Transalpine Corridor - Area 3

Financial results press conference

Chiasso/Zurich, 6.5.2009 Despite a drastic slump in traffic in the fourth quarter, combi operator Hupac has traffic growth of 1.8% and a positive Group result to report for 2008. As the crisis continues in 2009, Hupac is maintaining the transport network and continuing its strategic terminal investments.

Traffic development: slump in the international freight transport market
The economic crisis is having a clear impact on Hupac's pan-European network. Whilst double-digit growth rates were still being registered at the beginning of 2008, demand slackened in the course of the year and slumped at a surprising rate in the last quarter. Transalpine unaccompanied combined transport through Switzerland declined for the first time in years (-2.3%). Overall traffic, supported by continued strong growth in non-transalpine traffic (+14.1%), achieved a positive result of 1.8%. In the first quarter of 2009, the volume of traffic was 20 to 25 per cent lower than in the previous year. "The largest economic crisis in Hupac's history of more than 40 years has had a drastic impact on the exchange of goods in Europe, including combined transport, in a very short time," explained Chairman of the Board of Directors, Hans-Jörg Bertschi, at the financial results press conference on May 6 in Zurich. The steep decline in demand for transport services had a particularly severe effect on combined transport as a link between the roads and the railways, he said. For instance, the roads could eliminate their excess capacity more quickly and respond more flexibly to the new market situation than the railway system could. "On its shuttle trains, Hupac bears the full risk of train utilisation and has to decide each day whether it is economically sustainable to operate inadequately utilised trains," said Bertschi.

Hupac is maintaining the network
In this delicate balance between reducing and maintaining the network, Hupac is relying on continuity. "As one of Europe's leading combi operators, we aim to stand our ground even in the crisis," emphasised Bernhard Kunz, Managing Director of Hupac. The network was being maintained in all major markets, he said, while capacity was being adjusted to the reduced demand in consultation with the customers, for instance through frequency reductions, gateway solutions and the removal of duplications. "We have worked with our railway partners to develop a flexible production schedule, which enables us to optimise the deployment of resources." There was a pleasing trend in quality measured by train punctuality. In 2008 the punctuality rate rose by four percentage points to 79%. Due to the perceptible reduction in traffic density within the network, this figure rose by another six percentage points in the first quarter of 2009 to reach 85%.

Financial development: positive result thanks to a solid foundation
The tough economic situation also shows itself in the Hupac Group's annual result. Turnover rose by 2.3% in the 2008 financial year, though net costs were 7.0% above the previous year's level. This led to a reduction in gross profit of 17.6%. Despite the fall in demand throughout the year and the slump in the market in the fourth quarter, Hupac was able to generate an annual profit of CHF 2.8 million. This equates to a reduction of 61.1% compared to the previous year. The Group's cash flow stood at CHF 33.9 million by the end of the year, down by 43.8%. Investment volume reached a peak at CHF 77.3 million. The investments related mainly to the purchase of rail wagons as well as the construction and expansion of terminal infrastructure in Belgium and Italy. "In the current crisis we are bearing the burden of high fixed costs, caused mainly by the rolling stock," said Peter Hafner, financial director. Yet the company had systematically provided for times of crisis by operating sustainably, he added. "We have a solid foundation, which ensures our security even in tough times." Since the start of the crisis, Hupac has introduced comprehensive reorganisation measures to improve the profit situation. As well as consolidation of the network, these include the return of rented rolling stock, reduced working hours at the Busto and Singen terminals and the postponement of investments in new rolling stock.

New markets, new processes
Despite the economic crisis, Hupac is expanding its Shuttle Net transport network with new links. These include the connections between the Iberian Peninsula and Antwerp with a direct connection to eastern Germany, Poland and Russia. Also on the starting blocks is a connection via Budapest to the newly built Curtici terminal in Romania. In north-south traffic, Hupac is focusing on the growth sector of 4-metre transport, for example with the newly introduced connection between Taulov and Verona via the Brenner axis and the project to create a new link between Cologne and Novara via Lötschberg. Yet the crisis is also an incentive to reorganise some key business processes. For example, the "Customer Focus" project is adapting the interfaces between customers and the company in order to enhance the quality and efficiency of the service, from the bid proposal through booking and all the way to billing.

Economic crisis: grave consequences for combined transport
The huge reduction in the international exchange of goods in Europe, a fall of more than 20%, is having a particularly serious impact on combined transport. As a result of shrinking volumes, operators are being forced to abandon insufficiently utilised connections due to the high fixed costs. The European combi network built up over the decades is thinning out. There is a danger of a domino effect: if more traffic migrates to the road, even more connections would have to be terminated – a risk that not only threatens Hupac but also combined transport in Europe as a whole. Hans-Jörg Bertschi says: "To prevent the current crisis from irreparably damaging the system of combined transport and throwing the modal shift process back by many years, we will need a coordinated approach by all partners in the transport chain and the public institutions." Hupac has thus worked with the railways to develop an economic stimulus plan against the shift of traffic back onto the road. On the core transalpine transport links, Hupac is granting a temporary economic discount. Support for combined transport through additional modal shift incentives by the Swiss Federal Office of Transport is also up for discussion.

Investing in the infrastructure of the future
Despite the crisis, Hupac continues to believe in the future of combined transport. Strategic terminal investments are being maintained, such as the construction of the HTA Hupac Terminal Antwerp and the Combinant Terminal in Antwerp in collaboration with BASF and IFB. Both terminals should be put into operation at the start of 2010. At the Busto Arsizio-Gallarate terminal, expansion and completion of the facility is also continuing. "Logistics is a growth market in the medium to long term," said Bertschi. As an environmentally friendly transport solution, combined transport has good market opportunities, so it is all the more important to press ahead with the expansion of rail infrastructure. Keeping up with the roads requires efficient infrastructure that matches the requirements of the market and allows the railways to achieve the necessary productivity gains. Examples include the expansion of rail infrastructure on the south side of the Alps to Busto/Milan for 750-metre trains in compliance with the standard north of the Alps. There is also an urgent need to address the rapid expansion of the NEAT approach routes to a profile height of 4 metres, to allow the modern, high-volume semitrailers to shift onto the railways. "And we need competitive track prices for freight transport," demanded Bertschi. These are three times higher in Switzerland than in neighbouring countries. "As part of the planned reorganisation, the track prices for freight transport in Switzerland must be reduced to match those in neighbouring countries."