip.

INTERCARRIERS

Intercarriers, in which Finnlines holds a 78.5 per cent stake, of-

fered small-tonnage traffic services from ports in Lake Saimaa

and some Russian inland ports to various parts of Europe.

13FINNLINES 2016

15FINNLINES 2016

PASSENGER SERVICES

With its nine ro-pax vessels, operating between six ports in three countries, Finnlines has established its position as an important provider of passenger services in the Baltic Sea.

The total number of passengers transported on all routes (pri-

vate and commercial) grew by 5 per cent to 602 (575 in 2015)

thousand passengers.

The number of private passengers increased on all routes,

the strongest growth being on the Finland–Sweden route with

10 per cent, followed by the Finland–Germany route with 6

per cent. Even the route from Germany to Sweden had a

slight increase of 3 per cent despite the fact that the end of

2015 was boosted by a large number of asylum seekers.

A number of development projects were successfully

brought to an end. All passenger vessels underwent major

refurbishment in the public areas and now even better satisfy

passengers’ needs. The new website including a newly devel-

oped booking engine (web and mobile) was launched. Further

focus was put on web marketing and web channels were de-

veloped to respond to worldwide demand online. The share of

web bookings grew 12 per cent compared to the previous

year.

The onboard passenger concept on all lines is continu-

ously being improved in close collaboration with the personnel

onboard in order to maintain high customer satisfaction levels

and experience.

16

In 2016, Finnlines’ Port Operations generated revenues of EUR

38.4 (35.9 in 2015) million and employed 281 (280) people on

average. The Port Operations unit suffered from low volumes and

keen competition.

PORT OPERATIONS IN HELSINKI

The Vuosaari Harbour, which was opened at the end of 2008,

has proved to be an efficient world-class port with its modern

and advanced infrastructure.

The Company’s four post-Panamax container gantry cranes

have sufficient capacity and power to cope easily with future

growth in container volumes. The export terminals allow cargo

handling in all weather conditions, while the import terminal in the

logistics area has capacity for diversifying and increasing the

provision of supplementary services.

HELSINKI VOLUME DEVELOPMENT

The overall cargo volumes handled by Finnsteve companies

in the Vuosaari Harbour increased from the previous year.

Container volumes increased significantly because a new con-

tainer customer started to use Finnsteve’s terminal from the be-

ginning of June 2016.

The Group’s Port Operations are handled by Finnsteve companies (Finnsteve, Containersteve and FS-Terminals). Finnsteve companies are a major port operator focused on unitised cargo services required by regular liner traffic in the ports of Helsinki, Turku and Naantali. Helsinki is Finland’s most important export and import port for unitised goods, while Turku and Naantali have the fastest sea connections to Sweden.

In 2016, the total cargo throughput in the port of Helsinki in-

creased 1.9 per cent to a volume of 11.6 million tons, compared

to the 2015 volumes. Unitised export traffic decreased by 0.3 per

cent to 5.5 million tons while import traffic increased by 3.8 per

cent to 5.0 million tons. The volume of trailers and lorries in-

creased by 2.6 per cent to 525,337 units. Container traffic in-

creased by 4.8 per cent to 451,263 TEUs.

PORT OPERATIONS IN TURKU AND NAANTALI

The Company’s operations covered the West Harbour, the

Pansio Harbour, the Base Harbour and the port of Naantali.

In 2016, the total cargo throughput in the port of Turku in-

creased 4.9 per cent to 2.5 million tons in comparison to the

volumes in 2015. Container export and import traffic increased

by 72.6 per cent to 2,299 TEUs, thus representing only a small

part of the total cargo throughput. The volume of trailers and

lorries increased by 8.3 per cent to 106,550 units in 2016.

The Company’s Naantali operations provided services to the

Group’s FinnLink traffic between Naantali, Långnäs and

Kapellskär.

PORT OPERATIONS

17FINNLINES 2016

19FINNLINES 2016

>>

Finnlines is represented at the technical and environmental

committees under the Swedish and Finnish Shipowners’

Associations.

The Baltic Sea Research Institute (IOW) has installed a de-

vice on two of Finnlines’ ships. The devices measure greenhouse

gases in the Baltic Sea and in the Gulf of Finland.

LEGISLATION

The International Maritime Organisation (IMO) manages inter-

national legislation on safety and environmental matters. The

MARPOL 73/78 Convention contains regulations on the disposal

of waste and sewage into the sea, and on the prevention of air

emissions. The SOLAS Convention regulates maritime safety

matters, including ship construction, life-saving arrangements

and navigation. The Company’s port operations comply with

national legislation.

ENERGY CONSUMPTION AND ATMOSPHERE EMISSIONS

Finnlines operates mainly in the Emission Control Areas, i.e. the

Baltic Sea, the North Sea and the English Channel, where the

sulphur content limit for ship fuel oil is 0.10 per cent in accord-

ance with the MARPOL Convention. The global sulphur fuel limit

continues to be 3.5 per cent, but it will decrease to 0.5 per cent

in 2020.

To comply with the MARPOL Convention Finnlines has fitted

a total of 20 ships with exhaust gas scrubbers since the end of

2014. Scrubbers also remove most of the particles. Ships which

are not equipped with scrubbers run on ultra low sulphur fuel oil.

During the past few years, several measures have been taken

to reduce fuel consumption, including optimisation of schedules.

Nine ships have been rebladed and six ships fitted with rudder

bulbs. As organisms attached to the ship’s hull slow the ship

down, increasing fuel consumption and air emissions, the latest

generation of silicone hull paints has been applied on two ro-ro/

passenger ships. On the other ships, the bottom is brushed and

cleaned at regular intervals.

To reduce the carbon footprint from shipping and to create a

benchmark system in Europe, the EU regulation on the monitor-

ing, reporting and verification of CO2-emissions (MRV) will be-

SAFETY AND SECURITY

Safety is one of the most important environmental aspects in

shipping. The land-based ship management organisation and

all the ships are certified in accordance with the ISM Code

(International Management Code for the Safe Operation of Ships

and for Pollution Prevention). All ships and port facilities also

comply with the requirements of the ISPS Code (International

Ship and Port Facility Security Code).

The ships are regularly inspected and audited by the maritime

administration, classification societies and by in-house auditors.

To be prepared for safety and environmental risks, regular drills

are held both internally and with authorities, such as the coast

guard, border guard and local city rescue departments.

Occupational safety and health, which entails maintenance of

health, prevention of injuries and illnesses, and riskless use of

work equipment, is an important part of Finnlines’ operations. In

2016, inspections under the Maritime Labour Convention fo-

cused on psychosocial stress among the crew onboard the

ships. The purpose of the Convention is to safeguard that seafar-

ers are provided with decent working and living conditions.

In ports, stevedoring companies have safety systems, includ-

ing communication and contingency plans in case of an accident.

Ports are equipped to respond to fires and oil and chemical

spills.

ENVIRONMENTAL CERTIFICATION

Finnlines’ environmental work focuses on vessels as they have a

substantial effect on the environment. A certified environmental

system under the ISO 14001 Code provides a tool to monitor

and measure the impact of all environment-related operations and

services. The system will also guarantee that the environmental

performance unconditionally complies with relevant legislation

and regulations. The ISO 14001 certificate was renewed and will

be valid until September 2018.

STAKEHOLDERS

In environmental and safety matters, Finnlines’ most important

stakeholders are the flag, port and host state administration,

owners, customers, port operators and contractors, as well as

the inhabitants of harbour and fairway areas.

SAFETY AND ENVIRONMENT

Operating in ecologically sensitive areas, the objective of Finnlines’ safety and environmental policy is to provide safe, top-quality services while making efforts to minimise the environmental impacts in every aspect of operations. In 2016, Finnlines continued to implement its Environmental Technology Investment Programme, which will amount to EUR 100 million. The programme has included the installation of exhaust gas scrubbers, investments in propulsion and reblading, and silicone anti-fouling.

20

come fully effective in 2018. Ship owners and operators will be

required to report on vessels larger than 5,000 GT. Moreover, a

monitoring plan must be prepared and submitted to a verifier by

the end of August 2017.

In 2016, Finnlines’ vessel traffic consumed 310,662 tons of

heavy fuel oil and diesel oil, representing an increase of around

2.9 per cent compared with 2015.

WASTE AND SEWAGE

Efforts have been made to minimise the amount of waste that is

deposited in landfills. The main recyclable waste types generated

on board include energy waste, bio waste, glass, paper, card-

board, wood, and metal. Hazardous waste, including oil waste,

oily filters, paint, and electronic scrap, is separated and taken to a

designated container in the port.

MARPOL contains restrictions concerning black water, i.e.

toilet water. Finnlines’ ro-pax vessels land black water to onshore

municipal sewage systems whenever they are accessible. Tank

vehicles are used where reception facilities are not provided.

There are no restrictions on the discharge of grey water, i.e. wa-

ter from kitchens and showers, but Finnlines pumps grey water to

the shore-based sewage systems. Cargo ships are equipped

with sewage treatment plants approved by the flag-state

administration.

OTHER ENVIRONMENTAL ASPECTS

Oily waste water, ‘bilge water’, is generated in engine rooms.

Bilge water is separated in separators and the remaining sludge

is always taken ashore. The limit for the oil content of water that

may be discharged into the sea is 15 ppm but many of our ships

have more efficient separators. Some bilge water is also pumped

ashore.

Ballast water is used to stabilise ships when not fully loaded.

Taken on in one ecological zone and released into another may

introduce aquatic invasive species, which may disrupt fragile

marine ecosystems with disastrous ecological and economical

effects. The IMO Ballast Water Management Convention was

introduced as early as 2004. However, the entry into force crite-

ria of 35 per cent of global tonnage was not met until 8

September 2016. The Convention will enter into force one year

later and this means that ships must be fitted with treatment

equipment by the first renewal survey. Thus a transitional period

of a maximum of 5 years will apply. Furthermore, exchange of

ballast water will be mandatory after the entry-into-force date

with the exception of the Baltic Sea, which does not meet the

requirement of distance from shore or depth of water.

Finnlines has investigated different technologies and contact-

ed equipment suppliers for quotations. Low salinity, ice and high

turbidity create extra challenges for the equipment in the Baltic

Sea.

ENVIRONMENTAL ASPECTS IN PORT OPERATIONS

Being aware of their environmental impacts and responsibili-

ties, Finnsteve companies follow the principles of sustainable

development. The focus is on enhancing energy savings and on

reducing air emissions and waste generation in processes, in

storage operations and maintenance of machines and properties.

Finnsteve companies hold a valid ISO 14 001 environmental cer-

tificate and an ISO 9001 quality certificate.

To ensure maritime safety and reduce risks to cargo, the IMO

amended the SOLAS Convention with the requirement to verify

the gross weight of a packed container by weighing it before

loading. As from July 2016, this requirement has applied to all

vessels operating on a route, which is over 600 nautical miles.

Finnsteve offers weighing services for its customers in Vuosaari

harbour.

In 2016, the fuel consumption of the port operations totalled

some 810 tons, which includes the operations in Helsinki, Turku

and Naantali, an increase of nearly 8 per cent compared with

2015.

