Divesting for future growth: how Finnish Railways restructures its logistics division

2021/07/15 at 9:19 AM

Finnish state railway holding VR Group is continuing the restructuration of its logistics business. It has been divesting several subsidiaries dedicated to road haulage, particularly those dedicated to international connections. At the same time, the railway group has started to invest in another promising activity.

Five years ago, when the first Finnish private rail freight operator, Fenniarail, started to deliver freight with its own locomotives, VR Group, the state-owned railway holding, was investing in the development of its logistics division, VR Transpoint, to make it more multimodal and international. The recent years have been demonstrating a quite different trend in the company’s policy in terms of development. It is more and more focused on the home market and the core business, rail transport. “The market has undergone lots of changes over the years, and we have let go of international road traffic operations in Europe,” Martti Koskinen, VR Transpoint’s Senior Vice President, explained such a substantial transformation.

Farewell to international road logistics

This year VR Group intends to finalise one of the major divestment moves in its history. In late June the railway company announced the sale of Transpoint International, a business unit dedicated to international road haulage operations, and its two subsidiaries in Russia. The company will be divested to Avind International, a Finnish private freight forwarding provider with a strong focus on the Finland-Russia operations since it has a warehouse facility near the Port of Hamina-Kotka and a representative office in Saint Petersburg.

VR Transpoint will develop its road haulage business in Finland, source: Juho Kuva / VR Group

“Transpoint International is a company we are already familiar with and, with this acquisition, we will grow into one of the largest logistics players in Russia,” Kari Talvitie, CEO of Avind International, said. It is expected that the deal will be implemented by the year’s end. Avind’s staff will almost double after the acquisition: 90 employees of Transpoint International will join to 120 colleagues of Avind International. Moreover, the new owner will get more offices, namely in Helsinki and Vyborg, a Russian city close to the Finnish border.

It is worth reminding that VR Group started the divestment of Transpoint International in 2020 by selling some of its business units. For instance, in December of the last year, the national railway holding sold Transpoint International (EST), a Tallinn-headquartered subsidiary focused on road logistics operations in the Baltics and Central and Eastern Europe. It was Greencarrier Freight Services, a Sweden-based freight forwarder, that purchased the unit.

Circular economy

It may seem that VR Group is planning to totally withdraw from road haulage operations. However, it is not true as the company’s trucks are widely seen in Finland and the railway holding does not intend to abandon this business but to develop it further with a strong focus on the home market. To this end, VR Group will invest in the circular economy that will allow the company to attract more freight and support its responsibility programme.

Transitar to support responsibility programme of VR Group, source: Transitar

Among the latest developments in this regard is the acquisition of Transitar, a Finnish company dedicated to transporting recycled materials and one of the largest players in the Nordic countries. The deal was implemented on 1 July. Transitar was incorporated in 1998, it has a fleet of 50 trucks, 70 semi-trailers and several hundred containers.

“In line with its strategy, VR Transpoint invests in domestic logistics services in road transport and now, with the acquisition, we are strengthening our position as a circular logistics operator. Investing in the circular economy strongly supports our company’s responsibility program. The circular economy is a growing trend and its essential prerequisite is efficient logistics. Our goal is to provide circular economy logistics services comprehensively, competitively and flexibly so that our customers can succeed responsibly in their core business,” Martti Koskinen said.

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