Finnlines Plc Stock Exchange Release 25 October, 2007 INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2007 The Finnlines Group recorded revenue totalling EUR 505.4 (473.5) meur (continuing operations). Operating profit was EUR 57.2 (42.6) million. Profit before taxes was EUR 35.9 (34.6) million. Return on equity (ROE) was 8.8 (15.4)% and return on investment (ROI) was 7.5 (10.3)%. Significant events during the reporting period Changes in the Ownership In January, Grimaldi Group, the majority shareholder in Finnlines made a public mandatory tender offer for all shares of Finnlines. The purchase price was EUR 17.00 for each share. Grimaldi Group's holding and share of votes in Finnlines rose to 50.7 per cent. Annual General Meeting Finnlines Plc's Annual General Meeting, held on 16 March, 2007, decided to pay a dividend of EUR 0.42 per share, i.e. a total of EUR 17.1 million. The dividend payment day was 28 March, 2007. The AGM decided that the company's Board of Directors has seven members. The following were elected to the Board: Emanuele Grimaldi, Mr. Gianluca Grimaldi, Mr. Diego Pacella (vice- chairman), Mr. Heikki Laine, Mr. Antti Pankakoski, Mr. Olav K. Rakkenes and Mr. Jon-Aksel Torgersen (chairman). The firm of authorised public accountants Deloitte & Touche Oy was appointed as the company's auditors. Changes in management Antti Lagerroos, President and CEO of Finnlines Plc resigned from his duty in February and Mr. Olav K. Rakkenes, a member of the Board of Directors, was appointed temporary President and CEO of Finnlines Plc as from 24 April, 2007. Mr. Christer Antson (MSc,Econ), was appointed President and CEO of Finnlines Plc as from 4 July, 2007. Mr. Antson was previously Executive Vice President and Chief Controller of Finnlines Plc. Mrs. Seija Turunen (MSc,Econ) was appointed Deputy CEO and CFO being in charge of finance, accounting, communications, personnel, administration and information technology as from 4 July, 2007. Mrs. Turunen was previously Executive Vice President/Finance and Communications of Finnlines Plc. Vessels and traffic The third newbuilding, MS Finnlady, started the traffic between Helsinki, Finland and Travemünde, Germany in the middle of February and the fourth vessel of the series, MS Europalink, started plying between Malmö, Sweden and Travemünde, Germany in March 2007. The last vessel of the five newbuildings, MS Nordlink, was delivered early July and started the traffic between Malmö/Sweden and Travemünde/Germany at the end of July. The compensation dispute relating to the late delivery of the newbuildings has been settled with the yard and the received EUR 15 million compensation has been booked to balance sheet as deduction of the purchase prices of the vessels. MS Finntrader started operating in NordöLink traffic in February 2007 after conversion. Her sister vessel MS Finnpartner was docked for conversion in April 2007 and started plying in NordöLink traffic at the beginning of September. These so-called Hansa vessels have been converted into drive-through vessels with increased passenger capacity. MS Finnclipper has been back in FinnLink service since March after conversion. The cargo capacity of the vessel was increased by 500 lane meters to a total of 2,900 lane metres. In April, Finnlines Group agreed on the sale of the ro-pax vessels MS Malmö-Link and MS Lübeck-Link (built 1980) to external non-related parties. The first of these NordöLink vessels was replaced by the newbuilding Nordlink at the end of July and the second was replaced by MS Finnpartner at the beginning of September. The sales profit, approx. EUR 12 million, is included in the Group's third quarter result. At the end of August Finnlines ordered six new ro-ro vessels from the Chinese Jinling shipyard. Each of the vessels will have about 3,200 lane meters and the speed will be 20 knots. The contract price is around EUR 240 million and the vessels are to be delivered during 2010-2011. The vessels will form an essential part of Finnlines ice-classified core fleet. The operations at the terminals of Lübecker Hafengesellschaft in Lübeck harbours was suffering from actions of the dock workers' union during the second