SAFETY AND ENVIRONMENT (CONTINUED)

21FINNLINES 2016

>>

HUMAN RESOURCESSEA PERSONNEL

The focus in 2016 was, as expected, on upgrading the skills of

our sea personnel. Skills were upgraded to meet the require-

ments of the Manila amendments to the STCW regulations,

which entered into force on 1 January 2017. We also provided

training in occupational health and safety as well as vocational

training. Furthermore, we introduced a new extensive video train-

ing tool on our vessels. The importance of wellbeing of sea per-

sonnel and leadership and management skills was emphasised.

Our employees have been very interested in self-development.

The co-operation and communication between shore and sea

personnel was maintained by means of frequent contacts and

ship visits. Senior officers were invited to participate in in-house

training events and meetings.

After the entry into force of the EU Sulphur Directive, the

dockings related to the Company’s Environmental Technology

Investment Programme continued in 2016. This included the

installation of exhaust gas scrubbers and rebladings. The pro-

gramme caused temporary changes in vessels’ operating areas

and some layoffs. The refurbishment project of the passenger

facilities on ro-pax ships required flexibility from our sea person-

nel and the rest of our organisation, but the outcome was very

successful.

STEVEDORE PERSONNEL

During 2016, our main focus was on our stevedores’ well-

being, including both training courses and workshop activities.

These efforts are a continuation of many years’ successful co-

operation between the employees and their representatives and

the Company. As a result, our employees’ sick leaves have de-

creased considerably. In 2016, Finnsteve managed to reach the

finals in Etera Mutual Pension Insurance Company’s wellbeing at

work award competition and was granted a diploma for its efforts

in job wellbeing and early retirement prevention.

In 2016, training also focused on improving our personnel’s

skills and courses in first aid and safety were provided. The train-

ing for Finnsteve companies’ management team focused on de-

veloping leadership skills, for example, through the 360 feedback

survey and a related workshop. The communication between

foremen and stevedores was also further improved through de-

velopment discussions. In addition, HR reporting was improved

to better serve the foremen’s needs.

Production and resource management IT systems will be re-

newed in 2017, and related projects are already in full swing.

SHORE PERSONNEL

As for the shore personnel, the year’s focus was on development

of competence and leadership skills, as well as on job wellbeing.

For the shore personnel in Finland, the two-year ‘Vire’ project

on job wellbeing was completed at the end of 2016. It included

promoting physical and mental health in areas such as self

management and overall wellbeing, circuit classes and various

measurements.

Job rotation, new projects (refurbishment on passenger ships,

scrubber projects and dockings) and various training pro-

grammes relating to systems, safety, occupational health and

safety and job wellbeing, all contributed to the competence de-

velopment of our employees.

PERFORMANCE MANAGEMENT

Group HR reporting was further improved and harmonised with

the Grimaldi Group’s systems and responsibility report. A new

recruiting system was introduced which also streamlines our in-

ternal processes. In addition, we we put emphasis on leadership

and performance development and ameliorated communication.

Our Group’s revenue/average number of employees in 2016

was EUR 287 (320 in 2015) thousand. EBIT/average number of

employees was EUR 49 (44) thousand.

PERSONNEL CHANGES

The Group employed an average of 1,653 (1,597) persons during

the reporting period, consisting of 957 (899) persons at sea and

696 (698) persons on shore. The number of persons employed

at the end of the period was 1,627 (1,588) in total, of which 934

(889) at sea and 693 (699) on shore. The number of sea per-

sonnel increased due to the acquisition of the new vessels MS

Finnmaster and MS Finncarrier, which joined the Group´s fleet at

the beginning of 2016.

The personnel expenses (including social costs) for the re-

porting period were EUR 89.8 (84.2) million.

22

HUMAN RESOURCES (CONTINUED)

Key figures 2016 2015Average number of employees 1,653 1,597Revenue/employee, EUR 286,538 320,060Personnel expenses/employee, EUR 54,290 52,712Result before taxes/employee, EUR 40,504 33,281Employee turnover, % 27 24Average absence of personnel, day/employee 13.4 13.5Training days, total 2,464 1,551The average age of Finnlines personnel, years 47 45The average duration of employment, years 7 5Average number of employees per business areaShore-based personnel Shipping and Sea Transport Services 415 418 Port Operations 281 280Sea personnel 957 899Group, total 1,653 1,597

On 31 December 2016, the shore-based personnel amounted to 693 and

sea personnel to 934, in total 1,627.

On 31 December 2016, the shore-based personnel amounted to 699 and sea personnel

to 889, in total 1,588.Employee categoriesShore-based personnel excl. Stevedores 30% 30%Sea personnel 57% 56%Stevedores 13% 14%

Gender distribution Shipping Port personnelSea

operations Shipping Port personnel Sea operationsFemale 49% 6% 19% 49% 6% 21%Male 51% 94% 81% 51% 94% 79%Personnel by countryFinland 70% 68%Sweden 22% 23%Germany 6% 6%Other 2% 3%Quarterly figures, Average number of employeesContinuing operations I/2016 II/2016 I/2015 II/2015

1,621 1,631 1,595 1,595III/2016 IV/2016 III/2015 IV/2015

1,664 1,653 1,612 1,597

23FINNLINES 2016

2016FINANCIAL STATEMENTS

24

BOARD OF DIRECTORS’ REPORT

FINNLINES’ BUSINESS

Finnlines is the largest shipping company in the Baltic Sea based

on both ro-ro and ro-pax volumes (source: Baltic Transportation

Journal). The Company's passenger-freight vessels offer servic-

es from Finland to Germany and via the Åland Islands to Sweden,

as well as from Sweden to Germany. Finnlines’ ro-ro vessels

operate in the Baltic Sea and the North Sea. The Company has

subsidiaries in Germany, Belgium, Great Britain, Sweden,

Denmark and Poland, which all are also sales offices. In addition

to sea transportation, the Company provides port services in

Helsinki and Turku.

GROUP STRUCTURE

Finnlines Plc is a Finnish public limited company, which operates

under Finnish jurisdiction and legislation. At the end of the report-

ing period, the Group consisted of the parent company and 21

subsidiaries.

Finnlines is part of the Italian Grimaldi Group, which is a glob-

al logistics group specialising in maritime transport of cars, roll-

ing cargo, containers and passengers. The Grimaldi Group com-

prises seven shipping companies, including Finnlines, Atlantic

Container Line (ACL), Malta Motorways of the Sea (MMS) and

Minoan Lines. With an owned fleet of about 120 vessels, the

Group provides maritime transport services for rolling cargo and

containers between Northern Europe, the Mediterranean, the

Baltic Sea, West Africa, North and South America. It also offers

passenger services within the Mediterranean and the Baltic Sea.

On 25 August 2016, Grimaldi Group S.p.A. gained title to all the

shares in Finnlines Plc and the shares were thus delisted.

GENERAL MARKET DEVELOPMENT

Based on the statistics by the Finnish Transport Agency for

January–December, the Finnish seaborne imports carried in

container, lorry and trailer units increased by 4 per cent, whereas

exports increased by 4 per cent (measured in tons) compared to

the same period in 2015. Private and commercial passenger

traffic between Finland and Sweden remained on the same level

as in 2015. The corresponding traffic between Finland and

Germany increased by 4 per cent (Finnish Transport Agency).

FINNLINES’ TRAFFIC

At the beginning of 2016, the frequency of the Poland service

increased and Hanko became at new port of call in Finland.

Finnlines also made a major improvement in its weekly liner ser-

vices between West Finland and Germany, and offered two di-

rect sailings from Turku to Travemünde and back. The line was

operated by Finnlines' newest ro-ro vessels with a capacity of

3,260 lane metres.

In January 2016, the charter agreement of MS Misida expired

and the vessel was redelivered in Tilbury on 4 January 2016.

Finnlines also acquired two ro-ro vessels in accordance with the

purchase agreement signed earlier. The vessels were put into

Finnlines’ liner services in February 2016.

Starting from July 2016, MS Finneagle was transferred from

the FinnLink service and chartered out to the Grimaldi Group.

The vessel returned to the Finnlink service in October, and at the

same time, MS Finnfellow was docked for the installation of the

exhaust gas cleaning system.

During the reporting period, Finnlines operated on average 21

(22) vessels in its own traffic.

The cargo volumes transported during January–December

totalled approximately 629 (624 in 2015) thousand cargo units,

119 (156) thousand cars (not including passengers’ cars) and

1,611 (2,032) thousand tons of freight not possible to measure in

units. In addition, some 602 (575) thousand private and commer-

cial passengers were transported.

FINANCIAL RESULTS

The Finnlines Group recorded revenue totalling EUR 473.7

(511.2) million in 2016, a decrease of 7.3 per cent compared to

the same period in the previous year. Shipping and Sea

Transport Services generated revenue amounting to EUR 453.6

(492.9) million and Port Operations EUR 38.4 (35.9) million. The

Shipping and Sea Transport Services segment’s revenue de-

creased mainly due to the lower bunker surcharge as compensa-

tion passed to our clients. In Port Operations the revenue grew

due to increased external and internal cargo handling activities.

The internal revenue between the segments was EUR 18.2 (17.6)

million.

Result before interest, taxes, depreciation and amortisation

(EBITDA) was EUR 139.1 (126.9) million, an increase of

9.6 per cent.

Result before interest and taxes (EBIT) was EUR 81.5 (70.3)

million. In 2016, most of the vessels were operated using less

expensive fuel oil, which had a positive impact on the result even

though bunker prices started to increase globally during the

fourth quarter. The result includes a gain on sale of EUR 4.4 mil-

lion for MS Finnsailor.

As a result of the improved financial position, net financial

expenses decreased and were EUR -14.6 (-17.1) million.

Financial income was EUR 0.4 (0.9) million and financial expens-

es EUR -15.0 (-18.1) million. Result before taxes (EBT) improved

by EUR 13.8 million and was EUR 67.0 (53.2) million. The result

for the reporting period was EUR 68.1 (56.8) million).

The most important business and share related key indicators

are presented in the Five-Year Key Figures on page 35.

25FINNLINES 2016

>>

STATEMENT OF FINANCIAL POSITION, FINANCING AND

CASH-FLOW

Even though the Company has an ongoing Environmental

Technology Investment Programme and paid dividends of EUR

41.3 million, interest-bearing debt decreased by EUR 42.6 million

and amounted to EUR 491.1 (533.7) million excluding leasing

liabilities of EUR 3.7 (17.9) million. The equity ratio calculated

from the balance sheet improved to 48.9 (45.7) per cent and

gearing dropped to 83.8 (97.1) per cent. Due to the expired char-

ter agreements and redelivery of the remaining chartered ton-

nage in the first quarter 2016, vessel lease commitments de-

creased by EUR 0.1 million to EUR 0.0 million compared to the

end of December 2015.

The Group’s liquidity position is strong and at the end of the

period, cash and cash equivalents together with unused commit-

ted credit facilities amounted to EUR 130.5 (114.5) million.

Net cash generated from operating activities improved con-

siderably and was EUR 124.8 (105.8) million.

CAPITAL EXPENDITURE

The Finnlines Group’s gross capital expenditure in the reporting

period totalled EUR 46.3 (64.1) million, including tangible and

intangible assets. Total depreciation and amortisation amounted

to EUR 57.6 (56.6) million. The investments consist of the final

payments related to the purchase and delivery of MS Finncarrier

and MS Finnmaster, normal replacement expenditure of fixed

assets, scrubber and reblading projects, improvement of pas-

senger areas and dry-dockings of ships.

