Interviews

Ivan Bednárik: In the Event of Expansion, Epidemic Acts as a Catalyst

Published: 25. 6. 2020
Author: Michal Roh
Photo: ČD Cargo, a.s.
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Human society is going through a period of severe testing that is unparalleled, at least in recent decades. The covid-19 pandemic has affected virtually the entire world, and most measures aimed at slowing down the spread of the disease at least a bit, and limiting its effects on people's health and lives, which has been leading to drastic interference in the functioning of the economy, and almost to its halt. Thus, almost all areas of production and services have been affected, including transport and rail freight. We talked not only about the impact of covid-19 with Ivan Bednárik, Chairman of the Board of Directors of the largest Czech railway freight carrier ČD Cargo.

How was ČD Cargo doing in 2019?

The first half of the year was successful, in the second we were already affected by the cooling down of the economy, primarily in the steel industry and energy. Overall, however, I rate 2019, even with regard to current events, as very good.

You have invested a lot. What did you focus on most?

It's very simple, we focused on the future. I probably wouldn't say 'a lot', but yes, it was a multiple of what we'd invested in the past. Morally obsolete "hardware" clearly requires significant investment progress. The business we do is quite specific in this respect, because we are investing for decades to come. Unfortunately, my predecessors had to solve other problems related to, for example, market liberalization, and only the recent years have allowed us to look at where ČD Cargo should be in ten, twenty or even thirty years. And investments are closely related to that.

Will you continue to invest on the same scale this year?

I don't want to anticipate. Today, it is the case that we aren’t cutting the investments that are necessary for ČD Cargo to be fully prepared to satisfy all customers even after the crisis. Investments in rolling stock are therefore unrestricted. Over time, we are shifting to other, less priority investments. However, their amount is marginal, in units of per cent, for example in IT systems, etc. But what will make our living in the future are the virtual "shovel and pickaxe", we go for them without restrictions, as we set out in our long-term strategy. However, it is clear that we will not fulfil the original investment plan due to covid-19.

Covid-19 does not only affect investments. Which sectors are most affected by the economic downturn due to the epidemic?

To start with, let me make one comparison. The world economy is paralyzed as if you’ve broken your arm, and even if you wanted to, you can't do some things with an arm in cast. The question then is whether the plaster weighs one or ten kilograms. Only time will show that, seeing if doctors used the right amount of fixative or whether it was too little or too much. Today, there are discussions around the world as to when to remove the plaster, and everyone hopes that when it is down, the fracture will be healed and the arm will be fully functional. But I don't believe that. Recovery will definitely be needed and maybe in a year or two we will know if the patient is without consequences or not.

I used the comparison to have you better understand the current economic situation, to understand what we have to deal with every day. One small car weighs about a ton. There is about 700 kg of iron in it, and in order to produce this amount, you need to import about a ton of iron ore, 500 kg of coal and coke, 100 kg of limestone. You need to extract and import 100 kg of sand for glass, wire and rubber for tires, for the production of interior equipment you need to transport oil to the refinery and then transport the granulate somewhere where it is to  turn into plastic. When you add it up, you need another three tons of raw materials for a one-ton car. Our product is not only about the transport of thousands of manufactured cars, but also important companies from the heavy and mining industry, which suddenly do not have orders.

Covid-19 has affected all sectors. Some have been affected more, some less. It probably has the least impact on the operation of supermarkets and e-shops. Unfortunately, the railways contribute only marginally to their supply.

Are you able to cope with the consequences of the epidemic? What steps are you taking?

I must say that so far we have managed to cope with the consequences of the epidemic. The first month was challenging, with some colleagues actually working at the limit of their physical capabilities. An incredible number of problems had to be solved and, most importantly it was solved. Provide protective and disinfection aids, legislatively "treat" the crossings of our employees across the border, discuss with the Railway Administration where to park unnecessary cars, etc. We quickly had to plan and carry out the transport of alcohol for the production of disinfectants.

Then the second phase came. We are one of the first to know where the production limitations or problems are. We need to transfer this information to our plans and respond operatively by reducing or, conversely, increasing capacity in specific locations and at a given time. Subsequently, we need to resolve what to do with the remaining capacities. And this is where the divination from the crystal ball really begins, which if I say it nicely, I see there not only complications and problems, but also a great business opportunity. If we can keep employees and other freed capacity in the form of cars and locomotives, 2020 will not be very successful in terms of economic results, but immediately after the convalescence of the "patient with a broken arm" we will be one of the few who will be able to cover growing customer requirements, which should ultimately lead to revenue growth and a strengthening market share.

Will the epidemic affect your long-term goals, such as expanding abroad?

Definitely yes. In the event of expansion, the epidemic acts as a catalyst. It worked for us to align with our neighbours and we will definitely do so even more. By the way - we managed to get all the necessary documents required for the operation of rail transport in Germany and on 3rd April we brought the first train with wood to Ingolstadt.

Ivan Bednárik

Graduated from the grammar school in Zlaté Moravce, then studied at NSW Business College, Sydney, Australia.

Since 1995, he has held managerial positions in several companies engaged in trade and forwarding, most recently as a member of the Board of Directors and sales director of Express Group, a.s.

In November 2014, he was elected member of the Board of Directors of ČD Cargo, and at the introductory meeting he was also elected its Chairman.

In 2017, he graduated from the Central European Management Institute (CEMI).

With effect from 2nd November 2019, he was re-elected a member of the Board of Directors of ČD Cargo, and at the meeting of the Board of Directors on 4th November 2019, he was elected Chairman of the Board of Directors.

 

 ČD Cargo

The company ČD Cargo, as was established on 1st December 2007 by the contribution of a part of the company of the joint-stock company České dráhy, transporting 65 million tons of goods per year, it is one of the most important railway freight carriers in Europe. ČD Cargo, holds a license to operate rail freight transport not only in the Czech Republic, but also in Austria and Germany, and through subsidiaries also in Poland and Slovakia. ČD Cargo owns a stake in a total of 13 companies, including foreign ones. The share in two terminals (Brno, Lovosice) is key to the offer of services in the field of combined transport. A 100% stake in ČD Cargo Logistics allows us to offer customers truly comprehensive services.

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