Hungarian railway transportation market of 2009Jan 19th, 2011 | Category: Articles, Business, Current issue F&L, January11, Market Development
Railway shipping companies have had a difficult year. After the 2008 year of significant market loss, in 2009 there was an even greater decrease of the quantities shipped, revenues and profit, first of all, because of the global economic crisis. However, the Central Bureau of Statistics’ report on the 1st quarter of 2010 shows that the shipped quantities increased.
Current situation and performance
According to the Central Statistical Office data, in 2009 in Hungary have been carried by rail 43,4 million tonnes of goods in total, almost 16% less than during the previous year, and much below the 2006 peak – e.g. 54.7 million tonnes. The performance measured in tonne-kilometres decreased to a greater extent, by 21%, which means a 7.7 billion decrease (see the chart). Interesting trend: while export, import and transit components of the international freight have decreased, the domestic freight has increased, as measured in tonnes transported, but calculated in shipped tonne/kilometre reduced as well. The average railways freight distances have also slightly decreased. As compared to other transportation sectors, railway freight market share decreased as a whole, as well as international freight. Regarding the domestic figures, the railways share slightly increased in 2009.
Annual net revenues received from the last year’s shipment, estimated on base of the above data, was HUF 90.8 Billion. It is much less then the last year’s amount of HUF 112 Billion. In 2009 the railway companies have got for shipment of one tonne of goods for one kilometre distance HUF 11,7 in average, 40 penny more than the previous year. The same calculated in euro changed balance, last year every completed tonnes cargo kilometre brought 4.2 euro cents revenues in an average, which was 0.3 eurocent less than in 2008, due to the significant weakening of the Hungarian forint since October 2008. Taking into consideration the impact of inflation and exchange rate change, the revenues proportioned to shipped cargo quantity were smaller than during the previous year, so unfortunately, the industry’s profitability decreased as well. The reason was the significant price competition, which was generated by the new companies’ entry to the market, but details about that in the following pages. The market share of some rail companies – calculated based on the net income from transportation – has been rearranged, also because of the new railway companies which entered the market. The market share of two old companies – GYSEV and MÁV Cargo – reduced, thus lead to the market deconcentration. CER turnover slightly reduced, MMV and Eurocomé turnover significantly increased, and Train Hungary’s turnover doubled. There was slight increase in Floyd’s sales, and turnover decrease for 25% for Cargo and 20% for GYSEV compared to 2008. In the second half of the year, Pannontrain Vasúti Zrt. stopped its trains traffic due to the lack of orders, and the National Transportation Authority has suspended its operating license in November. MÁV Zrt. acted in the same way regarding the network access contract. Notable market news related to the Eurocom insolvency, due to irresponsible management, which will be described in details later on.
We can get interesting additional information, if we observe the evolution of the freight train mileage: 18 276 716km in 2008, 14 202 161 km a year later on MAV’s network, GYSEV lines not included. This means a 22.3% fall, which is more than experienced reductions in tonnes of cargo carried and cargo-tonnes decrease. This happened probably because operators (mainly MAV CARGO) try to reduce costs by connecting more cars (shipping more cargo) in one train. This might have occurred because of the crisis, which made the volumes of cargo carried on the scheduled trains, number of cars, trains length and load decrease so much. So, it was a time when fewer, but longer freight trains moved on. In 2006 – the last “peak” year – the freight trains made 18 963 648 km n the MAV railway network.
After four years, first time in the first quarter of 2010, the rail freight performance seem to rise again – measured both in tonnes of goods carried and in tonnes cargo kilometres. All this happens despite the fact, that the total output of the transportation sector decrea-ses, when measured in tonnes of cargo transported, but the average transport lengths increase, so tonnes of cargo calculated in kilometres, as well. The average level of increase compared to the similar period (quarter) of the previous year is 7.7%. If we compare it to the previous – forth quarter of 2009 – some decrease took place, but it is a natural phenomenon, because it is typical for the railway freight volatility that traffic in the I quarter would be the lowest, and continuously increase until the last quarter of the year. In the third quarter a minor decrease took place, but this is not typical for every year. These positive changes show a slight rearrangement of the market share in favor of the railway shipments, but we cannot declare any certain. But keep in mind that the growth visible is due to a low base value, as a result of a drastic decline in the previous year. If the growth will be stable in the rest of the year, then the following data can be forecasted for 2010:
Estimating was a difficult task, because the second quarter figures were not available at the time of closing the article for the press. A positive impact of the new government for the industry as a whole foreseen – in actions not yet, but orally declared “railway friend” transport policy. The first draft of Sechenyi plan has been published shortly before publishing this article. According to this plan, the transport as a whole and rail shipment is highly subsidized. We hope this would become a reality and it will be visible in the rail sector indicators in a couple of years. Maybe someday road carriers will be forced to get a rail freight license, to prevent a significant lost of the market.