In 2015, Finnlines launched the second phase of the EUR

100 million Environmental Technology Investment Programme

which covered scrubber orders for its remaining ro-ro vessels

and a further three of its ro-pax vessels. Moreover, additional

energy efficiency investment was initiated by extending the pro-

pulsion upgrading programme. The first of three ro-pax vessels

to be rebladed and equipped with scrubbers, MS Finnclipper,

received her new IAPP Certificate on 18 August 2016 upon com-

pletion of scrubber system commissioning. The second ro-pax

vessel to be rebladed and equipped with scrubbers, MS

Finnfellow, was under retrofit during the fourth quarter 2016. The

last of the three ro-pax vessels to undergo the same environmen-

tal upgrade, MS Finneagle, will receive her scrubbers and new

blades onboard in the first quarter 2017. After this, the whole

Programme will be completed.

As part of the Connecting Europe Facility (CEF), the

European Union awarded Finnlines a funding of EUR 14.5 million

for environmental technology investments on vessels in liner ser-

vices. The funding is recognised as adjustment of investment

costs. Interim payments of EUR 12.5 million had been received

until the end of 2016. Furthermore in June 2016, Finnlines signed

a loan from EIB with guarantees from Nordea and Finnvera to

finance part of the EUR 100 million Environmental Technology

Investment Programme.

During spring 2016, Finnlines initiated an extensive refurbish-

ment programme of the passenger areas on six of its ro-pax ves-

sels. The vessels deployed on the FinnLink route were all up-

graded before the summer season. On the HansaLink vessels,

the programme was divided into two phases. The first phase was

completed by midsummer and the second, more extensive

phase, which included refurbishment of shops, cafeterias and

restaurants, started in September 2016. All passenger service

area improvements were completed during the fourth quarter

2016.

PERSONNEL

The Group employed an average of 1,653 (1,597) persons dur-

ing the reporting period, consisting of 957 (899) persons at sea

and 696 (698) persons on shore. The number of persons em-

ployed at the end of the period was 1,627 (1,588) in total, of

which 934 (889) at sea and 693 (699) on shore. The number of

sea personnel increased due to the acquisition of the new ves-

sels MS Finnmaster and MS Finncarrier, which joined the

Group´s fleet at the beginning of 2016.

The personnel expenses (including social costs) for the re-

porting period were EUR 89.8 (84.2) million.

RESEARCH AND DEVELOPMENT

The aim of Finnlines’ research and development work is to find

and introduce new practical models and operating methods,

which enable the Company to meet customer requirements in a

more sustainable and cost-efficient way. In 2016, the focus con-

tinued to be on environmental investments and energy efficiency

of the vessels.

In 2016, the project for installation of scrubbers on vessels

was continued. Further, improvements for enabling a lower re-

sistance were made to some of the vessels. These measures will

considerably reduce energy consumption and impacts on the

environment. The Company has initiated a study on lengthening a

ro-ro vessel series by approximately 30 metres each. The techni-

cal specification (i.e. concept study) was prepared during au-

tumn 2016. The objective is to enable profitable growth by in-

creasing vessel capacity and improving transporting efficiency by

utilising bigger transport units.

During 2016, the harmonisation of the systems within the

Finnlines Group and in the framework of the entire Grimaldi

Group network were continued. Over the year, the new operative

IT system for the cargo traffic, which was implemented in 2015,

was developed further by adding new functionalities and improv-

ing the usability of the system. For instance, a new mobile user

interface for cargo booking enables a more flexible and faster

interaction with customers.

26

BOARD OF DIRECTORS’ REPORT (CONTINUED)

In 2016, the design of the new operative systems in the ports

was continued. The development and implementation of the new

systems will still continue in 2017 and 2018.

THE FINNLINES SHARE

The Company’s paid-up and registered share capital on 31

December 2016 totalled EUR 103,006,282. The capital stock

consisted of 51,503,141 shares. On 25 August 2016, Grimaldi

Group S.p.A. gained title to all the shares in Finnlines Plc and the

shares were thus delisted from the official list of Nasdaq Helsinki

Oy.

The shares and shareholders are dealt with in more detail in

the Notes to the Consolidated Financial Statements, in Note 37.

Shares and shareholders.

DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING

Finnlines Plc’s Annual General Meeting was held in Helsinki on

12 April 2016. The Annual General Meeting of Finnlines Plc ap-

proved the Financial Statements, the Board of Directors’ Report

and the Auditor’s Report, and discharged the members of the

Board of Directors and the President and CEO from liability for

the financial year 2015. It was decided to accept the proposal of

the Board of Directors that no dividend be paid for 2015.

The meeting decided that the number of Board Members be

seven. All of the current Board Members were re-elected; Mr

Christer Backman, Ms Tiina Bäckman, Mr Emanuele Grimaldi,

Mr Gianluca Grimaldi, Mr Diego Pacella, Mr Olav K. Rakkenes

and Mr Jon-Aksel Torgersen. It was decided to pay annual com-

pensation to the members of the Board as follows: EUR 50,000

for the Chairman, EUR 40,000 for the Vice Chairman, and EUR

30,000 for each of the other members of the Board.

The Annual General Meeting elected APA KPMG Oy Ab as

the Company’s auditor for the fiscal year 2016. It was decided

that the external auditors be reimbursed according to invoice.

It was decided to authorise the Board of Directors to resolve

on the issuance of shares in one or several tranches. The Board

of Directors may, on the basis of the authorisation, resolve on the

issuance of shares in one or several tranches, so that the aggre-

gate number of shares to be issued shall not exceed 10,000,000

shares. The Board of Directors decides on all the conditions of

the issuance of shares. The issuance of shares may be carried

out in deviation from the shareholders’ pre-emptive rights (direct-

ed issue). The authorisation is valid until the next Annual General

Meeting. The authorisation replaces the Annual General

Meeting’s authorisation to decide on a share issue of 14 April

2015.

DECISIONS TAKEN BY THE EXTRAORDINARY GENERAL

MEETING

Finnlines Plc’s Extraordinary General Meeting was held on 20

December 2016. The Extraordinary General Meeting decided, in

accordance with the proposal of the Board of Directors, to dis-

tribute a dividend of EUR 0.80 per share. The dividend was paid

to shareholders on 30 December 2016.

RISKS AND RISK MANAGEMENT

Finnlines is exposed to business risks that arise from the capacity

of the fleet existing in the market, counterparties, prospects for

export and import of goods, and changes in the operating envi-

ronment. The risk of overcapacity is reduced through scrapping

of aging vessels, on the one hand, and the more stringent

Sulphur Directive requirements, on the other.

Finnlines operates mainly in the Emissions Control Areas

where the emission limits are stricter than globally. The sulphur

content limit for heavy fuel oil was reduced to 0.10 per cent as

from 1 January 2015 in accordance with the MARPOL

Convention. This has increased costs of sea transportation.

However, with one of the youngest and largest fleets in Northern

Europe and with investments in engine systems and energy effi-

ciency, Finnlines is in a strong position to greatly mitigate this

risk.

The effect of fluctuations in the foreign trade is reduced by the

fact that the Company operates in several geographical areas.

This means that slow growth in one country is compensated by

faster recovery in another. Finnlines continuously monitors the

solidity and payment schedules of its customers and suppliers.

Currently, there are no indications of imminent risks related to

counterparties but the Company continues to monitor the finan-

cial position of its counterparties. Finnlines holds adequate credit

lines to maintain liquidity in the current business environment.

More detailed information on Finnlines’ financial risks and risk

management can be found in the Notes to the Consolidated

Financial Statements, in Note 33. Financial Risk Management.

The risk management procedures of the Company are presented

in more detail on the Company’s website under Corporate

Governance.

LEGAL PROCEEDINGS

The District Court of Helsinki rendered in February 2015 its deci-

sion on the dispute between Finnlines Plc and the State of

Finland. According to Finnlines Plc, the Finnish Act on Fairway

Dues in force until 1 January 2006 contained provisions which,

according to EU law, were discriminatory. The Company has

been charged excessive fairway dues during 2001–2004. In its

27FINNLINES 2016

decision, the District Court of Helsinki ordered the State of

Finland to refund to Finnlines Plc, as plaintiffs, the fairway dues,

charged in excessive extent in 2001–2004 totalling about EUR

17.0 million, including interest. The Finnish State appealed to the

Helsinki Court of Appeal. The Court of Appeal rendered its deci-

sion in August 2016 by dismissing the judgment rendered by the

District Court of Helsinki. The Court of Appeal considers that the

claims of Finnlines have expired. The Company has submitted

the leave to appeal at the Supreme Court. The case is pending.

The Company has summoned OMB Ostsee Mineralöl-Bunker

GmbH (’OMB’) Rostock, Germany, to the District Court and

demanded compensation for the damage that has occurred to

the Company for the price difference between the paid amount

for the supplied fuel and the market price. The Company's basis

for the demand is that OMB has abused its dominant position in

the relevant market and the Company was forced to buy fuel from

OMB, OMB being the sole supplier. The total claimed amount is

EUR 2.76 million. In its decision the District Court of Rostock

dismissed the Company's claims in full. The Company has de-

cided to appeal the District Court's decision to the Court of

Appeal. The case is pending.

The Company’s port operations subsidiaries have received a

summons from 18 former employees. All employees claim com-

pensation based on groundless termination of their employment

contracts and compensation according to the Non-Discrimination

Act. The total amount of the claims is EUR 2.2 million. The sub-

sidiaries consider the basis of the claims to be groundless. The

case is pending.

TONNAGE TAXATION

Finnlines Plc entered into the Finnish tonnage taxation regime as

from 1 January 2013. In tonnage taxation, the shipping opera-

tions transferred from taxation of business income to tonnage-

based taxation. Finnlines Deutschland GmbH exited from the

German tonnage tax scheme and transferred to business taxation

on 1 February 2014.

ENVIRONMENT AND SAFETY

Operating in ecologically sensitive areas, the objective of

Finnlines’ safety and environmental policy is to provide safe, top-

quality services while making efforts to minimise the environmen-

tal impacts in every aspect of operations. In 2016, Finnlines con-

tinued to implement its Environmental Technology Investment

Programme, which will amount to EUR 100 million. The pro-

gramme includes the installation of exhaust gas scrubbers, in-

vestments in propulsion and reblading, and silicone anti-fouling.

The IMO Ballast Water Management Convention will become

effective on 8 September 2017, which means that ships must be

fitted with treatment equipment by the first renewal survey.

Furthermore, exchange of ballast water will be mandatory after

the entry-into-force date. Finnlines has investigated different

technologies and contacted equipment suppliers.

In 2016, Finnlines’ vessel traffic consumed 310,662 tons of

heavy fuel oil and diesel oil, representing an increase of 2.9 per

cent compared with 2015. In 2015, fuel consumption of vessels

was exceptionally low due to a large number of dockings. In

2016, the fuel consumption of the port operations totalled some

810 tons, which includes the operations in Helsinki, Turku and

Naantali, an increase of nearly 8 per cent compared with 2015.

CORPORATE GOVERNANCE

The Corporate Governance Statement can be reviewed on the

corporate website: www.finnlines.com.

EVENTS AFTER THE REPORTING PERIOD

There are no significant events to report.

OUTLOOK AND OPERATING ENVIRONMENT

Finnlines is starting a new capital expenditure project on its fleet.

We are in the process of lengthening several of our vessels for

greater efficiency and better fuel economy. Finnlines Group’s

result before taxes is expected to improve over the previous

year’s high level.