quarter. The reason was the union's protest against the planned privatisation of Lübecker Hafengesellschaft. Financial performance The Finnlines Group recorded revenue totalling EUR 505.4 (473.5 from the continuing operations in 2006) million. Shipping and Sea Transport Services generated revenue amounting to EUR 429.5 (403.4) million and Port Operations EUR 100.4 (91.5) million. Other income from operations amounted to EUR 14.4 (1.5) million of which main part comes from the sales gain on the two sold vessels. Operating profit was EUR 57.2 (42.6,continuing operations)million. Financial income was EUR 3.3 (2.6) million and financial expenses totalled EUR -24.6 (-10.5) million. The increase in financial expenses is due to the investment programs, which are financed with long-term loans. Profit before taxes was EUR 35.9 (34.6, continuing operations) million. Return on equity (ROE) was 8.8 (15.4)% and return on investment (ROI) was 7.5 (10.3)%. Investments and financing The Group's investments were EUR 368.3 (206.8) million. The main part of this amount came from the delivery of three new buildings, MS Finnlady, MS Europalink and MS Nordlink. Based on the contract with the Chinese Jinling shipyard, the Group paid the first instalment of the vessels amounting EUR 72 million in September. Interest-bearing net debt amounted to EUR 738.5 (444.6) million. The equity ratio calculated from the balance sheet was 31.0 (37.9)%. Gearing was 170.9 (107.6)%. Personnel The Group employed an average of 2,340 (2,190)people during the period, consisting of 1,478 (1,444) employees on shore and 862 (746) persons at sea. The Finnlines share The Company's registered share capital on 30 September 2007 was EUR 81,383,916 divided into 40,691,958 shares. A total of 8.6 million Finnlines shares were traded on the Helsinki Exchanges during the period. The market capitalisation of the Company's stock at the end of September was EUR 594.1 million. Earnings per share (EPS) during the period were EUR 0.69 (0.65). Shareholders' equity per share was EUR 10.57 (10.11). Risks The loan portfolio of the company has increased substantially due to the five vessel investment program, which ended in July and due to the new investment program of six new ro-ro vessels with the value of approximately EUR 240 million and to be delivered during the years 2010-2011. The payments of this program will partly be in USD, but this exposure is 100% hedged against EUR. These five vessels and the coming ro-ro vessels have been and will be financed with long-term (12-15 years)loans. Otherwise there are no material changes in the risks disclosed in the notes to the financial statements 2006. Litigation An arbitration proceedings commenced between the owners of M/V Finnmill and M/V Finnpulp and Finnlines Plc. The vessels are chartered by Finnlines and the charter agreements include purchase options on each of the vessels. The main dispute concerns the validity of these purchase options. Outlook for 2007 During the first nine months of 2007 unitised cargo volumes have developed positively on the main routes of Finnlines. This is due to the good economic development in Finland and in its most important trading countries and also due to Finnlines' faster timetable between Finland and Germany. Despite one-time expenses relating to the new vessels taken into service, the rotation of the fleet and the vessels being out of service due to conversion, the whole year operating profit for 2007 is expected to be better than in 2006. Compared to the previous year, there is and will be an increase in the depreciations and interest expenses due to the investments made into five newbuildings and vessel conversions. The next report, financial statement bulletin for the year 2007, will be published on Wednesday 20 February, 2008. Finnlines Plc The Board of Directors ENCLOSURES Profit and Loss Account Balance Sheet Changes in Shareholders Equity Cash Flow Statement Revenue by business division Property, plant and equipment Financial indicators Contingencies and Commitments Revenue and operating result by quarter DISTRIBUTION Helsinki Exchanges Main media All figures unaudited CONSOLIDATED PROFIT AND LOSS ACCOUNT 