CARGO BUSINESS 1-10.indd - ZSSK Cargo

CARGO
In 2009, ZSSK CARGO experienced one of the most difficult years in
its modern history. It was influenced by financial and economic crisis,
which fully showed its impact on transportations by rail already in
the last quarter of 2008. In 2009, the company achieved volume of
transported goods of 33.8 million tonnes (excluding weight of empty
private wagons), which is about 24 percent less compared to 2008 and
32 percent less than the average annual volume in “no crisis” years
from 2003 to 2007. This decline has also been reflected in revenues.
Fall in production of key economic sectors (metallurgy, construction,
automotive, petrochemical and electrical industries) has been almost
identically reflected in demand for transportations, and that not only
in Slovakia, but also globally in transport market. Rail transportation
indicated a bigger fall than road transport, particularly due to its cost
structure and much higher dependence on heavy industry. In 2009, rail
freight traffic had a share in transport market in Slovakia of about 13%
in tonnes and 19% in ton-kilometres, while in 2008 this share was 15%
in tonnes and 24% in ton-kilometers. In the long term, ZSSK CARGO has
been from up to 60% dependent on metallurgical industry, performance
of which has been fluctuating in shorter – several years´ cycles. This
creates high pressure on fixed costs of the company and regulation of
capacities.
We remain a trustworthy partner despite the crisis
In 2008, ZSSK CARGO historically, for the first time, achieved a positive
economic result of 2.8 million EUR. It fully stabilized its trade and
operational company processes, significantly strengthened the
technical base through investments in its rolling stocks, reloading and
re-pumping capacities, its own information systems as well as company
employees. ZSSK CARGO now operates under international accounting
standards IFRS, with support of specific information systems ISP and
SAP. In 2009, despite the critical situation, we completed significant
investments, made the company processes more transparent, reduced
the staff by more than 600 employees, who left the company within
a social benefit program. There was also a significant reduction in
operating costs. Despite these cuts, the company maintained its
functionality and, we all hope, also the quality of provided services. It
is very important that the company maintained its financial capacity in
the previous year and that also thanks to a long-term loan from a single
shareholder (i.e. the Slovak Republic) and by meeting its obligations
it has maintained the credibility against financial institutions. We
have also managed to maintain our existing customers and even gain
new ones and to reach the same share in rail transport market as the
previous year, i.e. 93% in tons and 97% of ton-kilometres.
Objectives for 2010
In 2010, the ambition of the company is to ensure operational and
financial stability with high quality of provided services, while the priority
is to achieve a positive operating economic result (EBITDA). Also in
2010, rail carriers will pay too much to use rail transport routes. We
pay, on average, more than 10.5 EUR/train-kilometre, which is almost
3 times more than in Western Europe and 2.5 times more than in
Central Europe. I consider this to be the biggest barrier to development
of rail traffic in competition with road transport and international rail
transit. This year, however, will be groundbreaking in terms of further
development of rail transport route charges, since the system should
change in 2011.
Earlier this year, the electronic toll system was launched on Slovak
roads. We expect that this could result in moving the goods from road
to rail, particularly in commodities such as wood, building materials,
bulk substrates, coal, scrap metal, light goods and containers. The
introduction of electronic toll system is only a partial step. In order for
the railroad to be competitive, other additional systemic solutions must
be adopted - one of them is previously mentioned change in charging
the rail transport route.
In 2010, company ZSSK CARGO expects the recovery of critical
economic sectors - metallurgy, construction, automotive and electrical
industry, which may lead to stabilization of the rail transport market,
achieving increase of approximately 10% in transported volumes
compared to 2009. I firmly believe that our customers will benefit from
the measures taken internally, in terms of maintaining the quality and
range of provided services and that ZSSK CARGO will continue to be
a trustworthy and accepted business partner.
Matej AUGUSTÍN
Chairman of the Board of Directors and Chief Executive Officer
of ZSSK CARGO
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