DIVIDEND DISTRIBUTION PROPOSAL

The parent company Finnlines Plc’s result for the reporting pe-

riod was EUR 56.0 million. The Board of Directors proposes to

the General Meeting that the General Meeting authorise the

Board of Directors to decide, at its discretion, on the payment of

dividend up to Finnlines Plc’s result for the reporting period in

2016.

According to the consolidated statement of financial position,

the equity attributable to parent company shareholders equals

EUR 587.9 (561.1) million at the end of the reporting period.

Naples, 23 February 2017

Finnlines Plc, The Board of Directors

28

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, IFRS

This page is an extract of the audited Financial Statements. The complete audited Financial Statements of the Group and the parent company are available at www.finnlines.com. The extracts of the audited Financial Statements presented in the Annual Report should be

viewed together with the complete and audited Financial Statements.

Most of the items recognised in the Consolidated Statement of Comprehensive Income fall under the tonnage tax scheme.

EUR 1,000 1 Jan–31 Dec 2016 1 Jan–31 Dec 2015Revenue 473,711 511,167

Other income from operations 6,652 1,810Materials and services -126,486 -161,264Personnel expenses -89,753 -84,186Depreciation, amortisation and impairment losses -57,587 -56,590Other operating expenses -125,009 -140,654

Total operating expenses -398,835 -442,694Result before interest and taxes (EBIT) 81,528 70,284

Financial income 412 934Financial expense -14,978 -18,064Result before taxes (EBT) 66,961 53,153

Income taxes 1,162 3,675Result for the reporting period 68,124 56,829

Other comprehensive income:Other comprehensive income to be reclassified to profit and loss in subsequent periods:Exchange differences on translating foreign operations -74 32Tax effect, net 0 0Other comprehensive income to be reclassified to profit and loss in subsequent periods, total -74 32Other comprehensive income to be reclassified to profit and loss in subsequent periods, totalRemeasurement of defined benefit plans 20 632Tax effect, net -29 -36Other comprehensive income not being reclassified to profit and loss in subsequent periods, total -8 596Total comprehensive income for the reporting period 68,041 57,457

Result for the reporting period attributable to:Parent company shareholders 68,133 56,841Non-controlling interests -10 -12

68,124 56,829Total comprehensive income for the reporting period attributable to:Parent company shareholders 68,051 57,469Non-controlling interests -10 -12

68,041 57,457Result for the reporting period attributable to parent company shareholders calculated as earnings per share (EUR/share)Undiluted / diluted earnings per share 1.32 1.10

29FINNLINES 2016

CONSOLIDATED STATEMENT OF FINANCIAL POSITION, IFRS

EUR 1,000 31 Dec 2016 31 Dec 2015ASSETSNon-current assetsProperty, plant and equipment 982,629 997,619Goodwill 105,644 105,644Other intangible assets 3,529 3,758Other financial assets 4,580 4,576Receivables 1,720 1,258Deferred tax assets 5,646 5,792

1,103,747 1,118,645Current assetsInventories 6,700 4,333Accounts receivable and other receivables 77,749 86,019Income tax receivables 159 539Cash and cash equivalents 1,943 6,468

86,551 97,359Non-current assets held for sale 15,121 15,121Total assets 1,205,419 1,231,125

EQUITYEquity attributable to parent company shareholdersShare capital 103,006 103,006Share premium account 24,525 24,525Translation differences 135 209Fund for invested unrestricted equity 40,016 40,016Retained earnings 420,240 393,313

587,923 561,070Non-controlling interests 178 294Total equity 588,100 561,363

LIABILITIESLong-term liabilitiesDeferred tax liabilities 51,425 52,712Other long-term liabilities 63 113Pension liabilities 3,817 3,919Provisions 1,757 1,810Loans from financial institutions 322,600 367,445

379,663 425,999Current liabilitiesAccounts payable and other liabilities 65,174 59,191Current tax liabilities 9 14Provisions 262 345Loans from financial institutions 171,971 176,736

237,415 236,287Total liabilities 617,078 662,286

Liabilities related to long-term assets held for sale 241 7,476

Total shareholders’ equity and liabilities 1,205,419 1,231,125



30

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY, IFRS



EUR 1,000 Equity attributable to parent company shareholders

Share capital

Share issue

premiumTranslation differences

Fund for invested

unrestricted equity

Retained earnings Total

Non-controlling

interestsTotal

equity

Reported equity 1 January 2016 103,006 24,525 209 40,016 393,313 561,070 294 561,363Comprehensive income for the year:Result for the reporting period 68,133 68,133 -10 68,124Exchange differences on translating foreign operations -74 5 -69 -69Remeasurement of defined benefit plans 20 20 20Tax effect, net -29 -29 -29Total comprehensive income for the year -74 68,129 68,056 -10 68,046Dividend -41,203 -41,203 -106 -41,309Equity 31 December 2016 103,006 24,525 135 40,016 420,240 587,923 178 588,100

EUR 1,000 Equity attributable to parent company shareholders

Share capital

Share issue

premiumTranslation differences

Fund for invested

unrestricted equity

Retained earnings Total

Non-controlling

interestsTotal

equity

Reported equity 1 January 2015 103,006 24,525 178 40,016 335,876 503,601 306 503,907Comprehensive income for the year:Result for the reporting period 56,841 56,841 -12 56,829Exchange differences on translating foreign operations 32 32 32Remeasurement of defined benefit plans 632 632 632Tax effect, net -36 -36 -36Total comprehensive income for the year 32 57,437 57,469 -12 57,457DividendEquity 31 December 2015 103,006 24,525 209 40,016 393,313 561,070 294 561,363

31FINNLINES 2016

CONSOLIDATED STATEMENT OF CASH FLOWS, IFRS



EUR 1,000 1 Jan–31 Dec 2016 1 Jan–31 Dec 2015Cash flows from operating activitiesResult for reporting period 68,124 56,829Adjustments:

Non-cash transactions 52,461 56,192Unrealised foreign exchange gains (-) / losses (+) -11 -57Financial income and expenses 14,577 17,187Taxes -1,162 -3,675

Changes in working capital:Change in accounts receivable and other receivables 1,565 -2,009Change in inventories -2,367 1,592Change in accounts payable and other liabilities 6,471 -2,515Change in provisions -155 -238

Interest paid -11,394 -14,240Interest received 299 442Taxes paid 280 -81Other financing items -3,842 -3,632Net cash generated from operating activities 124,845 105,794

Cash flows from investing activitiesInvestments in tangible and intangible assets * -38,450 -78,897Sale of tangible assets ** 8,810 799Proceeds from sale of investments -5Dividends received 13 12Net cash used in investing activities -29,632 -78,085

Cash flows from financing activitiesLoan withdrawals 205,000 282,000Net increase (+) / decrease (-) in current interest-bearing liabilities 8,035 32,447Repayment of loans -271,662 -338,550Loans grantedIncrease / decrease in non-current receivables 200 180Dividends paid -41,309Net cash used in financing activities -99,736 -23,922

Change in cash and cash equivalents -4,523 3,787Cash and cash equivalents 1 January 6,468 2,680Effect of foreign exchange rate changes -3 1Cash and cash equivalents 31 December 1,943 6,468

* Investments include environmental aid granted by the European Union, of which the Group has received EUR 6.7 (5.8) million during the reporting period 2016.

** Includes sale of one vessel.

32



PROFIT AND LOSS ACCOUNT, PARENT COMPANY, FAS

EUR 1 Jan–31 Dec 2016 1 Jan–31 Dec 2015Revenue 365,578,003.15 399,551,256.21

Other income from operations 3,975,912.60 3,725,094.27

Materials and services -119,963,149.79 -146,434,213.23Personnel expenses -45,630,895.70 -40,143,206.84Depreciation, amortisation and other write-offs -30,971,035.52 -30,459,737.88Other operating expenses -110,190,579.93 -127,048,262.92Operating profit 62,798,254.81 59,190,929.61

Financial income and expenses -9,231,814.83 -11,159,462.11

Result before appropriations and taxes 53,566,439.98 48,031,467.50

AppropriationsGroup contributions -2,410,300.00 -800,000.00

Profit before tax 51,156,139.98 47,231,467.50

Other income taxesTonnagetax -82,136.74 -91,640.81Deferred taxes 4,943,192.54 5,658,883.85

Result for the reporting period 56,017,195.78 52,798,710.54

33FINNLINES 2016



BALANCE SHEET, PARENT COMPANY, FAS

EUR 31 Dec 2016 31 Dec 2015ASSETS

Non-current assetsIntangible assets 2,560,280.71 2,819,329.37Tangible assets 660,143,299.43 657,686,704.02Investments

Shares in group companies 159,480,069.61 249,480,069.61Other investments 4,611,284.61 4,606,744.61

Total non-current assets 826,794,934.36 914,592,847.61

Current assetsInventories 5,629,010.40 3,552,504.96Long-term receivables 163,424,556.23 163,954,523.75Short-term receivables 84,367,259.20 89,869,122.08Bank and cash 604,578.15 4,969,672.37Total current assets 254,025,403.98 262,345,823.16

Total assets 1,080,820,338.34 1,176,938,670.77

SHAREHOLDERS’ EQUITY AND LIABILITIES

Shareholders’ equityShare capital 103,006,282.00 103,006,282.00Share premium account 24,525,353.70 24,525,353.70Unrestricted equity reserve 40,882,508.10 40,882,508.10Retained earnings 270,675,742.15 259,079,544.41Result for the reporting period 56,017,195.78 52,798,710.54Total shareholders’ equity 495,107,081.73 480,292,398.75

Statutory provisionsPension obligation 719,000.00 617,000.00

LiabilitiesLong-term liabilitiesDeferred tax liability 27,480,883.96 32,424,076.50Interest-bearing 304,525,450.88 435,935,998.57

332,006,334.84 468,360,075.07Current liabilitiesInterest-bearing 203,539,261.65 183,621,891.28Interest-free 49,448,660.12 44,047,305.67

252,987,921.77 227,669,196.95

Total liabilities 584,994,256.61 696,029,272.02

Total shareholders’ equity and liabilities 1,080,820,338.34 1,176,938,670.77

34



CASH FLOW STATEMENT, PARENT COMPANY, FAS

EUR 1 Jan–31 Dec 2016 1 Jan–31 Dec 2015Cash flows from operating activitiesResult for the reporting period 56,017,195.78 52,798,710.54

Adjustments for:Depreciation, amortisation & impairment loss 30,971,035.52 30,459,737.88Gains (-) and Losses (+) of disposals of fixed assets and other non-current assets -624,254.14 -213,011.25Financial income and expenses 9,231,814.83 11,159,462.11Income taxes -4,861,055.80 -5,567,243.04Other adjustments 2,410,300.00 800,000.00

93,145,036.19 89,437,656.24Changes in working capital:Change in inventories, addition (-) and decrease (+) -2,076,505.44 1,362,952.94Change in accounts receivable, addition (-) and decrease (+) 4,185,793.71 -7,337,715.55Change in accounts payable, addition (+) and decrease (-) 6,340,240.35 -1,874,403.58Change in provisions 102,000.00 -520,000.00

101,696,564.81 81,068,490.05

Interest paid -10,493,863.70 -13,062,957.89Dividends received 90,387,600.00Interest received 4,076,079.45 4,704,721.07Other financing items -3,321,972.45 -2,867,949.21Income taxes paid -89,165.00 -79,863.97

