Information published on 4 March 2010 in the UIC electronic newsletter "UIC eNews" Nr 175.

www.railfreightportal.com: Member of the month, SBB Cargo

Interview with Nicolas Perrin, CEO, SBB Cargo AG

SBB Cargo continues under its own power

In his free time CEO Nicolas Perrin is a man who loves the water. It is that experience the 51 year old engineer is drawing on when he quips ‘you can see a good sailor when the weather’s bad’. Shrewd as he is, he parries immediately with this thought: “that certainly doesn’t mean I think that there are any more heavy storms coming our way, still less that I’m a good sailor. Obviously a good helmsman has a decent vessel in the first place and even more importantly the right crew. It is precisely by working together well that we keep our ship on the right course. That’s why I can never speak highly enough of all those people who have SBB Cargo’s best interests at heart - from governments and partners to our more than 4,200 employees.

“In any case, it is fair to say that we have steered a course through rough weather and that we can’t rule out storms and heavy sea in the future”, adds Nicolas Perrin. “But as the number one rail cargo company in Switzerland and as a leading international player on the north-south axis through Europe we are stronger than ever these days. So I have more than enough reasons to be optimistic about the evolution of SBB Cargo in the years to come.”

Consequences of the economic crisis

Nicolas Perrin: “SBB Cargo hoped to be able to publish positive results in 2007 already. Although the number of tons of freight transported kept on increasing we could not get out of our loss position. We would have got ourselves out of the red in 2008 if rail freight transport had not completely imploded in the space of just a few weeks in November. It’s true we did succeed in forcing down the deficit through a series of restructuring measures, so that in 2008 we booked a loss of ‘only’ CHF 29.9 million (20.4 million euros). The effect of the various turnaround measures undertaken then by SBB Cargo had the effect of saving around CHF 53 billion (36 million euros) in the end. Our output in 2008 came to a good 12.53 billion net ton-kilometres, and a total of nearly 57 million net tons of freight were transported. A major part was handled on the transalpine routes through Switzerland.”

Nicolas Perrin: “With a number of nimble interventions, we were able to compensate partly for declining revenues due to the economic crisis. In the first half of 2009 alone we were able to reduce the financial consequences of the economic crisis with a range of very effective countermeasures. Compared to the international competition we intervened very early on, and as early as August 2008 we took a lot of capacity out of the market. With a 16 percent decrease in business in the first half of 2009 we were amongst those with the lowest losses in Europe – on average European rail freight carriers recorded losses of around 25 per cent. It is obvious then that with this sort of economic conditions we put our investment programmes on ice. We did, however, continue to systematically renewing our fleet of shunting engines.”

The first to have our own branches abroad

Nicolas Perrin: “Our parent company, the Swiss Federal Railways - Schweizerische Bundesbahnen (SBB) in German - was founded in 1902, by merging and nationalising a large number of smaller and medium-sized railway companies. Under some special legislation the company was transformed in 1999 into a public limited company made up of three independent divisions: passenger transport, freight and infrastructure. This was also due to the fact that the market for railfreight transport was fully liberalised in Switzerland very early on.”

Nicolas Perrin: “This meant SBB Cargo lost transit cargo on the route through Switzerland, on which it had previously had a monopoly. Nonetheless we were the first railway company to set up its own branches abroad at the start of the 21st century – I’m talking about SBB Cargo Deutschland and SBB Cargo Italia. Following on from this I can add, too, that in addition to these subsidiaries, SBB Cargo is also the owner of the entire share capital of ChemOil Logistics AG (which is specialised in logistics for chemical products and petroleum) and has minority participations in RAlpin AG (30%), Hupac SA (23.85%) and Termini SA (20%) as well.”

xRail: more quality for the customers

Nicolas Perrin: “As the market leader in Switzerland, our focus in the home market is on a wide range of customer-specific and standard freight services for domestic and import-export traffic. It may perhaps sound arrogant, but the reality is that the Swiss economy could barely exist without freight transportation by rail. As an international logistics service provider – with a national base network of 323 delivery points and 200 customer-specific solutions for locations outside the base network – we want, of course, to continue to put a clear emphasis on more traffic and business via the national network.”

Nicolas Perrin: “Our international focus is based on the strategy of running traction services for container transport and block trains on the routes between the North Sea ports and Northern Italy. SBB Cargo’s single-source cross border production on the North-South axis has will certainly be developed further.”

Nicolas Perrin: “Don’t forget either that about 40% of wagons transported by SBB Cargo are linked to destinations outside of Switzerland. So I am also expecting the Xrail alliance, which was founded in February, to provide a serious boost in terms of improving the quality of distribution transport. Seven of us UIC members have invested a lot of resources in it. Here too it will soon become obvious that cross-border cooperation is necessary to guarantee customers better commercial service provision and more quality. In fact we are convinced that we need excellent connections to the European rail network in order to be able to satisfy customers’ needs.”

New SBB Cargo

Nicolas Perrin: “That is why, in spring 2009, we decided to pursue the idea that we should hold talks with both Deutsche Bahn and the French SNCF about purchasing a 49 percent interest in SBB Cargo. However, we had expressly stated that we would only choose this solution if it would guarantee greater success in the long term than continuing to run the freight division autonomously.”

Nicolas Perrin: “Partly because of the crisis the talks actually became deadlocked, so we reverted to our other plan, in other words carrying on alone. The aim, of course, is to increase our strength in the domestic market and cross-border single wagon transport as well as in combined transport. This means, first of all, that we will put our international block train services – between the North Sea/Ruhr and Switzerland/Northern Italy – into a separate company. With a new slim structure and by implementing a cost leadership policy, we will be able to turn over high volumes with low margins. We are looking now to see whether we can set up such structure in partnership with Hupac.”

Climate neutral goods transport with CO2 compensation

Nicolas Perrin: “In the meantime it has become obvious that we should not expect a major recovery in 2010. SBB Cargo’s position is favourable, it is true, but the competition is extremely tough - not only on the railways but also on the road with its current overcapacity and thus falling prices for road transportation.”

Nicolas Perrin: “In that respect it is also important for us to work out joint development plans with our biggest clients. For example, we distribute fresh products, amongst others, to the supermarket chains Migros and Coop at night. Thanks to SBB Cargo’s base network we can easily deliver all over the country without delays. A little while ago we also set up a joint operation with our client, Jura Cement. We take full silo containers from the cement factory in Wildegg by rail to St. Gallen Winkeln at night. Then they are transferred onto trucks in the morning. The reason this client switched to rail transport had partly to do with extra transport capacity, but even more with the volume of road traffic in Zurich, which is getting heavier and heavier. And, not without importance, there is the environmental aspect too.”

Nicolas Perrin: “In fact, since September 2009 SBB Cargo has been working with the non-profit foundation myclimate to offer customers completely climate neutral transport. All unavoidable CO2 emissions from rail transport can now be compensated for by certified carbon compensation projects all over the world. In contrast to other similar transactions, SBB Cargo includes all climate relevant emissions in its calculation of the environmental impact of the whole transport life cycle. In short, green logistics are a reality, despite the economic crisis. So, companies that want to switch to this form of environmentally friendly combined transport for their industrial and maritime traffic from Germany and the North Sea ports can in any case count on SBB Cargo and its partners having sufficient capacity.”