1000 EUR 7-9/07 7-9/06 1-9/07 1-9/06 1-12/06 Continuing Operations Revenue 176,525 154,874 505,410 473,529 632,666 Other income from 13,479 477 14,388 1,517 2,078 operations Materials and services -55,324 -49,727 -146,206 -151,049 -196,042 Personnel expenses -29,276 -27,142 -87,359 -81,561 -111,266 Depreciation, amortisation -14,035 -10,184 -39,046 -28,602 -39,875 and other write-offs Other operating -64,641 -53,369 -190,003 -171,251 -229,337 expenses Total operating expenses - - -462,615 -432,464 -576,521 163,274 140,422 Operating profit 26,730 14,929 57,183 42,582 58,223 Financial income 557 1,099 3,300 2,555 10,784 Financial expenses -9,961 -1,831 -24,553 -10,539 -21,557 Share of associated companies' profits 0 0 0 0 274 Profit before taxes 17,325 14,198 35,930 34,598 47,725 Income taxes *) -3,637 -3,213 -7,544 -7,961 -9,989 Profit for the reporting period, continuing 13,688 10,984 28,386 26,637 37,736 operations Discontinuing operations Profit for the reporting period, discontinuing operations N/A 18,264 N/A 18,976 18,742 Profit for the reporting period 13,688 29,249 28,386 45,613 56,477 Distribution: Parent company 13,512 29,064 28,030 45,325 56,053 shareholders Minority interest 176 185 356 288 425 13,688 29,249 28,386 45,613 56,477 Profit attributable to parent company shareholders calculated as earnings per share (EUR/share) Undiluted earnings per 0.33 0.71 0.69 1.11 1.38 share Diluted earnings per 0.33 0.71 0.69 1.11 1.38 share Profit attributable to parent company shareholders, continuing operations, calculated as earnings per share (EUR/share) Undiluted earnings per 0.33 0.27 0.69 0.65 0.92 share Diluted earnings per 0.33 0.27 0.69 0.65 0.92 share Profit attributable to parent company shareholders, discontinuing operations, calculated as earnings per share (EUR/share) Undiluted earnings per N/A 0.45 N/A 0.47 0.46 share Diluted earnings per N/A 0.45 N/A 0.47 0.46 share *)Taxes have been estimated based on the profit for the reporting period. CONSOLIDATED BALANCE SHEET, IFRS 1000 EUR 30/9/07 30/9/06 31/12/06 ASSETS Non-current assets Property, plant and equipment 1,130,77 797,937 817,977 3 Goodwill 108,660 107,103 108,660 Other intangible assets 10,007 9,979 10,136 Investment properties 1,585 1,589 1,588 Share of associated companies 1,526 2,074 2,349 Other financial assets 4,797 4,892 4,892 Receivables 10,612 6,811 5,839 Deferred tax assets 1,862 836 617 1,269,82 931,221 952,057 2 Current assets Inventories 6,121 5,098 5,412 Accounts receivable and other receivables 101,348 102,604 91,538 Income tax receivables 505 35 512 Bank and cash 17,998 51,867 18,436 125,972 159,604 115,898 Total assets 1,395,79 1,090,82 1,067,95 4 6 6 SHAREHOLDER'S EQUITY Equity attributable to parent company shareholders Share capital 81,384 81,384 81,384 Share premium account 24,525 24,525 24,525 Fair value reserves -2,838 Translation differences 210 323 28 Retained earnings 326,730 305,063 315,791 430,012 411,295 421,728 Minority interest 1,995 1,892 2,028 Total equity 432,006 413,187 423,757 LIABILITIES Long-term liabilities Deferred tax liabilities 96,409 90,580 98,352 Pension liabilities 2,454 2,797 2,565 Provisions 3,656 3,952 3,659 Interest-bearing liabilities 610,841 377,202 360,067 713,360 474,531 464,643 Current liabilities Accounts payable and other liabilities 94,584 77,752 79,155 Income tax liabilities 9,123 5,763 430 Provisions 435 93 230 Current interest-bearing liabilities 146,284 119,499 99,739 250,428 203,108 179,555 Total liabilities 963,787 677,638 644,199 Total equity and liabilities 1,395,79 1,090,82 1,067,95 4 6 6 CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY 1000 EUR Share Share Share Trans- capital issue issue lation premium diffe- rences Shareholder s´ equity 1.1.2006 81,314 6 24,301 -1,046 Translation differences 1,369 Profit for reporting period Total recognised income for the period 1,369 Dividend Share issue 70 -6 224 Teamlines sale 70 -6 224 Shareholder s´ equity 30.9.2006 81,384 24,525 323 1000 EUR Retained Total Minority Total earnings interest equity Shareholder s´ equity 1.1.2006 271,946 376,520 2,002 378,523 Translation differences 1,369 1,369 Profit for reporting period 45,325 45,325 288 45,613 