80,558,678.30 -11,306,050.00

Net cash generated from operating activities 182,255,243.11 69,762,440.05

Cash flows from investing activitiesInvestments in tangible and intangible assets -27,339,869.06 -55,993,336.25Proceeds from sale of tangible and intangible assets 559,854.14 308,453.31Investment in subsidiary -6,685,566.00Investments in other shares -231,540.00Change in internal loans (net) -4,502,792.29 12,210,720.34Net cash used in investing activities -31,514,347.21 -50,159,728.60

Net cash before financing activities 150,740,895.90 19,602,711.45

Cash flows from financing activitiesProceeds from short-term borrowings 33,717,370.37Repayment of short-term borrowings -1,243,951.16Proceeds of long-term borrowings 195,000,000.00 298,400,000.00Repayment of long-term borrowings -340,210,547.69 -311,815,042.57Dividends paid -41,202,512.80Group contributions -2,410,300.00 -800,000.00Net cash used in financing activities -155,105,990.12 -15,458,993.73

Change in cash and cash equivalents -4,365,094.22 4,143,717.72Cash and cash equivalents on 1 January 4,969,672.37 825,954.65Cash and cash equivalents on 31 December 604,578.15 4,969,672.37

35FINNLINES 2016



FIVE-YEAR KEY FIGURES

2016 2015 2014 2013 2012EUR million IFRS IFRS IFRS IFRS IFRSRevenue 473.7 511.2 532.9 563.6 609.3Other income from operations 6.7 1.8 6.8 5.3 5.7Result before interest, taxes, depreciation and amortisation (EBITDA) 139.1 126.9 115.4 83.7 89.8

% of revenue 29.4 24.8 21.7 14.8 14.7Result before interest and taxes (EBIT) 81.5 70.3 58.6 18.1 23.7

% of revenue 17.2 13.8 11.0 3.2 3.9Associated companiesResult before taxes (EBT) 67.0 53.2 36.6 -6.7 -1.6

% of revenue 14.1 10.4 6.9 -1.2 -0.3Result for reporting period, continuing operations 68.1 56.8 41.7 6.0 -0.1

% of revenue 14.4 11.1 7.8 1.1 0.0Result for reporting period, discontinuing operationsResult for reporting period 68.1 56.8 41.7 6.0 -0.1

% of revenue 14.4 11.1 7.8 1.1 0.0Total investments * 46.3 64.1 36.6 10.1 67.1

% of revenue 9.8 12.5 6.9 1.8 11.0Return on equity (ROE), % 11.9 10.7 8.6 1.3 0.0Return on investment (ROI), % 7.4 6.5 5.3 1.5 1.8Assets total 1,205.4 1,231.1 1,210.5 1,298.5 1,479.9Equity ratio, % 48.9 45.7 41.7 35.7 29.0Gearing, % 83.8 97.1 113.0 149.1 204.9Average no. of employees 1,653 1,597 1,701 1,861 2,023

2016 2015 2015 2014 2013IFRS IFRS IFRS IFRS IFRS

Earnings per share (EPS), EUR 1.32 1.10 0.81 0.12 0.00Earnings per share (EPS) less warrant dilution, EUR 1.32 1.10 0.81 0.12 0.00Shareholders’ equity per share, EUR 11.42 10.89 9.78 8.98 9.14Payout ratio, % n/a 0.0 0.0 0.0 0.0Effective dividend yield, % n/a 0.0 0.0 0.0 0.0Price/earnings ratio (P/E) n/a 16.0 19.8 62.5 n/aAdjusted average number of outstanding shares (1,000) 51,503 51,503 51,503 49,782 47,344Adjusted number of outstanding shares 31 Dec (1,000) 51,503 51,503 51,503 51,503 47,344Number of outstanding shares at year-end (1,000) 51,503 51,503 51,503 51,503 46,821

* Includes continuing and discontinuing operations.

Calculation of key ratios is presented on page 36.

36



CALCULATION OF KEY RATIOS, IFRS

Earnings per share (EPS), EUR = Result attributable to parent company shareholders

Weighted average number of outstanding shares

Shareholders’ equity per share, EUR = Shareholders’ equity attributable to parent company shareholders

Undiluted number of shares at the end of period

Payout ratio, % =Dividend paid for the year

x 100Result before tax +/– non-controlling interests of Group result +/– change in deferred tax liabilities – taxes for the period

Effective dividend yield, % = Dividend per share x 100Share price on stock exchange at the end of period

P/E ratio = Share price on stock exchange at the end of period

Earnings per share

Return on equity (ROE), % = Result for the reporting period x 100Total equity (average)

Return on investment (ROI), % = Result before tax + interest expense + other liability expenses x 100Assets total – interest-free liabilities (average)

Gearing, % = Interest-bearing liabilities – cash and bank equivalents x 100Total equity

Equity ratio, % = Total equity x 100Assets total – received advances

The recognised income taxes are based on the year’s estimated average income tax rate which is expected to realise during the entire reporting period.

Finnlines Plc’s Shipping and Sea Transport Services transferred to tonnage-based taxation in January 2013.

37FINNLINES 2016



QUARTERLY DATA, IFRS

EUR million Q1/2016 Q1/2015 Q2/2016 Q2/2015 Q3/2016 Q3/2015 Q4/2016 Q4/2015Revenue by segmentShipping and Sea Transport Services total 100.4 112.9 120.3 130.2 125.1 133.4 107.9 116.4

Sales to third parties 100.4 112.9 120.3 130.2 125.1 133.5 107.9 116.4Sales to Port Operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Port Operations total 9.3 8.3 10.2 9.7 9.7 8.9 9.2 9.0Sales to third parties 4.8 3.9 5.3 5.0 5.3 4.8 4.7 4.5Sales to Port Operations 4.5 4.4 4.8 4.7 4.4 4.2 4.6 4.5

Group internal revenue -4.4 -4.4 -4.9 -4.6 -4.4 -4.1 -4.6 -4.5Revenue total 105.2 116.8 125.6 135.2 130.4 138.2 112.6 120.9

Result before interest and taxes per segmentShipping and Sea Transport Services 12.1 5.0 25.1 20.2 34.7 29.0 10.9 18.1Port Operations -0.8 -1.1 0.2 -0.1 0.1 0.1 -0.8 -0.8Result before interest and taxes (EBIT) total 11.4 3.9 25.3 20.1 34.8 29.0 10.1 17.3

Financial income and expenses -3.9 -4.3 -3.6 -4.8 -3.7 -4.4 -3.4 -3.7Result before tax (EBT) 7.4 -0.4 21.7 15.3 31.1 24.7 6.7 13.6Income taxes 0.9 1.0 0.5 0.5 -0.8 0.0 0.6 2.1Result for the reporting period 8.3 0.6 22.2 15.8 30.3 24.7 7.3 15.7

Quarterly consolidated key figuresResult before interest and taxes, (% of revenue) 10.8 3.3 20.1 14.8 26.7 21.0 8.9 14.3Earnings per share, EUR 0.16 0.01 0.43 0.31 0.59 0.48 0.14 0.31Average number of outstanding shares (1,000) 51,503 51,503 51,503 51,503 51,503 51,503 51,503 51,503

38

Distributable funds included in the parent company’s shareholders’ equity on 31 December 2016:

Retained earnings EUR 270,675,742.15Unrestricted equity reserve EUR 40,882,508.10Result for the reporting period EUR 56,017,195.78Distributable funds total EUR 367,575,446.03

The Board of Directors proposes to the General Meeting that the General Meeting authorise the Board of Directors to decide,

at its discretion, on the payment of dividend up to Finnlines Plc’s result for the reporting period in 2016.

Naples, 23 February 2017

Jon-Aksel Torgersen

Chairman of the Board

Christer Backman Tiina Bäckman Gianluca Grimaldi

Diego Pacella Olav K. Rakkenes

Emanuele Grimaldi

President and CEO

THE AUDITOR’S NOTE

Our auditor’s report has been issued today.

Helsinki, 23 February 2017

KPMG Oy Ab

Kimmo Antonen

Authorized Public Accountant

BOARD’S PROPOSAL FOR THE USE OF THE DISTRIBUTABLE FUNDS AND SIGNATURES TO THE BOARD OF DIRECTORS’ REPORT AND TO THE FINANCIAL STATEMENTS



39FINNLINES 2016

AUDITOR’S REPORT

Auditors’ report issued for the Board of Directors’ report and Financial Statements for the year ended on 31 December 2016 is available at www.finnlines.com.

TO THE ANNUAL GENERAL MEETING OF FINNLINES OYJREPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OPINIONWe have audited the financial statements of Finnlines Oyj (business identity code 0201153-9) for the year ended 31 December, 2016. The financial statements comprise the consolidated balance sheet, statement of compre-hensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company’s balance sheet, income statement, statement of cash flows and notes.

In our opinion- the consolidated financial statements give a true and fair view of the

group’s financial performance, financial position and cash flows in ac-cordance with International Financial Reporting Standards (IFRS) as adopted by the EU

- the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Fin-land and comply with statutory requirements.

BASIS FOR OPINIONWe conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further de-scribed in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical respon-sibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR FOR THE FINANCIAL STATEMENTSThe Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the prepara-tion of financial statements that are free from material misstatement, wheth-er due to fraud or error.

In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as applica-ble, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent com-pany or the group or cease operations, or there is no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTSOur objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with good auditing practice, we exer-cise professional judgment and maintain professional skepticism through-out the audit. We also:- Identify and assess the risks of material misstatement of the financial

statements, whether due to fraud or error, design and perform audit pro-cedures responsive to those risks, and obtain audit evidence that is suf-ficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentio-nal omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control.

- Evaluate the appropriateness of accounting policies used and the reaso-nableness of accounting estimates and related disclosures made by ma-nagement.

- Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going con-cern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial state-ments represent the underlying transactions and events so that the finan-cial statements give a true and fair view.

- Obtain sufficient appropriate audit evidence regarding the financial in-formation of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We re-main solely responsible for our audit opinion.

- We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

OTHER REPORTING REQUIREMENTSOTHER INFORMATIONThe Board of Directors and the Managing Director are responsible for the other information. The other information comprises information included in the report of the Board of Directors. Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibil-ity is to read the information included in the report of the Board of Directors and, in doing so, consider whether the information included in the report of the Board of Directors is materially inconsistent with the financial state-ments or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applica-ble laws and regulations.

If, based on the work we have performed, we conclude that there is a material misstatement in the information included in the report of the Board of Directors, we are required to report this fact. We have nothing to report in this regard.

OTHER OPINIONSWe support that the financial statements should be adopted. The proposal by the Board of Directors regarding the use of the profit shown in the bal-ance sheet is in compliance with the Limited Liability Companies Act. We support that the Members of the Board of Directors and the Managing Director should be discharged from liability for the financial period audited by us.

Helsinki, 23 February 2017KPMG Oy Ab

Kimmo AntonenAuthorized Public Accountant

This document is an English translation of the Finnish auditor’s report. Only the Finnish version of the report is legally binding.

40

FINNLINES PLC CORPORATE GOVERNANCE STATEMENT

Finnlines Plc applies the guidelines and provisions of the Finnish

Limited Liability Companies Act and its own Articles of

Association. Finnlines also applies the Finnish Corporate

Governance Code for listed companies entered into force on

1 January 2016 with regard to Finnlines’ Corporate Governance

Statement for the financial period ended on 31 December 2016.

