France’s SNCF returns to the black

SNCF Group

French rail owner and operator SNCF Group has reported a strong set of results for 2016, which showed solid growth rates in revenues and core profits. 

Annual sales grew 4.2% to €30.5bn from €29.2bn one year earlier. Although gross profit fell 4.9% year-on-year to almost €2.3bn, operating profit surged 57.3% to €878m from €558m in 2015, when it recorded heavy economic losses due to €2.7bn impairments, which, by comparison, came in at only €149m in the past year.

It said that “impairment losses in 2016 (…) mainly comprised an impairment reversal of €273m for the Gares & Connexions cash-generating unit and the impairment of Intercités assets for -€84m” (both units are included under SNCF Voyageurs), adding that the “revenue to current operating profit conversion rate” rose from 1.9% in 2015 to 2.9% in 2016.

Lower gross profits were the result of rising employee benefit expenses, purchases and external charges and infrastructure fees, but nonetheless it did not impact underlying earnings. In fact, operating income after share of net profit of companies consolidated under the equity method – to all intents and purposes this is an adjusted EBIT measurement – stood at €1.23bn in 2016, versus comparable operating losses of €1.33bn that in the prior year included higher one-offs, including proceeds from disposals and other adjustments.

Consequently, return on capital employed almost doubled to 5.2% from 2.7%, while the group returned to the black, with net income surging to $511m, compared to 2015’s €2.18bn net loss.

Operating cash flow fell by €179m to €1.47bn, and net debt rose to almost €8bn from €7.7bn in 2015, despite cash and cash equivalents up to €4.58bn from €4bn last year.

Its SNCF Voyageurs business represented about half of group revenue, and was responsible for the majority of gross profit (€1.3bn) as well as operating income (€646m), but also absorbed the majority of net heavy investment, at €1.1bn versus €1.9bn for the entire group. 

Elsewhere, the logistics unit – which includes Geodis, rail freight and multimodal transport (TFMM), Ermewa and STVA – turned over €10bn, while generating gross profit of €490m and current operating profit of €161m, against capital expenditures of €385m.

Finally, Keodis, the smallest division with €5bn of revenues, required net capex of €264m although its current profit contribution was lower on a relative basis at group level.

Source: Transport Intelligence, March 14, 2017

Author: Alessandro Pasetti