Total recognised income for the period 45,325 46,694 288 46,982 Dividend -12,208 -12,208 -392 -12,600 Share issue 289 289 Teamlines sale -6 -6 -12,208 -11,919 -6 -12,317 Shareholder s´ equity 30.9.2006 305,063 411,295 1,892 413,187 CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY 1000 EUR Share Share Trans- Fair capital issue lation value premiu diffe- reserve m rences s Shareholder s´ equity 1.1.2007 81,384 24,525 28 Cash flow hedges -2,838 Translation differences 182 Profit for reporting period Total recognised income for the period 182 -2,838 Dividend Shareholder s´ equity 30.9.2007 81,384 24,525 210 -2,838 1000 EUR Retained Total Minority Total earnings interest equity Shareholder s´ equity 1.1.2007 315,791 421,728 2,028 423,757 Cash flow hedges -2,838 -2,838 Translation differences 182 3 185 Profit for reporting period 28,030 25,374 356 28,386 Total recognised income for the period 28,030 25,374 359 25,733 Dividend -17,091 -17,091 -392 -17,483 -17,091 -17,091 -392 -17,483 Shareholder s´ equity 30.9.2007 326,730 430,012 1,995 432,007 CONSOLIDATED CASH FLOW STATEMENT 1000 EUR 1-9/07 1-9/06 1-12/06 Cash flows from operations: Profit for the reporting 28,386 45,613 56,477 period Adjustments: Non-cash transactions 27,623 7,568 13,913 Financial income and 19,978 8,878 10,743 expenses Taxes 7,544 8,047 9,989 Changes in working capital: Change in accounts receivable and other receivables -11,406 -6,100 4,525 Change in current assets -709 1,543 1,228 Change in accounts payable 15,120 -11,340 -11,646 and other liabilities Change in provisions 86 -2,153 -2,096 Interest paid -19,968 -9,170 -11,473 Interest received 1,020 976 2,008 Taxes -1,152 7,947 7,174 Other financing items -2,278 -1,451 1,475 Net cash from operating 64,244 50,356 82,318 activities Cash flows from investing activities: Acquisition of N/A -1,727 -1,727 subsidiaries Sale of subsidiaries 35,893 35,708 Investments in tangible - - - assets 368,471 203,938 229,537 Investments in intangible assets -1,305 -1,370 -2,207 Sale of tangible assets 29,823 1,329 1,625 Disposal of associated companies 200 Proceed sale of investment 243 Dividends received 3 34 34 Net cash used in investing activities - - - 339,507 169,779 196,104 Cash flow from financing activities: Proceeds from issue of 289 289 shares Borrowing 309,307 202,881 202,881 Net increase in current interest-bearing 64,277 -6,130 -27,816 liabilities Repayment of loans -81,663 -43,299 -59,394 Increase / decrease of long-term receivables 383 1,403 2,190 Dividends paid -17,483 -12,600 -12,600 Financing expenses 10 -2,063 Net cash used in financing activities 274,821 142,555 103,487 Change in cash and cash equivalents -442 23,132 -10,299 Cash and cash equivalents on 1 January 18,436 28,735 28,735 Effect of foreign exchange rate changes 3 0 Cash and cash equivalents on September 30 / December 17,998 51,867 18,436 31 REVENUE AND OPERATING RESULT BY BUSINESS SEGMENTS (PRIMARY SEGMENT) 1-9/07 1-9/06 1- 12/06 Sales EUR % EUR % EUR % (1000) (1000) (1000) Shipping and sea transport 429,48 85.0 403,43 85.2 538,99 85.2 0 8 6 Port operations 100,39 19.9 91,484 19.3 123,09 19.5 6 2 Eliminations (intragroup) - -4.8 - -4.5 - -4.7 24,466 21,393 29,422 External sales 505,41 100. 473,52 100. 632,66 100. 0 0 9 0 6 0 Operating profit Shipping and sea transport 50,453 37,168 50,771 Port operations 6,730 5,415 7,452 Operating profit total 57,183 42,582 58,223 Share of associated 0 0 274 companies Financial items - -7,984 - 21,253 10,773 Profit before taxes 35,930 34,598 47,725 Income taxes -7,544 -7,961 -9,989 Profit for reporting period continuing 28,386 26,637 37,736 operations PROPERTY, PLANT AND EQUIPMENT (INCL. INVESTMENT PROPERTIES) 30/9/07 30/9/06 31/12/0 6 EUR EUR EUR (1000) (1000) (1000) Historical cost at the beginning of the 1,084,49 849,029 849,029 period 1 Translation 159 1,106 5,442 differences Additions 367,004 202,806 230,470 Acquisition of subsidiaries 3,219 3,219 Disposals -60,732 -1,328 -2,615 Business disposals -825 -825 Reclassifications -229 -229 Historical cost at 1,390,92 1,053,7 1,084,4 the end of the period 3 78 91 Accumulated depreciation at the beginning of the -264,926 - - period 227,710 227,710 Translation -108 