A few days ago, Jean-Pierre Ferrandou warned that SNCF’s results would be lower than in the very good year 2022. The group’s CEO was very measured following the controller strike episode. Holiday period. Is it enough to stop after the rise to power that started two years ago or to revise the strategy put in place after the major railway overhaul of 2018? No, quite the opposite, according to Laurent Trevisani, SNCF group boss and its financial director.
While it is undeniable that the results are worse than in 2022, they are far from negative. with a contrasting tone to his interview given to the world Last week, Jean-Pierre Ferrandau welcomed the year 2023 marked “Two good news”. And this, despite a rather complex macroeconomic environment, with low GDP growth, stagnation in household consumption and still significant inflation.
“This is the third year in a row that the group is in the green. This means something in terms of seriousness, resilience, solidity in our activities. And it is good news that the SNCF group is making money. Some people are not used to it and are surprised, but the SNCF group is a solid, industrial, international, diversified group for mobility, freight, passengers and it makes money. And this is good news for the French people for whom this money is widely used, because we are reinvesting almost everything in the railways by buying TGVs, building new workshops, supporting efforts to modernize and regenerate the infrastructure, renovating stations We are… the benefit of everyone, the French, the regions and the planet,” rejoiced the CEO of the SNCF group.
A profit of more than one billion euros
In detail, only the net result is really struggling. It nearly halved from the previous year under the combined impact of non-recurring items such as smaller disposals, but also provisions to absorb salary increases and rising interest rates. But, with 1.3 billion euros in net profit, SNCF achieved better performance than it had been able to experience before the crisis.
For Laurent Trevisani, this result, above all, does not represent the operational performance of the group. This appears to be mostly favorable with a slight increase in turnover, and above all, more than 6.4 billion euros in Ebitda (earnings before interest, tax, depreciation and amortization). This is certainly a slight drop from 2022’s record – less than 3% – but its operating margin is still more than 15%. The group’s financial director emphasizes the importance of a performance plan. It has in fact generated savings of around 700 million euros beyond the planned objective. And SNCF likes to point out that without the strike for the pension reform that affected the first quarter, it would undoubtedly have performed better than in 2022.
The last important indicator, free cash flow is not only largely positive at 2.5 billion euros, but also in strong growth: it doubles compared to 2022. And this, despite investment starting to pick up again after a small decline last year, and which is expected to accelerate further in 2024.
Farandou validates their strategy and reforms
For Jean-Pierre Ferrandou, like Laurent Trevisani, if the SNCF is here today, it is thanks to the strategy put in place after the health crisis and directly as a result of the railway reform of 2018. Later he took steps for conversion. group into a limited company, with the objectives of financial profitability in return for the assumption of a large portion of its enormous debt.
“We have a 2023 operational performance that is fully comparable to 2022. That is why we believe that we have a fully satisfactory result for 2023. It is profitable for the third year in a row, and this is proof that the reform of 2018 is working,” says Laurent Trevisani.
The financial director thus underlines the fact that this reform has established financial unity between the various branches of the group, allowing it to juggle its two pillars alternatively: passenger transport on the one hand, and the Keolis and Geodis subsidiaries on the other. Different, each responds to different economic cycles. The group believes in it in all cases, to the point of including it at the center of its new strategic plan, which was approved last December and which should take it through 2032. Jean-Pierre Ferrandou welcomed this alignment between the shareholder, namely the French state, and the strategy implemented by the management of the group for four years.
SNCF continues to earn voyagers
In this balancing act, the big performance of the year 2023 is attributed to the attractiveness of the train: attendance is increasing in all segments from TER to TGV. The latter transported 156 million passengers last year (including 122 million in France), a record. And this, despite the impact of the strike earlier in the year. With the leverage effect of price increases, this could increase turnover by more than 10% and 19 billion euros.
The price shield put in place last year on the TGV still limits this effect, with the average increase in ticket prices limited to 5% below the increase in costs. Hence slightly lower level of profitability. Jean-Pierre Ferrandou does not fail to point out that it is “For the second year in a row that we are not raising prices at the same level as cost increases”Explaining that 2022 was marked by an increase in electricity prices, while 2023 was expected to face an increase in tolls. Clement Beaune, the former minister responsible for transport, announced before his departure that fares would be frozen in 2024. On Ouigo and the balance of the region’s trains, the increase will be limited to 2.6% on the TGV Inoui.
This shield did not prevent SNCF Voyageurs from collecting almost half of the group’s revenue and more than a third of its operating profit. “It is the locomotive of the group in 2023”Laurent underlines Trevisani, apologizes for the pun.
Return to Earth for Geodes
But if the railway operator has taken on such importance, it is also because the second leg of the group has slowed down. Geodis, whose activities (via boats, planes and trucks) became the pinnacle of SNCF during the Covid years, today face a more complicated environment with the economic recession, as Laurent Trevisani points out. As for the logistics sector as a whole, the official speech indicates a return to normal levels after two extraordinary years and pre-crisis prices, but the impact is still severe. Marked by a drop in volume and a drop in prices, the group’s subsidiary lost more than 20% of its turnover in a year at constant scope and exchange rates.
However, Geodis seems to have anticipated this change well: the company maintained its operating profit, increasing by more than 1.1 billion euros in the process, and as a result, it significantly improved its margins. It also generates positive free cash flow, says the financial director.
The diversification strategy undertaken by its CEO, Marie-Christine Lombard, is sufficient to validate in terms of geography and activities. A strategy demonstrated in 2023 by the acquisition of Trans-O-Flex, a company specializing in pharmaceutical transport in Germany, where Geodis was so far poorly established.
Rail Logistics Europe The situation is less rosy in rail freight with loss of turnover and particularly profitability. The decline was largely due to freight SNCF, with a complex industrial situation and the first effects of the Brussels-imposed freeze. This will lead to a division of activity this year, giving up 20% of its activity in favor of the competition. 15 of the 23 lines concerned have already been transferred on 1st January, others will follow on 1st July.
Next cost
Given the challenges the group will face this decade, starting with the revival and modernization of the long-neglected railway network, having multiple sources of profit may not be too much. SNCF will thus largely contribute to the additional effort needed to upgrade the network, as part of a 100 billion euro plan decided (but not financed) by the government until 2040. It thus paid 1 billion euros for this purpose through its aid fund (in an agreement with the state, the group automatically pays 60% of its profits to this fund). This partnership should reach 1.7 billion euros next year.
The group will also have to finance the purchase of new equipment, including its ecological transition, the TGV M or “Inoui 2025”. Jean-Pierre Ferrandou confirmed Alstom’s delays with deliveries not starting before summer 2025, as indicated. Gallery A few months ago. Even if SNCF bosses now want to anticipate them and avoid conflicts, it will also be necessary to finance the salary changes, which will not be lacking. “Social Progress Platform”.
