Czech Railways improves profits

The national rail carrier saw better results but still has large debts

Czech Railways (ČD) made a profit of Kč 984 million in 2017, a year-on-year improvement of about Kč Kč 100 million. Freight and passenger transport saw increases and both were profitable, in accordance with International Financial Reporting Standards (IFRS).

The strong Czech currency also contributed to a reduction in ČD's net debt by Kč 3 billion to Kč 27.2 billion.

“Last year, we focused on continuing the stabilization of the Czech Railways group in the interest of shareholders, creditors and employees. … In passenger transport, the topics were the growth of competition, the gradual opening up of the long-distance transport market and the redefinition of the regional transport business model after 2019, coupled with the liberalization of the passenger transport market,” Pavel Krtek, chairman of the board of directors and CEO of ČD, said in a press release.

“Freight transport has focused on stabilizing transport performance and developing business activities in neighboring countries. At the same time, we continued to develop human resources. Quality and reliable employees are the most valuable thing the company has. Personnel policy, therefore, continued to focus on retaining existing and recruiting new workers. Especially in professional technical professions,” Krtek added.

“The good condition of the company allowed us to focus more on repairs and maintenance of railway vehicles in order to increase the quality of passenger transport and increase freight transport capacity. As a result of the collective agreement… personnel costs also increased. However, sales growth was able to cover these higher costs. Overall, the ČD group's revenues from the core business came close to Kč 34 billion,” he said.

Passenger transport saw moderate profits, as passenger numbers and transport performance continued to grow in 2017. Czech Railways' services were used by almost 175 million people.

“There was greater interest in traveling long distances and in suburban connections. The offer of attractive products and their targeted promotion has helped to increase revenue from the sale of travel documents. Significant revenue growth is evident, for example, on the international routes Prague - Vienna - Graz and Prague - Berlin - Hamburg, but also on domestic trains into integrated transport systems. The share of sales from purely commercial transportation increased dynamically,” Krtek said.

According to Martin Bělčík, a member of the ČD board of directors responsible for the economy and informatics, revenue from the sale of travel documents was up by almost a quarter of a billion crowns year-on-year. “Thanks to this, we have achieved a net profit of Kč 6 million in the passenger segment. Compared to the result of 2016, it is a year-on-year improvement of Kč 652 million,” he said.

Traditionally, the biggest impact on the ČD group bottom line was from the freight segment represented by ČD Cargo. “In cooperation with its subsidiaries abroad, ČD Cargo has successfully continued its expansion into foreign markets. For example, to Poland, Romania and Hungary. This helped to increase revenues by Kč 163 million year-on-year despite the fact that ČD Cargo realizes a significant part of its revenue in euros and has thus had to cope with the negative impact of end of ČNB's intervention regime,” Bělčík said, referring to a change in policy by the Czech National Bank on maintaining the exchange rate.

ČD Cargo last year saw a net profit of Kč 743 million, Bělčík said. “The profit is slightly lower than in 2016, but the company has had to invest in purchasing new locomotives and freight wagons to increase its competitiveness on the European market,” he added.

The main task of the Czech Railways management for the near future is the solution of the business model in passenger transport after 2019 when the company ends most of the long-term contracts with the regions and with the Ministry of Transport.

The national carrier also expects to defend its international rating from Moody's, to repay the crown-denominated bonds in the summer of 2018 and to refinance euro bonds in 2019.

“Our priority is that Czech Railways is able to meet its obligations to creditors, shareholders and employees and to defend the maximum existing performances in both long-distance and regional transport,” Krtdek said.

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