224 -990 differences Disposals of 373 373 subsidiaries Cumulative depreciation on reclassifications and 44,082 724 2,272 disposals Cumulative depreciation on -579 -579 business acquisition Depreciations -37,612 -27,286 -38,292 Accumulated depreciations at the -258,564 - - end of the period 254,254 264,926 Book value 1,132,35 799,525 819,564 8 FINANCIAL INDICATORS 1-9/07 1-9/06 1-12/06 Operating profit as % of revenue (continuing operations) 11.3 9.0 9.2 ROE, % 8.8 15.4 14.1 ROI, % 7.5 10.3 9.9 Gearing, % 170.9 107.6 104.2 Gross capital expenditure, MEUR *) 368.3 206.8 238.8 % of revenue 72.9 43.7 37.7 Equity ratio, % 31.0 37.9 39.7 Shareholders' equity/ share, EUR 10.57 10.11 10.36 Number of shares during period, average (1000) 40,692 40,682 40,685 Number of shares at end of period (1000) 40,692 40,692 40,692 Market capitalisation, EUR million 594.1 651.1 699.9 Average personnel (continuing operations) Shore-based personnel 1,478 1,444 1,451 Sea-borne personnel 862 746 745 Personnel total 2,340 2,190 2,196 *) Includes continuing and discontinuing operations Financial ratios have been calculated according to the same principles as in financial statements 2006. CONTINGENCIES AND 30/9/07 30/9/06 31/12/06 COMMITMENTS 1000 EUR Vessel hires (continuing operations): Within 12 months 89,821 80,077 88,258 Between one and five 67,105 101,153 102,301 years After five years 0 0 0 156,926 181,230 190,559 Other leases (continuing operations): Within 12 months 5,278 5,583 5,515 Between one and five 11,955 12,322 11,899 years After five years 8,462 10,666 9,937 25,695 28,571 27,351 Collateral given: Borrowings secured by given mortgages Loans from financial institutions 540,681 312,221 300,367 Vessel mortgages provided as guarantees for the 723,500 461,000 461,000 above loans Other guarantees given on behalf of the Group: Collateral 2,518 2,892 2,485 Mortgages 606 Other guarantees given on behalf of the others: Collateral 1,027 1,027 1,027 Mortgages 431 431 431 Other commitments given by group on behalf of subsidiaries: Commitments 6,000 6,000 Obligations for capital expenditure 211,319 239,891 239,768 Other obligations 107 115 Open derivative instruments: 1000 EUR 30/9/07 31/12/0 30/9/07 31/12/0 6 6 Net fair values Contract amounts Currency forwards -2,495 0 86,325 0 Interest rate swaps -513 0 120,000 0 Contingent liabilities Finnsteve's Leasehold Agreement: When the new Vuosaari harbour is operational Finnsteve Oy will transfer its port operations from Helsinki's West Harbour and North Harbour to Vuosaari. Finnsteve and the Port of Helsinki have made a leasehold agreement, which obliges the leaseholder to dismantle and remove any buildings, plants and equipment (including foundations) located in the area. The extent of the liabilities arising from this depends on future town planning and is therefore difficult to estimate. REVENUE AND OPERATING RESULT BY QUARTER Q1/0 Q1/0 Q2/0 Q2/0 Q3/0 Q3/0 7 6 7 6 7 6 MEUR MEUR MEUR MEUR MEUR MEUR Continuing Operations Shipping and sea transport 132. 129. 146. 142. 150. 132. 5 1 4 2 6 1 Port 33.3 30.4 33.5 31.5 33.5 29.6 operations Eliminations (intragroup) -8.4 -6.6 -8.5 -7.9 -7.6 -6.8 External sales 157. 152. 171. 165. 176. 154. 4 9 4 8 5 9 Operating profit Shipping and sea transport 11.0 7.9 14.9 16.1 24.5 13.2 Port 2.5 1.9 2.0 1.8 2.2 1.8 operations Operating profit total 13.5 9.7 16.9 17.9 26.7 14.9 Share of associated companies 0 0 0 0 0 0 Financial -5.2 -3.3 -6.7 -3.9 -9.4 -0.7 items Profit before taxes 8.3 6.4 10.2 14.0 17.3 14.2 Income taxes -1.7 -1.4 -2.2 -3.3 -3.6 -3.2 Profit for the reporting period,Continu ing Operations 6.6 5.0 8.1 10.6 13.7 11.0 Discontinuing Operations 0 -0.3 0 1.0 0 18.3 Profit for the reporting 6.6 4.7 8.1 11.6 13.7 29.2 period EPS* 0.16 0.12 0.20 0.28 0.33 0.27 (undiluted) EPS* (diluted) 0.16 0.12 0.20 0.28 0.33 0.27 * Continuing operations Related Party Transactions There were no material related party transactions during the reporting period. Reporting The interim report includes a summary of the financial statements for the period in accordance with the IAS 34. The accounting principles are the same as in the financial statements of 2006. This interim report is unaudited.