SNCF made a strong return with a net profit of almost one billion euros in the first half

The results are good, even too much for SNCF in this first part. Reinvigorated by the recovery of traffic, boosted by the performance of its subsidiary Geodis and relieved by a large part of its debt burden to the State, the railway group achieved an unexpected level in the first half of 2022. All the lights are green, with some indicators above the level of 2019. However, a shadow on the board is very present: the threat of a change after in summer.

First visible element of this recovery, the turnover reached 20,3 billion euros. This is 27% more than the same period last year, but above all 14% more than in 2019 – the last reference year before the health crisis. Already a driving force last year, Geodis ” continues along 2020, with a significant improvement in its activity in all its sectors “, explains Laurent Trevisani, Deputy Managing Director Strategy and Finance of the SNCF group. With 6.7 billion euros in revenue, the logistics subsidiary has improved its performance by 34% within a year and by 67% compared to 2019. The manager took the opportunity to insist on the importance of this diversification in SNCF’s strategy, where some believe. it should refocus on national railway operations. An argument strengthened by the fact that Keolis also increased by 2% compared to 2019, to 3.3 billion euros.

The heart of the group’s activity, SNCF Voyageurs recovered to reach 8.4 billion euros with an increase of 36% a year, but still small compared to 2019 (-4%). After the strong impact of the wave of contamination at the beginning of the year, the traffic increased sharply from March-April. ” We have a very strong recovery in the attendance of our trains. And when I say very strong, it is very strong “, welcomed Laurent Trevisani. In the TGV activity, with all the rolling stock deployed, the occupancy rate exceeded 70% in the second quarter and even 80% in June, with a good performance during the week and not only at the weekend.

To explain this motivation, the financial director highlighted the current appetite for travel, the choice of train due to the reduction of the environmental footprint compared to other means of transport, but also the economic advantage provided by the train to the car with an increase in fuel prices. SNCF Réseau also benefits from this recovery in activity through tolls, with an increase of 7% compared to 2019 reaching 3.5 billion euros.

From activity to profit

Perhaps more importantly, SNCF Voyageurs succeeded in turning this renewed activity into a profit. From a negative margin of 6% last year, the subsidiary moved to a positive margin of 11%. This enabled it to generate 900 million Ebitda (earnings before interest, taxes, depreciation and amortization). Thus it returned to the same level as SNCF Réseau, which remained profitable during the crisis and significantly improved its margin by four points to reach 26%. Geodis is the third largest contributor with 598 million euros (margin of 9%) followed by Keolis with 314 million (10%).

In fact, the group doubled its Ebitda compared to the first half of 2021 and even slightly exceeded 2019, with 3 billion euros. This allowed it to post a margin of 15% (compared to 16% in 2019).

The net result increased significantly: SNCF went from a loss of 780 million euros in 2021 to a profit of 928 million. The performance is remarkable, especially given that only 20 million euros were generated in 2019. And above all, the group once again generated money, with a free cash flow of 1.1 billion euros, against a negative which ran at 745 million euros last year.

Leverage effect and savings plan

The railroad business is a fixed cost economy. If you fill your trains better, they will end up directly on the sidelines. This is the same leverage effect, but in the opposite direction, that we saw during the crisis », Details Laurent Trevisani. But he cautioned that this is not the only reason to explain this increase in profits: ” This is also due to the efforts of the house, which continues to implement its performance plan in the first half of 2022. We plan to make 660 million euros in savings in the financial year. In the first half of the year, we reached the target of 55%, or 360 million euros. »

To achieve this, the group plays with the costs of the industry thanks to the particular contribution of digital technology (290 million euros), the optimization of its heavy organization with a better distribution distribution of responsibilities between central entities and the field (30 million) and finally reduced the cost of projects with standardization and better negotiations for investment financing. In this last point, it has been able to use the large area above it, with almost 11 billion euros of investment per year (SNCF and co-financiers) to put pressure on the ecosystem and get the ” right price “.

Laurent Trevisani, on the other hand, did not mention the impact of the reduction of staff or the gradual disappearance of the status of the railway worker on the reduction of costs. SNCF has thus reduced its workforce by around 2% on average between 2011 and 2021, and in September Jean-Pierre Farandou, CEO of the group, announced the future layoffs of 2,000 to 3,000 positions.

Summer can be beautiful, but after?

Thanks to his results, Laurent Trevisani is confident about SNCF’s ability to maintain the commitment made by the State during the 2018 railway reform, which is to create a positive free cash flow by 2022. We are on the right track. The first half accounts show this and that makes us confident about the year “, he congratulated himself.

However, the Director of Strategy and Finance is careful not to put forward numbers, contenting himself to say that the group is better than broke. So far, the summer is very positive in line with the progress seen since spring, but Laurent Trevisani is wary of a change after the summer: ” For the last term, from September to December, I remain more cautious due to exogenous factors such as the worsening of the Ukrainian crisis, a new episode of Covid, a hardening of the economic situation which creates social tensions… All this can do is affect us and cause a slowdown in activity. And with the leverage effect we’ve seen, it can be done very quickly. »

The situation is especially worrying because the recovery of business traffic is still lagging behind leisure traffic. In the first quarter, affected by the Omicron variant, it was only half of its pre-crisis level. While the numbers have since improved, the gap remains large. However, in September, these business clients partly replaced holidaymakers.

Inflation will hit the cost in 2023

Inflation also has an effect. For investment financing, the group must be preserved in the short term, but only in the short term. ” Like all companies, our service providers have been meeting with us gradually to ask us for price increases. We are entering into difficult negotiations, but this is the first step. The impact will be limited in 2022, but stronger in 2023. »

To this add the demanded wages of railway workers so as not to suffer too much from inflation. The first social events took place at the beginning of the holidays.

The impact of rising energy prices should also be moderate for now, thanks to SNCF’s multi-year hedging policies. They allow it to buy electricity at predetermined prices, which is very useful in the current context, but it will break down over time. The group also has Regulated Access to historic nuclear electricity, the famous Arenh, which provides access to a megawatt hour (MWh) for 42 euros compared to 900 euros on the spot market. But this mechanism must expire on December 31, 2025. It still gives time for SNCF to return, but the additional costs may prove too heavy.

Laurent Trevisani judged that it was premature to talk about the increase in ticket prices in 2023 to cover the increase in costs in the future, preferring to remember that SNCF did not raise prices in 2022.