The Code is publicly available on www.cgfinland.fi. This

Corporate Governance Statement has been approved by

Finnlines’ Board.

TASKS AND RESPONSIBILITIES OF GOVERNING BODIES

Management of the Finnlines Group is the responsibility of the

Board of Directors elected by the General Meeting as well as of

the President and CEO. Their duties are for the most part de-

fined by the Finnish Limited Liability Companies Act. Day-to-day

operational responsibility lies with the members of the Extended

Board of Management supported by relevant staff and service

functions.

GENERAL MEETING OF SHAREHOLDERS

The ultimate decision-making body in the Company is the

General Meeting of Shareholders. It resolves issues as defined

for the General Meeting in the Finnish Limited Liability

Companies’ Act and the Company’s Articles of Association.

These include approving the financial statements, deciding on

the distribution of dividends, discharging the Company’s Board

of Directors and CEO from the liability for the financial year, ap-

pointing the Company’s Board of Directors and auditors and

deciding on their remuneration.

A General Meeting of Finnlines Plc is held at least once a

year. The Annual General Meeting (AGM) must be held no later

than the end of June. The notice to the Shareholders’ Meeting

shall be given no earlier than three (3) months before the

Shareholders’ Meeting and no later than one (1) week before the

Shareholders’ Meeting.

ANNUAL GENERAL MEETING 2016

The Annual General Meeting of Finnlines Plc approved the

Financial Statements and discharged the members of the Board

of Directors and the Company's President and CEO and the

Company's officers from liability for the financial year 2015.

The Meeting approved the Board of Directors’ proposal not to

pay any dividend.

AGM decided that the Board of Directors shall have seven

members. The following were re-elected to the Board: Mr

Christer Backman, Ms Tiina Bäckman, Mr Emanuele Grimaldi,

Mr Gianluca Grimaldi, Mr Diego Pacella, Mr Olav K. Rakkenes

and Mr Jon-Aksel Torgersen. The Board elected Mr Jon-Aksel

Torgersen Chairman and Mr Diego Pacella Vice Chairman.

The firm of authorised public accountants KPMG Oy Ab was

appointed as the Company’s auditors for 2016.

AGM decided to authorise the Board of Directors to resolve

on the issuance of shares in one or several tranches. The Board

of Directors may, on the basis of the authorisation, resolve on the

issuance of shares in one or several tranches, so that the aggre-

gate number of shares to be issued shall not exceed 10,000,000

shares. The Board of Directors decides on all the conditions of

the issuance of shares. The issuance of shares may be carried

out in deviation from the shareholders' pre-emptive rights (direct-

ed issue). The authorisation is valid until the next Annual General

Meeting. The authorisation replaces the Annual General

Meeting’s authorisation to decide on a share issue of 14 April

2015.

All related documents can be found on Finnlines’ website: www.finnlines.com/company > About us > Corporate Governance > General Meeting

DECISIONS TAKEN BY THE EXTRAORDINARY

GENERAL MEETING

Finnlines Plc’s Extraordinary General Meeting was held on

20 December 2016. The Extraordinary General Meeting decid-

ed, in accordance with the proposal of the Board of Directors,

to distribute a dividend of EUR 0.80 per share. The dividend was

paid to shareholders on 30 December 2016.

41FINNLINES 2016

>>

BOARD OF DIRECTORS

Responsibility for the management of the Company and proper

organisation of its operations lies with the Company’s Board of

Directors, which has at least five (5) and at most eleven (11)

members. The members of the Board are appointed by AGM for

one year at a time.

The majority of the directors shall be independent of the

Company and at least two of the directors representing this ma-

jority shall be independent from significant shareholders of the

Company. Information on the Board composition, Board mem-

bers and their independence can be found on Finnlines’ website.

The President and CEO is a member of the Board.

The proposal for the Board composition shall be included in

the notice of AGM. The names of candidates for membership of

the Board of Directors, put forward by the Board of Directors or

by shareholders with a minimum holding of 10 per cent of the

Company’s voting rights, are published in the notice of the AGM,

provided that the candidates have given their consent to the elec-

tion. The candidates proposed thereafter shall be disclosed

separately.

The Board elects a chairman and a deputy chairman from

among its members. The Board steers and supervises the

Company’s operations, and decides on policies, goals and strat-

egies of major importance. The principles applied by the Board in

its regular work are set out in the Rules of Procedure approved

by the Board. The Board handles all issues in the presence of the

entire Board. The Board does not have any separate committees.

The Board considers all the matters stipulated to be the respon-

sibility of a board of directors by legislation, other provisions and

the Company’s Articles of Association. Due to the limited extent

of the Company’s business, it is considered effective that the

entire Board also handles the duties of the audit committee, the

nomination committee as well as those of the remuneration

committee.

THE MAIN DUTIES AND WORKING PRINCIPLES DRAWN UP BY

THE BOARD ARE:

• the annual and interim financial statements

• the matters to be put before General Meetings of

Shareholders

• the appointment and dismissal of the President and CEO,

the Deputy CEO, if any, and the members of the Executive

Committee

• approval of internal supervision and organisation of the

Company’s financial supervision

• other matters related to the duties of the audit committee

mentioned in the Finnish Corporate Governance Code

• approval of the Group’s strategic plan and long-term goals

• approval of the Group’s annual business plan and budget

• decisions concerning investments, acquisitions, or divest-

ments that are significant or that deviate from the Group’s

strategy

• decisions on raising long-term loans and the granting of

security or similar collateral commitments

• risk management principles

• the Group’s organisational structure

• approval of the remuneration and pension benefits of the

President and CEO, the Deputy CEO, if any, and the

members of the Executive Committee

• monitoring and assessment of the performance of the

President and CEO.

In addition to matters requiring decisions, Board meetings are

given updates on the Group’s operations, financial position and

risks.

The Board of Directors reviews its operations and working

methods annually. The Board convenes 6–8 times a year follow-

ing a predetermined schedule. In addition to these meetings, the

Board convenes as necessary.

BOARD OF DIRECTORS 2016

In 2016, the Board consisted of 7 members:

• Mr Jon-Aksel Torgersen, Chairman of the Board, born 1952,

MBA, CEO of Astrup Fearnley AS, attended meetings: 12/12

• Mr Diego Pacella, Vice Chairman of the Board, born 1960,

Degree with honours in Mech. Eng., Managing Director of

Grimaldi Deep Sea S.p.A., attended meetings: 12/12

• Mr Christer Backman, born 1945, M.Pol.Sc., attended mee-

tings: 12/12

• Ms Tiina Bäckman, born 1959, Master of Laws, Chairman of

the Board of Pension Foundation of Rautaruukki, attended

meetings: 12/12

• Mr Emanuele Grimaldi, born 1956, Degree in Economics and

Commerce, Managing Director of Grimaldi Group S.p.A.,

President and CEO of Finnlines Plc, attended meetings:

12/12

• Mr Gianluca Grimaldi, born 1955, Degree in Economics and

Commerce, Managing Director of Grimaldi Euromed S.p.A.,

attended meetings: 12/12

• Mr Olav K. Rakkenes, born 1945, Master’s License, former

CEO of Atlantic Container Line AB, attended meetings: 11/12

42

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

During 2016, Finnlines Plc’s Board of Directors held 12

meetings.

The present Board of Directors can be found on Finnlines’ website: www.finnlines.com/company > About us > Corporate Governance > Board of Directors

INDEPENDENCE OF THE BOARD OF DIRECTORS

Four Members, Mr Christer Backman, Ms Tiina Bäckman, Mr

Olav K. Rakkenes and Mr Jon-Aksel Torgersen, are independent

of the Company and of the major shareholders. Mr Gianluca

Grimaldi and Mr Diego Pacella are independent of the Company.

Mr Emanuele Grimaldi is dependent of the Company and the

shareholders.

PRESIDENT AND CEO AND DEPUTY CEO

The Board of Directors appoints a President for the Group who

is also its Chief Executive Officer. The President and CEO is in

charge of the day-to-day management of the Company and its

administration in accordance with the Company’s Articles of

Association, the Finnish Limited Liability Companies Act and the

instructions of the Board of Directors. He is assisted in this work

by the Executive Committee. The current President and CEO of

the Company is Mr Emanuele Grimaldi (born 1956, Degree in

Economics and Commerce, University of Naples, Italy). He does

not receive any compensation or other benefit in the form of sal-

ary, bonus or pension benefit from the Company.

The Board of Directors appoints, if necessary, a Deputy CEO.

The Company has no Deputy CEO at present.

EXECUTIVE COMMITTEE AND BOARD OF MANAGEMENT

The members of the Executive Committee are appointed by

the Board of Directors. The Executive Committee convenes reg-

ularly, and is chaired by the President and CEO. The Executive

Committee supports the President and CEO in his duties in im-

plementing Group-level strategies and guidelines, in coordinating

the Group’s management, in finding practical solutions for reach-

ing the targets determined by the Board, and in supervising the

Company’s operations.

The Company has a Board of Management, headed by the

President and CEO, which consists of the members of the

Executive Committee and the heads of functions and Line

Managers as well as heads of the main agencies. The heads of

functions are responsible for the sales volumes and profitability

of their respective units. The Board of Management supports the

Executive Committee in their work upon request.

The Company has an Extended Board of Management, head-

ed by the President and CEO, which comprises, in addition to

the Board of Management, heads of other agencies, the

Company's internal auditor, as well as Junior Managers. The

Extended Board of Management convenes regularly to discuss

operative issues related to the Group business and service

products.

The retirement age of the members of the Extended Board of

Management is based on local laws and there are no special

pension schemes in place.

Information on the members of the Executive Committee, the Board of Management, and the Extended Board of Management, including their areas of responsibility, is given on Finnlines' website: www.finnlines.com/company > About us > Corporate Governance > Management

COMPENSATION

The remunerations paid to the members of the Board of

Management, and the principles underlying it, are determined by

the Board of Directors.

The members of the Extended Board of Management are

included in a bonus scheme which is decided by the Board of

Directors on a yearly basis. The Board of Directors also decides

on any separate performance-based compensation schemes for

the management.

The bonuses are paid in cash. There are no other bonus

schemes.

REMUNERATION IN 2016

The annual remuneration for the Board of Directors in 2016 was

EUR 50,000 for the Chairman, EUR 40,000 for the Vice

Chairman and EUR 30,000 for the other Board members. The

remuneration of the Board of Directors has remained the same

as from 2008.

A detailed specification of the management contracts, salaries, remuneration and benefits paid in 2016 is given in the Financial Statements of 2016, Transactions with Related Parties, and in Finnlines’ Remuneration Statement 2016 on Finnlines’ website: www.finnlines.com/company > About us > Corporate Governance > Compensation

43FINNLINES 2016

>>

INTERNAL AUDIT

The Group’s internal audit is handled by the Company’s Internal

Audit unit, which reports to the Chairman and the President and

CEO.

The purpose of the Internal Audit is to analyse the Company’s

operations and processes and the effectiveness and quality of its

supervision mechanisms. The unit assists Finnlines to accom-

plish its objectives by bringing a systematic, disciplined approach

to evaluate and improve the effectiveness of the internal control

and governance processes. The Internal Audit unit carries out its

task by determining whether the Company’s risk management,

internal control and governance processes, as designed and

represented by the management, are adequate and functioning in

a manner to ensure that:• Risks are appropriately identified and managed.

• Interaction with the various governance groups occurs as

needed.

• Significant financial, managerial and operating information is

accurate, reliable and timely.

