Operail seeks new opportunities as cargo volumes fall

Operail seeks new opportunities as cargo volumes fall
© operail.com

Operail is facing an 83% reduction in cargo volumes due to the impact of the war in Ukraine, resulting in projected losses for the first half of the year. Despite this setback, the company is actively seeking new opportunities to counteract the decline in cargo volumes.

As a result of the complex effects of the war in Ukraine, Operail faced a significant 83% drop in freight volumes. Although the company recorded projected losses for the first half of this year, it is seeking to strengthen its financial position through the sale of strategic assets. Management is now actively exploring new ways to improve the company's profitability.

Compared to the pre-war year of 2021, when Operail transported 6.6 million tonnes of freight in Estonia in the first six months, the figures are significantly lower. In the corresponding period of 2022, cargo volume plummeted to 3.6 million tons, and this year the number stands at a mere 1.1 million tons. Out of the projected 2.2 million tons for 2023, only half of the target was achieved in the initial half of the year.

The decline in cargo volumes can be attributed to the sanctions imposed on Russia and Belarus in 2022 and the owner's decision to stop transporting goods from these countries from 2023 onwards, regardless of the sanctions. Although this decision reflects Operail's stance against aggressors, it has inadvertently created a competitive advantage for competitors who continue to transport Russian and Belarusian goods. The company foresees a challenging revenue outlook for Estonian traffic this year.

Operail has adapted by reducing its workforce by half, although this reduction isn't directly proportional to the decline in transport volumes. To mitigate the impact on small Estonian companies that do not have enough freight to fill an entire train, Operail introduced a new service aimed at smaller customers. As part of its strategic maneuvering, Operail sold its freight transport business in Finland and its wagon rental business. The proceeds from these sales have provided financial stability and enabled the company to focus on new solutions.

“It’s challenging to operate profitably with a reduced volume and to cut costs at the same rate. Moreover, in the first half of the year, there were also extraordinary expenses, such as layoff,” commented Operail's CEO, Raul Toomsalu, and added: “Despite decreased cash flow due to lower volumes, our group's financial stability remains strong. The sale of non-strategic assets has served as a significant financial cushion."

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