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This December will mark three years since Tomáš Toth was elected chairman of the board of ČD Cargo, the largest Czech rail carrier specializing in freight transport. He took over during years marked by Covid, military conflicts, "bouncing" energy prices, sharp inflation... Despite all of these adversities, the company has managed to stay "in the black" and is planning a sizeable expansion.
The times are difficult for the majority of businesses and are likely to remain so – the war in Ukraine, slow recovery from Covid, expectations of rising energy prices, now the instability around Israel shaking up prices and markets... How is ČD Cargo dealing with all of that?
It is difficult, of course. Every year brings more and more challenges for our company. Despite all the negatives you listed, we managed to bring in 481 million CZK in earnings before taxes (EBT according to the International Financial Reporting Standards) and net after-tax earnings of 314 million. In the local transportation market, ČD Cargo's transport volume fell by 7 percent due to unfavorable conditions in various industries, including energy. This number matches the overall statistics of rail transport volume published by the Railway Administration, which show a year-over-year drop of 8.6 percent in gross tonne-kilometers for all carriers. So, the year-over-year earnings increase happened primarily due to growth in international transport. As for the future outlook, we would like to stay "in the black" not only this year but in the years ahead as well. It is key that we maintain our investment pace and negotiate reasonable financing for our expansion activities.
Fossil fuel consumption is gradually shrinking and is supposed to shrink at an even faster rate, which leads to lower volumes of coal being transported, among other issues. Has it had a visible effect? And what does it mean for ČD Cargo?
In an eight-month period this year, we transported roughly six million tonnes of brown coal, which is more than 600 thousand tonnes (10 percent) less than the same period last year. I dare say that no boom in the transport of solid fuels is on the horizon. And what that means for ČD Cargo? In terms of the commodity in question, it means a gradually decreasing transportation volume and a subsequent drop in turnover. Therefore, we plan to gradually cut the repairs of older hopper wagons. However, nowadays, we transport a large portion of brown coal in Innofreight interchangeable units on our new Sggrss intermodal wagons. In case interest in this type of transport wanes in the future, we can remove the “coal” units and fit the wagons with different ones – such as units for transporting metallurgical products, gravel, etc. That is why the versatility of our railway wagons is essential for us in terms of new investments. We will strive to replace the drop in earnings due to the shrinking use of brown coal in the energy and heating industries by transporting alternative fuels, such as biomass and most recently also communal waste.
When I spoke to Minister Martin Kupka earlier in the summer, we discussed the fact that current railway freight transport capacities are at their limits. Are there better times ahead?
It depends on what capacities you mean. Personally, I feel that the capacities of railway carriers are sufficient at the moment – we have modern hardware at our disposal as well as qualified employees. These capacities are not easy to attain by any means, but a much more burning issue for us right now is the insufficient capacity of the railway network. The main railway corridors are overloaded with passenger transport, be it long-distance or even commuter transport in large urban agglomerations. So, our trains operate in large part during the night. Service disruptions are another major problem for us. We understand that the infrastructure needs to be modernized, but diverting our trains, if it is possible at all in the first place, means a sizeable expense increase and a significant drop in transport quality. We will have to deal with numerous disruptions next year that will have a major impact on the operation of our trains. To be more specific, one such case will be the disruption caused by the double tracking of the Braník Bridge in Prague. Some relief could come about once certain investment projects are finalized, such as the double tracking of the Choceň – Hradec Králové – Velký Osek line or the construction of high-speed railways.
The Minister also mentioned the need to build new terminals for transloading from trains to trucks, especially in the so-called last mile. Have there been any developments in this area? And how has the cooperation between railways and roads been going in general?
This is a very important topic for the future. With decarbonization and future transportation energy savings in mind, we will have to expand the cooperation between railway and road transportation according to the example of combined maritime transport. ČD Cargo is the only railway carrier in Czechia operating a system of individual wagon shipments, which could be of major help in this regard as well. We need to provide our clients with a fast and adequately priced service without the need to transload the actual goods, which means leveraging intermodal transportation units, specialized containers. That's why I am pleased with the Railway Administration's initiative in rolling out a trial project concerning a small logistics center in Česká Třebová that would enable the transloading of such intermodal units.
How far ahead do you need to plan your expansion activities? And what are your long-term plans?
ČD Cargo's strategy for the future is made up of four fundamental building blocks – interoperability, intermodality, expansion abroad, and social responsibility. Subsequently, we take specific steps to implement this strategy. The modernization of our train fleet is a major focus – we are adding new interoperable locomotives and further modernizing the diesel locomotive fleet to ensure that it meets the strictest emission limits. We guarantee our clients that by January 2025, we will have a sufficient number of locomotives equipped with the European Train Control System (ETCS) to meet all of their requirements. Being able to transport goods along the entire route is another requirement. We are capable of that in seven European countries today, and the expansion process is far from over. We would like to expand our operations into Belgian and Dutch ports, and we see potential in Serbian and Slovenian transport markets as well. A lot of our efforts are also directed at digitalization and computerization. Our clients have access to online shipment tracking, they can make use of digital transport documentation, etc. The personal development of our employees is important for us, too. All of the aforementioned steps would not be possible without long-term planning and we couldn't be a reliable partner for our clients without a clear strategy, either. Therefore, we work out a detailed plan five years into the future, and we have a general outlook for the next ten years as well.
THE COMPANY
ČD Cargo a.s. is the largest Czech rail carrier specializing in freight transport that handles around 60 million tonnes of goods per year, making it one of the largest carriers in the European Union.
It operates a fleet of nearly 700 locomotives, including state-of-the-art Vectron and TRAXX interoperable engines. ČD Cargo customers have access to nearly 20 thousand freight wagons of various types.
Through its branches and subsidiaries, ČD Cargo holds licenses to operate freight transport in seven European countries.
ČD Cargo interoperable locomotives
