INTERVIEW

PKP Cargo bets its future on frail foundations

Image: Shutterstock. Samo451

The Polish state-owned rail freight operator PKP Cargo is struggling, as are many of its counterparts across Europe. Rumours surfaced about a possible bankruptcy for PKP Cargo and RailFreight.com went straight to the source to better understand what is happening. The company confirmed that the situation is bleak, and most of its hopes heavily rely on a “market revival”, which is far from being a certainty.

The bankruptcy speculations started to spread after the current Acting President of the company, Marcin Wojewódka, said that the situation is worse than expected, with both volumes and performance dropping. Despite not directly addressing the possible bankruptcy issue, sources from PKP Cargo said that the company “is facing a shrinking market and growing costs that need to be adjusted to the current demand for work”.

Recent data showed that rail freight volumes in Poland have been quite stagnant since 2021 and even decreased in 2023. This trend does not seem likely to change, as PKP Cargo also confirmed. “The first months of this year did not change the market trend for the better, and we see that the price war is becoming even harder”, a source from the company explained. One thing that PKP Cargo seems to be counting on is the hope that things will get better. “We count on the second half of the year that may bring the market revival on the back of industry growth and new investments”.

What is being done to avoid a catastrophe?

PKP Cargo’s management, the sources said, introduced a rigid optimisation plan to optimise operational processes and costs. “First of all, we need to curb the employment costs that are the major cost category in the Profit and Loss”, a PKP Cargo spokesperson said. Some of these cuts have already been implemented, with roughly 30 per cent of the company’s workforce being placed in an ‘inactive’ status.

This initiative allows them to cut the salaries of these employees by 40 per cent for the next 12 months. The PKP Cargo spokesperson described this as an optimal solution given the current market conditions. “Employment downtime is a temporary solution, and as soon as the market rebounds, we will need qualified employees”, they reassured. However, the company did not explicitly exclude that more of its employees might meet a similar fate. Other than cuts in the workforce, the company is reconsidering its investment strategy for rolling stock. No further details were provided by PKP Cargo, but the company previously confirmed its intention to enter the semi-trailer market.

On the other hand, giving up routes or customers to other private operators to regain some financial stability does not seem a viable option for PKP Cargo. “In many areas, we hold a competitive advantage that is difficult for other companies to replicate”, the spokesperson underlined. In other words, for PKP Cargo, “the goal is not downsizing but rather activating our capacity and optimising the processes that should translate into market growth”. It remains to be seen if the company’s hopes will turn into truths or if the company’s future is at risk.

Lower volumes and higher prices

According to PKP Cargo, however, not all signs point to a bleak future, with 2024 starting on a slightly better note. “At the end of the first quarter this year, the consolidated sales of the PKP CARGO Group amounted to a sound 1,180.7 million Polish zloty (roughly 280 million euros), and EBITDA showed 122.4 million Polish zloty (about 28 million euros), which gives over 10 per cent margin”, company sources underlined. Moreover, in March 2024, PKP Cargo saw a 7 per cent increase month-on-month, while the rest of the industry recorded a 5.1 per cent growth. However, lower volumes and higher financial figures likely mean that PKP Cargo increased prices, which is not necessarily a measure that can attract customers.

State-owned operators struggling across the EU

Over the past months, other EU state-owned rail freight operators have been under the spotlight for their continued losses, often covered by public financial support. In France, Fret SNCF has been forced to give up a few contracts, and there are doubts about the ability of the private sector to take them up. DB Cargo will also have to go through a major restructuring to avoid penalties from European institutions. More recently, big names in the rail freight industry went as far as saying that Member States should not participate in the market with state-owned companies.

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Author: Marco Raimondi

Marco Raimondi is an editor of RailFreight.com, the online magazine for rail freight professionals.

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