French stimulus plan supports SNCF Group strategy with aid to rail industry

SNCF Group

SNCF’s Board of Directors have approved a new strategic roadmap that will enable the Group to fulfil two major responsibilities: contribute to a lasting nationwide economic recovery that serves all French regions, and meet ambitious financial goals to keep its own business model resilient and sustainable. On Thursday, September 3, the State announced €4.7bn in aid for the rail industry under its France Relance recovery programme, including €4.1bn for SNCF Group’s subsidiary SNCF Réseau.

Like all transport companies, SNCF was hit hard by the Covid-19 health crisis, whose impact will be felt through year-end 2020 at least. At the pandemic’s peak, for example, the Group reduced capacity to 7% for TGV high-speed lines, 34% for Transilien commuter service in the Paris Region and 16% for TER regional service. Group finances also suffered, with operating margin (EBITDA) dropping €3.2bn in the first half of 2020, and provisional estimates calling for the toll to reach over €4bn full year.

From the very start of the crisis, SNCF moved quickly to adopt an action plan to temper the pandemic’s impact on its projected financial trend. SNCF stated that this paid off quickly, boosting available cash by €1.1bn in June. Cash flow savings generated by the plan are expected to reach €1.8bn by the end of 2020.

Included in the package is a €4.1bn capital increase for SNCF SA, with proceeds going to subsidiary SNCF Réseau, the French rail network manager, to enhance network safety and accelerate planned upgrades. An additional €0.6bn will be injected in the form of budget credits for the rail sector, focusing on upgrades to small local rail lines and investments needed to reintroduce overnight trains.

This State stimulus will help SNCF meet the strategic goals identified when French legislators adopted the Rail Reform Act in 2018. In operations, the Group is committed to an all-out drive to upgrade the network and improve safety, on-time arrivals and passenger information. Business and financial performance is also a priority, with a special focus on optimising cost structures, raising profitability and bringing finances onto a sound, sustainable footing.

The State rail stimulus plan offers a springboard for “Tous SNCF”, a strategic roadmap that will build on a core business—rail—and a core domestic market—France—in hopes to make SNCF Group a leader in sustainable mobility for both passengers and freight by 2030. Sustained and selective goals for Keolis and Geodis, will also drive future growth on international markets, and contribute to the Group’s resilience and profitability.

Source: SNCF