Market ranking based on the companies’ revenues
Chart 1 shows the ranking of the shipping railway companies according their net revenues, exclusively from goods shipment:
Unfortunately Pannontrain Zrt. has not been fulfilling its reporting obligations for years. PSZ and SZDS – based abroad -are not obliged to provide annual report of their business activities in Hungary, therefore we worked with the estimated data calculated for them.
Market ranking based on the companies’ after-tax profit
Chart 2 shows the ranking of the shipping railway companies according to their after-tax profit resulted not only from the goods shipment:
We took into account only those rail companies, which have significant revenues more than 80% of which comes from rail freight. So Bobo Kft, GYSEV ZRT. Pannontrain Zrt., PSZ and SZDS have been omitted from this comparison, for the above-mentioned reasons.
Market ranking based on the profitability
It is useful to compare the market ranking of the rail freight companies, based on the EBITDA margin, calculated from profit and loss not only of shipment, only in such a way we can see the current companies’
profitability. EBITDA margin or EBITDA ratio is a widely used indicator in the international accounting practice, on base of which the companies’ profitability may be inferred, or several companies’ profitability, or compare the profitability of the same company at different times. The margin shows the ration of the company’s interest payments, taxes, depreciation and amortization, profit and loss before the impairment against the net sales and other revenues amount.
When determining the ranking, we have taken into account only the rail companies, which have significant revenues coming from the rail freight (more than 80%). So Bobo Kft, GYSEV ZRT have been omitted from the comparison, also Pannontrain Zrt., PSZ and SZDS have been omitted from analyses for the above-mentioned
Rail companies – players of the industry
According to national and EU regulations, two licenses are required for the participation in the Hungarian rail market. The first is the railway operating license (related to the cargo carriage or passenger transport activity), issued by the traffic authority by the registration country of the business, which is valid across the EU. Another condition is the existence of a railroad safety certificate, which should be requested in each EU member state, where the company intends to operate train traffic. In 2009 a number of foreign railway companies entered the Hungarian market by acquiring additional safety license in Hungary. In Hungary not all companies maintaining valid licenses are involved in the railway freight market competition. Some of the companies transport goods for themselves (for example, material carriage to constructions) instead of shipping external customers’ cargo. Some companies deal only with passenger transport, others provide towing services ( e.g. locomotive and staff).
Further railway companies
In aim of completeness, we also list other railway companies, which do not participate in the market competition of cargo carriage, however, they have a railway permit and safety certificate. These companies deal with the rail track construction, renovations, railway chemical weed control, vehicle maintenance, or exclusively with the passengers’ transportation or towing, and do not deal with the external freight orders yet.
Hereunder is the list of these companies:
–Szentesi Vasútépítő Kft.
–Mávépcell Mély-, Magas- és Vasútépítő Kft.
–Vasútépítők Pályatervező, Kivitelező és Iparvágány-fenntartó Kft.
–G & G Növényvédelmi és Kereskedelmi Kkft.
–JÁSZ-VASÚT Műszaki, Tervező Kft.
–COLAS Építő Zrt. (license currently suspended)
–BSS 200 Energetikai Szolgáltatóipari és Kereskedelmi Kft.
–MÁV FKG Felépítmény-karbantartó és
–MÁV-GÉPÉSZET Vasútjármű Fenntartó
és Javító Zrt.
–MÁV START Vasúti Személyszállító Zrt.
–Mátrai Erőmű Zrt.
–MÁV-TRAKCIÓ Vasúti Vontatási Zrt.
–MTMG Logisztikai Zrt.
–Záhony-Port Záhonyi Logisztikai és Rakománykezelési Szolgáltató Zrt.
–KÁRPÁT Vasút Vasútüzemi Szolgáltató Kft.
[ by Gayer Márk ]