The results are good, even very good for the SNCF in this first half. Reinvigorated by the recovery in traffic, boosted by the performance of its subsidiary Geodis and relieved of a large part of the weight of its debt by the State, the rail group has 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 reversal after the 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 ” continued in line with 2020, with significant growth 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 improved its performance by 34% over one year and by 67% compared to 2019. The manager took the opportunity to insist on the importance of this diversification in the strategy of the SNCF, where some believe it should refocus on national rail operations. An argument reinforced 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 is recovering to reach 8.4 billion euros with an increase of 36% over one year, but still slightly down compared to 2019 (-4%). After being strongly impacted by the wave of contamination at the start of the year, traffic picked up strongly from March-April. ” We have had a very strong recovery in attendance on our trains. And when I say very strong, it’s really very very strong “, welcomes Laurent Trevisani. In TGV activity, with all the rolling stock deployed, the occupancy rate exceeded 70% in the second quarter and even 80% in June, with good performance during the week and not just on weekends -end.
To explain this enthusiasm, the financial director highlights the current appetite for travel, the choice of the train because of its reduced environmental footprint compared to other means of transport, but also the economic advantage conferred on the train over the car with the increase in the price of gasoline. SNCF Réseau also benefited from this recovery in activity via tolls, with an increase of 7% compared to 2019 to reach 3.5 billion euros.
From activity to profitability
More important perhaps, SNCF Voyageurs succeeded in transforming this renewed activity into profitability. 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). It thus returns to the same level as SNCF Réseau, which remained profitable during the crisis and which further 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 doubles its Ebitda compared to the first half of 2021 and even slightly exceeds that of 2019, with 3 billion euros. This allows it to post a margin of 15% (compared to 16% in 2019).
The net result improves greatly: the SNCF goes from a loss of 780 million euros in 2021 to a profit of 928 million. The performance is notable, especially given the only 20 million euros generated in 2019. And above all, the group is once again generating cash, with a free cash flow of 1.1 billion euros, against a negative flow of 745 million euros last year.
Leverage effect and savings plan
” The rail business is a fixed cost economy. When you fill your trains better, it ends up directly on the sidelines. It’s the same leverage effect, but in the opposite direction, that we saw during the during the crisis », Details Laurent Trevisani. But he warns that this is not the only factor to explain this improvement in profitability: “ It is also due to the efforts of the house, which continued to implement its performance plan for the first half of 2022. We had planned to make 660 million euros in savings over 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 played on the industrial costs thanks in particular to the contribution of digital technology (290 million euros), the optimization of its heavy organization with a better distribution of responsibilities between the central entities and the field (30 million) and finally lowering the cost of projects with standardization and better negotiation for investment expenditure. On this last point, it was able to use its imposing surface area, with almost 11 billion euros of investment per year (SNCF and co-financiers) to put pressure on the ecosystem and obtain the ” right price “.
Laurent Trevisani, on the other hand, did not address the impact of staff reductions or the gradual disappearance of the status of railway worker on the reduction of costs. The SNCF has thus reduced its workforce by almost 2% on average between 2011 and 2021, and last September Jean-Pierre Farandou, CEO of the group, announced the upcoming elimination of 2,000 to 3,000 positions.
Summer will be beautiful, but after?
Thanks to his results, Laurent Trevisani is confident about SNCF’s ability to keep its commitment made to the State during the 2018 rail reform, namely to generate positive free cash flow in 2022. We are on the right track. The first half accounts show this and that makes us confident about the year “, he congratulates himself.
However, the Strategy and Finance Director is careful not to put forward figures, contenting himself with asserting that the group will do better than break even. For the moment, the summer is going very positively in line with the improvement seen since the spring, but Laurent Trevisani is wary of a turnaround after the summer: “ For the last term, from September to December, I remain more cautious because of exogenous factors such as a worsening of the Ukrainian crisis, a new episode of Covid, a hardening of the economic situation which is generating social tensions… Everything it can affect us and cause a slowdown in activity. And with the leverage effect that we have seen, it can go very, very quickly. »
The situation is all the more worrying as the recovery of business traffic is still lagging significantly behind that of leisure traffic. In the first quarter, affected by the Omicron variant, it was only half of its pre-crisis level. While the figures have since improved, the gap remains substantial. However, in September, it was this business clientele that partly took over from holidaymakers.
Inflation will hit costs in 2023
Inflation will also have its effect. For investment expenditure, the group should be preserved in the very short term, but only in the very short term. ” As in all companies, our service providers are gradually coming to see us to ask us for price increases. We have entered into tough negotiations, but this is only the first step. The effect will be limited in 2022, but much stronger in 2023. »
To this will be added the wage demands of railway workers so as not to suffer too strongly from inflation. The first social movements have already taken place at the start of the holidays.
The impact of rising energy prices should also be moderate for the time being, thanks to SNCF’s multi-year hedging policies. They allow it to buy electricity at rates fixed in advance, which is very advantageous in the current context, but which will unravel over time. The group also has Regulated Access to historical nuclear electricity, the famous Arenh, which provides access to one megawatt hour (MWh) at 42 euros compared to 900 euros on the spot market. But this mechanism must end on December 31, 2025. This still leaves time for the SNCF to turn around, but the additional cost could prove to be very heavy.
Laurent Trevisani judges that it is premature to speak of an increase in ticket prices in 2023 to compensate for the increase in future costs, preferring to recall that the SNCF has not increased its prices in 2022.
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