Green logistics is back on track
Green Cargo and its customers were heavily affected in 2009 by the downturn in the economy that began the previous year. Rail transport volumes plummeted 23 percent compared to 2008 and the Group's loss after financial items for the full-year 2009 totalled SEK -223 million. Net sales shrunk 8 percent.
In response to the changing business economy, a savings program was introduced at the end of 2008 and implemented throughout the entire company. In total, Green Cargo will decrease its annual costs by more than SEK 600 million as of 2012. Measures implemented in 2009 had a savings effect of around SEK 320 million.
Green Cargo emerged from the financial crisis and the recession on its feet. We were forced to announce redundancies, we slowed our investment program and we decreased the number of trains in operation in order to maintain fill rates and get by with fewer resources.
However, it is not possible for a company with large fixed costs to keep costs in line with income when volumes fall 30 percent in just a few weeks. Green Cargo was therefore plagued by considerable losses in the first half of the year. As transport volumes slowly began to rise after the summer and our savings program began to deliver tangible results, the company once again began to generate a profit. We have not slowed our efforts to implement cost reductions and efficiency measures, but we are now also pursuing aggressive marketing campaigns and sales initiatives.
Despite the weak economy, 2009 was a record year for new business for Green Cargo. There is considerable commercial demand for rail logistics and we welcomed 28 brand new rail customers during the year. Unfortunately, this new business was not able to offset the large decreases in volume we experienced primarily in our traditional industries, such as steel, forestry and automobiles.
Investments are a prerequisite for growth and maintaining quality. Green Cargo's gross investments in 2009 totalled SEK 927 million. Ordered investments that have yet to be delivered totalled approximately SEK 1 billion at year-end 2009.
New, modernised locomotives are now being rolled out onto the tracks and wagons that can handle trailer freight for long haul rail transport have led to new assignments. In mid-2009, immediately after the summer, trains carrying Coop trailers began to roll across Sweden, followed one month later by the premier of trains carrying forest fuel to the large, new, biofuel-driven heat and power plant in Södertälje.
Our intermodal traffic in Sweden is growing and it is now time for Green Cargo's intermodal shuttles to head out into Europe. Starting in April 2010, Green Cargo will introduce daily traffic between the Skåne region and two large German industrial centres to transport the trailers of large European transport companies by rail. We intend to gradually develop similar products for customers who want to be in the forefront when it comes to efficient transports with low environmental impact. Our Road division continued to serve as a role model for the industry and made it possible for more companies to choose the train for their long haul needs. Several of the intermodal transport solutions that were introduced in 2009 would not have been possible without our Road operations.
Third-party logistics had a strong year in 2008 and continued its success in 2009 with a 15- percent increase in profitability. Green Cargo has become the second largest actor in Sweden for managing customers' imports, warehousing and distribution.
The conditions needed to ensure that climate-smart rail capacity continues to meet both the industry's and market's demand for freight transport have become a highly political issue. Resources for maintenance and investments are appropriated by Parliament via a document, "The National Plan for Transportation Policy 2010 – 2021". The Swedish Shippers' Council and the Association of Swedish Train Operators, of which Green Cargo is a member, have taken the stance that the plan provides "too little, too late" to ensure the growth and quality of freight transports.
The infrastructure owner's preparedness, methods and equipment for snow removal along the tracks at strategic shunting yards came into focus during the winter of 2010. The Swedish National Rail Administration's priorities and general inability to handle the situation has led to a loss of revenue and increased costs for Green Cargo. It is time to assign responsibility where it is due. Green Cargo is evaluating its own behaviour and helping the infrastructure owner draw reasonable conclusions about improvements that are needed for the future. We are convinced that the political forces will also be able to contribute to improving the credibility of rail transport as a sustainable alternative. In 2009, despite the comprehensive savings program that led to the redundancy of more than 300 employees, Green Cargo successfully delivered 95 percent punctuality to customers within its rail traffic. When placing this number in an international context, it is a very good result.
The year as a whole was a difficult one for Green Cargo. However, during this period, we learned a lot about our own abilities and where our future lies. The extremely poor results during the first half of the year were reversed during the second half of the year and the underlying trend appears to be reasonably positive. Thanks to efforts to become more efficient, the weak but burgeoning economic recovery and the continued development of our product portfolio, we expect 2010 to show further improvement.
Solna, March 2010
Lennart Pihl
CEO Lennart Pihl
Green Cargo's national transports are an approved Good Environmental Choice