Aves One's operating profit in H1 2020 at prior year's level due to the strong performance of the rail segment
Quarterly revenues rise to EUR 63.6 million (previous year EUR 55.6 million)
Rail investments in the first half year reach EUR 65.3 million
EBITDA slightly increased to EUR 42.2 million (previous year EUR 41.8 million)
Book losses in the container segment impact earnings
EBT (adjusted) amounts to EUR 1.8 million (previous year EUR 6.8 million)
Aves One AG, a strongly growing holder of long-life logistics assets, is consistently pursuing its growth path and continued to achieve increasing revenues and stable EBITDA in the first half of 2020 despite the COVID-19 pandemic.
Group revenues increased significantly compared to the same period of the previous year to approximately EUR 63.6 million (previous year EUR 55.6 million). This includes the sale of the company's last real estate asset. After deducting these one-off proceeds of approx. EUR 3.4 million, revenues from operations climbed to approx. EUR 60.2 million. The rail segment contributed approx. 70 % of Aves One's rental revenues despite the slightly lower capacity utilization. This was achieved by the strong fleet expansion and the associated increase in rental revenues to EUR 41.2 million - an increase of approximately 15.1 % compared to the same period of the previous year. In the container segment, revenues increased only slightly compared to the first half of 2019 to EUR 18.3 million (previous year: EUR 18.1 million).
Significant earnings contribution from the rail segment
In the first six months of 2020, the rail segment generated an EBITDA of EUR 32.4 million, an increase of about 15.2 %. The EBITDA margin of the rail segment remained stable at 78.6 % (previous year 78.6 %). The container segment lost approximately EUR 3.0 million EBITDA compared to the same period of the previous year and contributed EUR 12.8 million EBITDA to the Group result. The main reasons for the declining result in the container segment were increased expenses affecting net income, book losses from the sale of old containers of approximately EUR 1.8 million and costs of EUR 1.0 million for the renewal of older swap bodies. At Group level, EBITDA increased slightly to EUR 42.2 million (previous year EUR 41.8 million) due to the positive development of the rail business.
Interest expenses impact container segment
The reduction in operating profit in the container segment had a significant impact on earnings before tax due to the historical financing contracts with high interest expenditure (financial result container: EUR -10.4 million). The EBT of the container segment had a stronger impact on consolidated earnings than in the first half of the previous year, dropping by around EUR 3.3 million to EUR -4.7 million after adjustment for currency effects in the financial result.
Corporate focus on the rail segment proved successful
The rail segment generated a positive EBT contribution of EUR 9.4 million. Thus, at group level, after adjusting for currency effects in the financial result, H1 EBT reached EUR 1.8 million. The operating cash flow increased to EUR 42.8 million (previous year EUR 41.8 million).
"The strong stability and earning power of the rail segment is shown by comparing it with the container segment. The performance of the container segment was comparatively weaker in the first half of the year, mainly due to book losses from container disposals," explains Jürgen Bauer, member of the Management Board of Aves One AG. In contrast, EUR 65.3 million were invested in the rail portfolio and EUR 1.7 million in swap bodies. "The expansion of the rail business was also pursued consistently in the first half of 2020. Our core business remains successful. Nevertheless, we too are feeling the effects of the overall situation triggered by the COVID-19 pandemic. However, it is positive to note that the rental business continues to be solid," Bauer adds.
Rail segment continues its positive performance despite COVID-19
While Corona has lead to significantly longer lead times than usual in all areas of new or follow-up lettings, the operating letting business is nevertheless very stable. Despite COVID-19 in the first half of the year, occupancy rates in all segments are at a good level by long-term comparison. In the rail segment, capacity utilization in the 1st half of the year fell slightly to 91.7 %. However, this decline in capacity utilization was less attributable to COVID-19 than to the crisis in the steel industry, which had already begun earlier. Most of the affected wagon returns were completed by Mai. Since then there have not been any further relevant terminations.
"In the rail segment, our tight portfolio management is paying off. Despite the COVID-19 pandemic, we are recording low wagon returns. In recent weeks, we have also been able to successfully extend several key lease agreements that would have expired by the end of the year - some of them long-term and at higher rents," Bauer says.
Challenging conditions in the container segment
The container segment continues to be challenging. However, the increased considerable loss in this segment in the first half of the year is not due to the letting situation. Capacity utilisation in the first half of the year was at a good level of 94.2 %. However, it should be noted that there are currently various adverse market developments which have already resulted in income from the container segment in the first half of the year not being able to offset the high interest burden from existing financing agreements in this segment. An issue to be observed is that shipping companies, which have been experiencing rising volumes and freight rates for weeks despite the COVID-19 pandemic, are demanding rent reductions for new leases or lease extensions.
The secondary market for used sea containers has detached itself from its traditional correlation with the price trend for new containers. New container prices have been above the long-term average price since the spring, while prices for used containers have stagnated at a low level since the end of last year.
Jürgen Bauer describes the situation as follows: "There are no market analyses available at present, but we assume that the typical buyer structures on the secondary market are more affected by the consequences of the COVID-19 pandemic than the large shipping companies. This is currently resulting in book losses on the sale of our old containers. Although prices have risen slightly again in recent weeks, this unusual market inefficiency persists to date".
He adds: "Since about half of our sea container stock is around 13 years old and is therefore likely to be sold off in the next 12 to 36 months after the expected return of the container by the lessee in line with market conditions, the development of the secondary market is important for us. We are constantly evaluating the situation and will react with sales stops or other measures if necessary".
Continuous and strong focus on the rail business
"Concluding we can say that we are very comfortable with the current situation in the rail segment, but the losses in the container segment have increased notably. The further expansion of our rail investments and at the same time the further reduction of sea containers remain to be our most important operational goals," comments Bauer.
For further information on the financial performance we refer to our half-year report H1-2020, which is available for download at the following link: www.avesone.com/en/finanzberichte