• Employees’ actions are in compliance with policies, stan-

dards, procedures and applicable laws and regulations.

• Resources are acquired economically, used efficiently and

adequately protected.

• Programs and plans are properly implemented and objectives

are achieved.

• Quality and continuous improvement are fostered in the

Company’s internal control processes.

• Significant legislative or regulatory issues impacting the

Company’s internal controls are recognised and addressed

appropriately.

The head of the Internal Audit unit prepares an annual plan

using an appropriate risk-based methodology and taking into

consideration potential risks or control concerns identified by the

management. The scope of the audits within a fiscal year is

planned so that it is representative and the focus is set on the

business areas with the biggest risk potentials. The plan is ap-

proved by the President and CEO. The internal auditor also car-

ries out special tasks assigned by the Chairman, the President

and CEO or the Board of Directors.

The internal auditor conducts the internal audits independently

from operational units. In his auditing work the auditor complies

with the corporate governance, ethical principles, policies and

other guidelines of the Company as well as generally accepted

standards for the professional practice of Internal Auditing.

The audit reports are sent to the President and CEO, the

CFO and also to the Chairman. The President and CEO and the

CFO have at least once a year a closed session with the head of

Internal Audit unit about the results of the conducted audits and

the plans for the next period. Relevant issues are also brought to

the attention of the Board of Directors.

RISK MANAGEMENT

Internal control in Finnlines is designed to support the Company

in achieving its targets. The risks related to the achievement of

the targets need to be identified and evaluated in order to be able

to manage them. Thus, identification and assessment of risks is a

prerequisite for internal control in Finnlines.

Internal control mechanisms and procedures provide manage-

ment assurance that the risk management actions are carried out

as planned. Conscious and carefully evaluated risks are taken in

selecting strategies, e.g. in expanding business operations, in

enhancing market position and in creating new business.

Financial, operational and damage/loss risks are avoided or

reduced. The continuity of operations is ensured by safeguarding

critical functions and essential resources. Crisis management,

continuity and disaster recovery plans are prepared. The costs

and resources involved in risk management are in proportion to

the obtainable benefits.

The Board of Directors of Finnlines is responsible for defining

the Group’s overall level of risk tolerance and for ensuring that

Finnlines has adequate tools and resources for managing risks.

The President and CEO, with the assistance of the Executive

Committee, is responsible for organising and ensuring risk man-

agement in all Finnlines’ operations.

Responsibilities for the Group’s working capital, investments,

financing, finances, human resources, communications, informa-

tion management and procurement are centralised to the head

office of the Company. The Group’s payment transactions, exter-

nal and internal accounting are managed centrally by the

Financial Department, which reports to the CFO. The Group’s

foreign exchange and interest exposure is reviewed by the Board

of Directors in each budgeting period. External long-term loan

arrangements are submitted to the Board of Directors for

approval.

The Corporate Legal Affairs and Insurance unit is responsible

for risks associated with the Company’s noncurrent assets and

any interruptions in operations, as well as for the management

and coordination of the Group’s insurance policies. The majority

of the Group’s non-current assets consist of its fleet. The fleet is

44

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

always insured to its full value. The financial position and credit-

worthiness of the Group’s customers are monitored continuously

in order to minimise the risk of customer credit losses.

Each business unit has a responsible controller who reports

to the head of the relevant business unit and to the Group CFO.

The heads of Finnlines’ business units are responsible for the

profit and working capital of their units. They set the operational

targets for their units and ensure that resources are used effi-

ciently and that operations are evaluated and improved.

Finnlines’ most important strategic, operative and financial

risks are described in the Financial Statements 2016, Financial

Risk Management.

INTERNAL CONTROL OVER THE FINANCIAL REPORTING

Monitoring is a process that assesses the quality of Finnlines’

system of internal control and its performance over time.

Monitoring is performed both on an ongoing basis, and through

separate evaluations including internal, external and quality au-

dits. The business unit is responsible for ensuring that relevant

laws and regulations are complied with in their respective re-

sponsibility areas.

The Internal Audit function assists the President and CEO and

the Board of Directors in assessing and assuring the adequacy

and effectiveness of internal controls and risk management by

performing regular audits in the Group’s legal entities and sup-

port functions according to its annual plan. Finnlines’ external

auditor and other assurance providers such as quality auditors

conduct evaluations of the Company’s internal controls.

The Company’s financial performance is reviewed at each

Board meeting. The Board reviews all interim and annual financial

reports before they are released. The effectiveness of the pro-

cess for assessing risks and the execution of control activities

are monitored continuously at various levels. This involves re-

views of results in comparison with budgets and plans.

Responsibility for maintaining an effective control environment

and operating the system for risk management and internal con-

trol of financial reporting is delegated to the President and CEO.

The internal control in the Company is based on the Group’s

structure, whereby the Group’s operations are organised into

two segments and various business areas and support functions.

Group functions issue corporate guidelines that stipulate respon-

sibilities and authority, and constitute the control environment for

specific areas, such as finance, accounting, and investments,

purchasing and sales.

The Company has a compliance program. Standard require-

ments have been defined for internal control over financial report-

ing. The management expects all employees to maintain high

moral and ethical standards and those expectations are commu-

nicated to the employees through internal channels.

The Group Finance & Control unit monitors that the financial

reporting processes and controls are being followed. It also mon-

itors the correctness of external and internal financial reporting.

The external auditor verifies the correctness of external annual

financial reports.

The Board monitors the statutory audit of the financial state-

ments and consolidated financial statements, evaluates the inde-

pendence of the statutory auditor or audit firm, particularly the

provision of related services to the Company and prepares the

proposal for resolution on the election of the auditor.

The Board reviews annually the description of the main fea-

tures of the internal control and risk management systems in rela-

tion to the financial reporting process, which is included in this

Corporate Governance Statement.

INFORMATION MANAGEMENT

An effective internal control system needs sufficient, timely and

reliable information to enable the management to follow up the

achievement of the Company’s objectives. Both financial and

non-financial information is needed, relating to both internal and

external events and activities.

Information management plays a key role in Finnlines’ internal

control system. Information systems are critical for effective inter-

nal control as many of the control activities are programmed

controls.

45FINNLINES 2016

The controls embedded in Finnlines’ business processes

have a key role in ensuring effective internal control in Finnlines.

Controls in the business processes help ensure the achievement

of all the objectives of internal control in Finnlines, especially

those related to the efficiency of operations and safeguarding

Finnlines’ profitability and reputation. Business units and IT man-

agement are responsible for ensuring that in their area of respon-

sibility the defined Group level processes and controls are imple-

mented and complied with. Where no Group level processes and

controls exist, business units and IT management are responsible

for ensuring that efficient business level processes with adequate

controls have been described and implemented.

The proper functioning of Finnlines’ information systems is

guaranteed through extensive and thorough security programs

and emergency systems.

INSIDER MANAGEMENT

Finnlines’ shares or other securities are not listed. Therefore,

Finnlines does not apply MAR or other regulations applicable to

inside information relating to listed issuers.

RELATED PARTY TRANSACTIONS

The Company will assess and monitor transactions carried out

with related parties and ensure that any conflicts of interests will

be appropriately considered in the Company’s decision-making.

The Company maintains a list of related parties in its Group

administration.

The Company provides information on related party transac-

tions according to the Limited Liability Companies Act and regu-

lations governing the preparation of the financial statements in

the review by the Board of Directors and notes to the financial

statements.

EXTERNAL AUDIT

The Company has one auditor which shall be an auditing firm

authorised by the Central Chamber of Commerce. The auditor is

elected by the Annual General Meeting to audit the accounts for

the ongoing financial year and its duties cease at the close of the

subsequent Annual General Meeting. The auditor is responsible

for auditing the consolidated and parent company’s financial

statements and accounting records, and the administration of the

parent company. On closing of the annual accounts, the external

auditor submits the statutory auditor’s report to the Company’s

shareholders, and also regularly reports the findings to the Board

of Directors. An auditor, in addition to fulfilling general compe-

tency requirements, must also comply with certain legal inde-

pendence requirements guaranteeing the execution of an inde-

pendent and reliable audit.

AUDITOR IN 2016

In 2016, the Annual General Meeting elected KPMG Oy Ab as

the Company’s auditor for the fiscal year 2016. Mr Kimmo

Antonen, APA, has been appointed the head auditor. It was de-

cided that the external auditors will be reimbursed according to

invoice. In 2016, EUR 150 thousand was paid to the auditors in

remuneration for the audit of the consolidated, parent company

and subsidiary financial statements. During the same year, EUR

58 thousand was paid for consulting services not related to

auditing.

COMMUNICATIONS

The principal information on Finnlines’ administration and man-

agement is published on the Company’s website. All press re-

leases are published on the Company’s website as soon as they

are made public.

46

BOARD OF DIRECTORS 31 DECEMBER 2016

JON-AKSEL TORGERSEN

• Chairman of the Board

• Member of Finnlines Board since 2007

• Independent of the Company and major shareholders

• Born 1952

• Master in Business Administration, University of St. Gallen, Switzerland

• Astrup Fearnley AS, CEO

Current positions:

• Atlantic Container Line AB, Chairman

• Awilco LNG ASA, Board Member

• I.M. Skaugen ASA, Board Member

• Chairman and Board Member of a number of private companies

DIEGO PACELLA

• Vice Chairman of the Board


• Independent of the Company

• Born 1960

• Degree in Mechanics Engineering, University of Naples, Italy

• Grimaldi Group S.p.A., Managing Director

• Grimaldi Deep Sea S.p.A., Managing Director

• Grimaldi Euromed S.p.A., Managing Director

• Grimaldi Group, Finance Director

Current positions:

• Minoan Lines, Greece, Board Member

• Malta Motorways of the Sea Ltd, Board Member

• Atlantic Container Line AB, Board Member

• Finance Committee of Confitarma, Member

CHRISTER BACKMAN



• Born 1945

• M.Pol.Sc., Åbo Akademi University

TIINA BÄCKMAN



• Born 1959

• Master of Laws LL.M., University of Lapland

• Pension Foundation of Rautaruukki, Chairman to the Board

Current positions:

• Oulun Puhelin Oyj Pension foundation, Chairman to the Board

• Legal Committee of Finnish Central Chamber of Commerce, Member, Vice Chairman

• Redemption Committee of Finnish Central Chamber of Commerce, Member

• Board Partners (Pohjois-Suomen Hallituspartnerit ry), Vice Chairman

• Finnish Company Law Association, Board Member

EMANUELE GRIMALDI


• President and CEO of Finnlines Plc

• Born 1956

• Degree in Economics and Commerce, University of Naples, Italy

• General Certificate of Education (scientific), Military School Nunziatella, Naples, Italy

• Grimaldi Group S.p.A., Managing Di-rector

• Grimaldi Deep Sea S.p.A., Managing Director

• Grimaldi Euromed S.p.A., President

Current positions:

• Minoan Lines, Greece, President

• Malta Motorways of the Sea Ltd, President


• European Community Shipowners’ Associations, Past President and Board Member

• Interferry Inc, Board Member

• President of Italian Shipowner Association

GIANLUCA GRIMALDI


• Independent of the Company

• Born 1955

• Degree in Economics and Commerce, University of Naples, Italy

• Honored as “Cavaliere del Lavoro” since 2014

• Grimaldi Group S.p.A., President

• Grimaldi Deep Sea S.p.A., President

• Grimaldi Euromed S.p.A., Managing Director

Current positions:

• Minoan Lines, Greece, Board Member

• Malta Motorways of the Sea, Board Member


• Antwerp Euro Terminal n.v. – Antwerp (Belgium), President

OLAV K. RAKKENES



• Born 1945

• Master’s Licence, Maritime College of Tromsø, Norway

Current positions:


• Through Transport Mutual Club, Board Member

More information on the members of the Board at www.finnlines.com.

