Operail nine-month freight volumes halved due to Russia sanctions

Operail rolling stock.
Operail rolling stock. Source: Raul Mee

Freight volumes of the Estonian state-owned international transport and logistics company Operail fell to 5.2 million tons in the first nine months of 2022, due to which more than 100 employees have been laid off, the company announced Friday. More than

Operail Group's freight volumes in Estonia and Finland totaled 5.2 million according to the unaudited consolidated interim report for the first nine months of 2022, marking a 48 percent decrease on year, according to a company press release.

The company has laid off more than 100 employees due to this decrease in freight volume, the latter of which can be attributed to Estonian and EU sanctions against Russia and Belarus halting the transit of Russian fertilizers and Belarusian oil products via Estonia.

Intra-Estonian multimodal operations, however, have shown strong growth in the first three quarters, with volumes up 52 percent on year.

"I am glad that the work in the field of intra-Estonian transport has borne fruit and that growth has been strong," Operail CEO Raul Toomsalu said. "We have removed about 16,000 trucks from Estonian roads, thus making the roads safer for all road users and reducing the footprint of the transport sector. However, it's obvious that domestic trade, Estonian imports and exports as well as north-south transit will not replace the lost volumes in the near future."

Due to the decrease in freight volumes, Operail's operating income fell from €55 million to €42 million on year. The group was in a loss of €3.5 million in nine months; during the same period last year, it had made a profit of €3.5 million.

This loss was exacerbated by extraordinary costs resulting from layoffs and legal and consulting costs related to the preparation of the sale of company assets.

The company's nine-month earnings before interest, taxes, depreciation, and amortization (EBITDA) fell to €5.7 million, down from €13.4 million on year.

In addition to its domestic multimodal operations, Operail has also benefited from its wagon rental business, which continues to make a profit. The company is also utilizing funds accumulated in previous years. The concern about the future of the Estonian railway sector, however, is nevertheless serious.

Transit volumes down, maintenance costs unchanged

"The entire railway infrastructure in Estonia has been relying for years on wagon rental income and large transit volumes," Toomsalu said. Transit volumes, meanwhile, have decreased severalfold, while railway maintenance costs remain steady or are increasing along with general price increases.

"If local goods are made to be responsible for the maintenance of the entire railway in the future, then these goods will be transported by road due to the price, and the future of the railway as the safest and most environmentally friendly mode of transport in Estonia is in serious danger of disappearing," he explained. "Operail's management is working hard to ensure that goods can continue to be transported by rail in the future as well."

Operail is an Estonian state-owned railway company whose main lines of business are freight transport, the construction and repair of rolling stock as well as rolling stock rental. In addition to the parent company AS Operail, the Operail Group also includes Operail Repairs OÜ, which is engaged in rolling stock construction and repair, wagon rental companies AS Operail Leasing and Operail Leasing Finland Oy as well as Finnish railway transport company Operail Finland Oy. The company employs approximately 400 people.


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Editor: Aili Vahtla

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