47FINNLINES 2016

EXECUTIVE COMMITTEE 31 DECEMBER 2016

EMANUELE GRIMALDI

• President and CEO


• Born 1956

• Degree in Economics and Commerce

• General Certificate of Education (scientific), Military School Nunziatella, Naples, Italy

THOMAS DOEPEL

• Head of Group Purchasing

• Born 1974

• M.Sc. (Econ.), Master Mariner

STAFFAN HERLIN

• Head of Group Marketing, Sales and Customer Service

• Line Manager Germany, North Sea ro-ro

• Born 1958

• M.Sc. (Econ.)

MIKAEL LINDHOLM

• Head of Ship Management

• Born 1958

• Master Mariner, Business management education

TOM PIPPINGSKÖLD

• CFO

• Born 1960

• B.Sc., MBA

BOARD OF MANAGMENT 31 DECEMBER 2016 (IN ADDITION TO THE EXECUTIVE COMMITTEE)

UWE BAKOSCH, Managing Director, Finnlines Deutschland GmbH

DOMENICO FERRAIUOLO, Head of Port Operations

CLAUS HØGH, Line Manager, Scandinavia ro-ro

AGNIESZKA WALENCIAK, Line Manager, Hanko–Gdynia line*

KIMMO KOSTIA, Head of Group IT, Hardware

SANTERI LAAKSO, Head of Financial Department

SANNA SIMPANEN-MÄENPÄÄ, Group Business Controller

KRISTIINA UPPALA, Head of Customer Service, Passenger Services

VESA VÄHÄMAA, Head of Group IT, Software

EXTENDED BOARD OF MANAGEMENT 31 DECEMBER 2016 (IN ADDITION TO THE BOARD OF MANAGEMENT)

LUC HENS, Managing Director, Finnlines Belgium N.V.

MERJA KALLIO-MANNILA, Head of Sales, Finland

REIJO KROOK, Internal Auditor and Quality Manager

BLASCO MAJORANA, Traffic Manager, North Sea

TORSTI MUURI, Traffic Manager, Baltic Sea

BRIAN ROLFE, Managing Director, Finnlines UK Limited

TORKEL SAARNIO, Head of Truck and Trailer Segment

ANTONIO RAIMO

• Line Manager FinnLink, NordöLink & Russia

• Born 1975

• M.Sc. (Banking and Economics), Master in Business Administration

KIELO VESIKKO

• Head of Passenger Services

• Line Manager HansaLink & Hanko–Rostock

• Born 1957

• Diploma in Translation

TAPANI VOIONMAA

• Group General Counsel

• Born 1951

• Master Mariner, LL M, Pg Dipl

* Member as from 1 January 2017.More information on the members of the

Management at www.finnlines.com.

48

FINNLINES FLEET 31 DECEMBER 2016

FINNMAID * (2006)

FINNSTAR * (2006)

FINNLADY * (2007)

NORDLINK * (2007)

Length, o.a. (m) 218.8Breadth, moulded (m) 30.5DWT metric tons 8,964 / 8,982 / 8,761 / 8,846GT 45,923Total lane length (m) 4,215Passengers 554Speed (knots) 22Ice Class 1A Super

FINNCLIPPER * (1999)

FINNEAGLE (1999)

FINNFELLOW * (2000)

Length, o.a. (m) 188.3Breadth, moulded (m) 29.5DWT metric tons 7,209 / 8,073 / 7,267 GT 33,958 / 29,841 / 33,724Total lane length (m) 3,079 / 2,459 / 2,918Passengers 440Speed (knots) 22Ice Class 1A

FINNPARTNER (1995 / 2007)

FINNTRADER (1995 / 2007)

Length, o.a. (m) 183.0Breadth, moulded (m) 28.7DWT metric tons 9,017 / 9,061GT 33,313Total lane length (m) 3,050Passengers 270Speed (knots) 21Ice Class 1A Super

RO-PAX VESSELS

YOUNGEST, LARGEST AND STRONGEST FLEET

49FINNLINES 2016

FINNBREEZE * (2011)

FINNSEA * (2011)

FINNSKY * (2012) FINNSUN * (2012)

FINNTIDE * (2012)

FINNWAVE * (2012)

Length, o.a. (m) 188.4Breadth, moulded (m) 26.5 DWT metric tons ~10,800GT 28,002Total lane length (m) 3,291Speed (knots) 21Ice Class 1A

FINNMERCHANT * (2003)

Length, o.a. (m) 193.0Breadth, moulded (m) 26.0 DWT metric tons 13,106GT 23,235Total lane length (m) 2,606Speed (knots) 18Ice Class 1A

FINNMILL * (2002 / 2009)

FINNPULP * (2002 / 2009)

Length, o.a. (m) 187.06Breadth, moulded (m) 26.5 DWT metric tons 11,744 / 11,682GT 25,732Total lane length (m) 3,259Speed (knots) 20Ice Class 1A

FINNKRAFT * (2000)

FINNHAWK * (2001)

Length, o.a. (m) 162.5Breadth, moulded (m) 20.6 DWT metric tons 9,041 / 9,035GT 11,671Total lane length (m) 1,853Speed (knots) 20Ice Class 1A Super

FINNCARRIER * (1998)

FINNMASTER * (1998)

Lenght, o.a. (m) 154.5Breadth, moulded (m) 22.7DWT, metric tons 8,689 / 8,647 GT 12,433Total lane length (m) 1,775Speed (knots) 20Ice Class 1A Super

* Exhaust gas scrubbers installed.

DWT: Deadweight TonnageGT: Gross Tonnage

RO-RO VESSELS

50

St. Petersburg

Ust-Luga Paldiski

RaumaUusikaupunki

Långnäs

NaantaliTurku

HankoHelsinki

Kotka

Kapellskär

Malmö

Amsterdam

Aarhus

Lübeck

Travemünde

Gdynia

Bilbao

Santander

Hull

Tilbury

AntwerpZeebrugge

El Ferrol

Rostock

OPERATING AREASFinnlines’ main operating areas are the Baltic Sea and the North Sea. With more than 170 weekly

freight departures and 80 passenger departures, Finnlines today provides efficient shipping

services.

51FINNLINES 2016

St. Petersburg

Ust-Luga Paldiski

RaumaUusikaupunki

Långnäs

NaantaliTurku

HankoHelsinki

Kotka

Kapellskär

Malmö

Amsterdam

Aarhus

Lübeck

Travemünde

Gdynia

Bilbao

Santander

Hull

Tilbury

AntwerpZeebrugge

El Ferrol

RostockLINER TRAFFIC AREA 31 DECEMBER 2016

52

FIND US ONLINE

www.finnlines.com

CONTACT INFORMATION

FINNLINES PLC

Komentosilta 1

00980 Helsinki, Finland

P.O. Box 197


tel +358 (0)10 343 50

www.finnlines.com

FINNLINES DEUTSCHLAND GMBH

Einsiedelstraße 43–45

23554 Lübeck, Germany

P.O. Box 102222

23527 Lübeck, Germany

tel +49 451 150 70

FINNLINES BELGIUM N.V.

Blikken

Haven 1333

9130 Verrebroek, Belgium

tel +32 3 570 9530

FINNLINES DANMARK A/S

Multivej 16

8000 Aarhus C, Denmark

tel +45 86 206 650

FINNLINES POLSKA CO. LTD.

ul. Aleja Solidarnosci 1C

81336 Gdynia, Poland

tel +48 58 627 4239

FINNLINES UK LTD.

Finhumber House

Queen Elizabeth Dock

Hedon Road

Hull HU9 5PB, Great Britain

tel +44 1482 377 655

REDERI AB NORDÖ-LINK

Lappögatan 3B

21124 Malmö, Sweden

P.O. Box 106

20121 Malmö, Sweden

tel +46 40 176 800

FINNSTEVE OY AB

Komentosilta 1


P.O. Box 225


tel +358 10 565 60

Photos:

Petri Artturi Asikainen, Nils Bergmann, Tasha Doremus, Horst-Dieter Foerster, Aki Havukainen, Hans Christian Jacobsen, Soile Kallio,

Rami Lappalainen, Pär-Henrik Sjöström, Jarmo Teinilä, Timo Virojärvi, Finnlines archive.

THE GRIMALDI GROUP

With long experience dating back to 1947, the Grimaldi Group

specialises in the operation of roll-on/roll-off vessels, car carriers

and ferries. It is a dedicated supplier of integrated logistics ser-

vices based on maritime transport for the world’s major vehicle

manufacturers. Through its maritime services, the Naples-based

Group also transports containers, palletised/unitised cargo and

passengers with a modern fleet of more than 120 owned ro-ro

multipurpose vessels, pure car carriers and ferries, 35 of which

were built in the last 5 years.

The Group’s presence in the maritime transport of vehicles

started in 1969 when it introduced a regular service between

Italy and England. The Group rapidly gained the trust of other

major car manufacturers who chose Grimaldi’s vessels to trans-

port their production from Northern Europe to various

Mediterranean countries. Throughout the years the Group rapidly

developed and now serves over 130 ports in 50 countries in the

Mediterranean Sea, Northern Europe, West Africa, North and

South America. The shore personnel and crew consist of nearly

13,000 people.

The Grimaldi Group comprises seven main shipping compa-

nies, including Atlantic Container Line (ACL), Malta Motorways

of the Sea (MMS), Finnlines and Minoan Lines. The Finnish com-

pany Finnlines runs a fleet of ro-pax and ro-ro vessels in the

Baltic Sea and Northern Europe, while the Greek ferry company

Minoan Lines operates ro-pax service between Piraeus (the port

of Athens) and Crete.

Recently, the Grimaldi Group has also evolved to become a

multimodal transport operator offering “door to door” logistics

services. For this purpose, it currently operates, together with

strategic partners, car and container terminals (totalling over

5.4 million sq. metres) in the Mediterranean, Northern Europe

and West Africa as well as trucking companies for the transport

of cars and containers.

In recent years, the Group has also invested in development

of the Motorways of the Sea in the Mediterranean Sea by intro-

ducing new and modern ro-pax ferries. Currently, its network

covers Italy, Spain, Malta, Tunisia, Morocco, Libya, Montenegro

and Greece for the transport of trailers, cars and passengers.

The high-quality services offered by the Grimaldi Group are

being regularly awarded by its international clientele such as

General Motors, Fiat Auto, Ford, Renault-Nissan, Honda and

Land Rover.

Finally, the Grimaldi Group is the first Italian shipping com-

pany to have obtained the SMS, ISO 9001 and ISO 14001 certi-

fications for Safety, Quality and Environment. Moreover, the

Grimaldi Group is also the first shipping company in Italy to be

awarded the status of Authorized Economic Operator –

Complete (AEO-F).

Finnlines Plc

Komentosilta 1


P.O.Box 197, 00181 HELSINKI, Finland

Phone +358 10 343 50

www.finnlines.com

annual report - finnlines · of the poland service. also in january, finnlines acquired two ro-ro...

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