Good result in difficult environment – debt stabilised: SBB improves result – stagnating demand for rail transport.

In 2012, SBB achieved a good result in a challenging market environment. Every day it carried 967,000 passengers and around 175,000 tonnes of freight safely and punctually to their destination. The company provides its services to more than 5 million customers on the world's most densely used rail network and in heavily frequented stations. The operating result declined as a result of falling demand for passenger services and higher train path prices. One-off effects pushed consolidated net income up to CHF 422.5 million (+ CHF 83.8 million). Although reduced, interest-bearing debt remains high. SBB's good consolidated net income will help it to absorb the still soaring financial liabilities arising from train path and energy prices.

2012 was a year in which a weaker economy, strong Swiss franc, reduced industrial capacity and declining demand from tourists combined to create a challenging environment for SBB. As a result, it experienced stagnating demand for its rail services. The company carried 967,000 customers every day, slightly fewer than 2011's figure of 977,000. Since the distances travelled by passengers fell by 1.2 percent compared to the previous years, passenger-kilometres declined from 17,749 million to 17,545 million. This is because services were not significantly expanded during 2012.

Subsidised regional services continued to grow, increasing passenger-kilometres by 1.6 percent to 4,620 million. In contrast, traffic volumes on self-financing domestic long-distance services fell by 2.1 percent to 12,925 million passenger kilometres. Leisure and tourist travel in particular were down, while commuter and business travel continued to grow, albeit less strongly than in previous years. Passenger-kilometres increased by around 6 percent on international passenger services, above all on the Zurich-Paris route and the Rhine valley route to Frankfurt and other destinations in Germany.

SBB Real Estate benefited from the high passenger numbers and associated demand for prime real estate in central locations with excellent public transport links.

One example is the development project in Zurich's Europaallee, where SBB inaugurated the first phase in September.

Freight services had to contend with the economic slump that is affecting the whole of Europe and the reduction of industrial capacity in Switzerland, particularly in the paper and metalworking industries. This situation was compounded by the closure of the Gotthard mountain route on three occasions due to rockslides near Gurtnellen. As a result, the Freight Division posted an operating loss. SBB Cargo reported a 1.7 percent drop in freight traffic in 2012, to 12,132 million net tonne-kilometres. SBB responded to these challenges by systematically gearing its freight services to the rail system's strengths.

Usage of SBB Infrastructure's network intensified again somewhat in 2012. Train-path kilometres increased slightly once more, rising 0.3 percent to 165.6 million. SBB Infrastructure intensified maintenance activities on the rail network. The backlog was stabilised as planned and now totals CHF 1.815 billion (+ CHF 35 million). A total of 160 kilometres of permanent way was renewed in 2012 (2011: 150 kilometres) and productivity was increased by extending fixed maintenance intervals. SBB also equipped the first of around 11,000 locations with ETCS, the high-tech European Train Control System.

Slight increase in earning power

Although demand for rail transport services stagnated overall, SBB performed better in 2012 than in the previous year. Consolidated net income for 2012 came in at CHF 422.5 million (2011: CHF 338.7 million). The result was bolstered by one-off effects and reversals of provisions totalling CHF 93 million. Adjusted for these one-off effects, however, earning power improved only slightly on the previous year. Consolidated net income was boosted by the financial result, as the reduction in interest-bearing debt lowered the financing requirement.

The positive consolidated result gives SBB a foundation from which to manage its financial liabilities, which will continue to rise rapidly. Train path prices will increase further in 2013 and subsequent years, pushing up SBB's costs by around CHF 250 million. In addition the costs of producing renewable energy are rising, as are interest costs. The increase in train path prices is needed to pay for the backlog in and increased requirement for rail infrastructure maintenance.

Investing in customers

Last year, SBB substantially increased its investments in improvements for customers to CHF 3,206.6 million (2011: CHF 2,490.9 million/+ 28.7%). This is attributable to specially financed public-sector investments such as the Zurich cross-city line or the joint Franco-Swiss link between Geneva and Annemasse (CEVA) on the one hand, and major investments in rolling stock on the other.

Free cash flow after public-sector funding came to CHF 905.8 million (2011: CHF -5.2 million). This is primarily due to the sale of financial assets and real estate as well as a further improvement in cash management. Delays to rolling stock deliveries and individual real estate projects also brought temporary relief. Thanks to its improved free cash flow, SBB was able to reduce interest-bearing net debt. However, interest-bearing net debt remained high at the end of 2012, at CHF 6,841.9 million (2011: CHF 7,494.4 million).

Enhancing rail travellers' safety

Although safety performance was good in 2012, it fell short of the very good levels achieved in previous years. Safety was marred by several accidents, in which two SBB employees and four employees of contractors lost their lives. In recent years, SBB has made a major commitment to reinforcing its existing, highly effective safety systems at critical places by installing additional speed supervision equipment. This commitment has resulted in an upgrade programme, during which 3,200 of the 11,000 main signals in service on the network have already been fitted with speed supervision equipment. A further 1,700 are due to be upgraded over the next few years.

A further growing challenge facing SBB is that of protecting passengers and employees against acts of violence. Violence is becoming more commonplace throughout society and the railways are not immune to this development. SBB therefore always deploys two conductors on each of its long-distance trains. The transport police is well equipped and a visible presence at stations and on trains. Prevention activities have also been stepped up.

As regards punctuality, connection rates rose once more in 2012 from 97.7 to 98.3 percent. Although customer punctuality, i.e. the proportion of travellers who arrive at their destination on time or with a delay of less than three minutes, failed to match 2011's record level of 89.8 percent, it declined only slightly to 88.0 percent.

SBB further strengthened its commitment to conserving energy and cutting carbon emissions in 2012. The effect of energy-saving measures implemented to date rose from 145 Gigawatt-hours (GWh) to 183 GWh per annum. This saving corresponds to the annual energy consumption of 9500 households. Thanks to good water levels, hydroelectric sources already accounted for an impressive 83.5 percent of the power used by SBB in 2012. CO2 emissions were reduced by about 12,000 tonnes by comparison with 2009. This corresponds to the emissions from over 1800 households. By tending line-side embankments and woodland, moreover, SBB is doing a great deal to promote biodiversity.

Further service expansion in the period up to 2016

In the period up to 2016, SBB will be doing the groundwork in preparation for subsequent years. Over the next few years, customers will benefit from progressive improvements in services. Infrastructure projects and new trains will provide the foundation for doing so. SBB will be deploying new double-deck trains on regional and long-distance services and modern ETR 610 units on services to Italy as replacements for the ageing ETR 470s. It will also be putting new trains into service on further international routes.

The company will also be completing major real estate projects such as Europaallee in Zurich, Südpark in Basel, La Praille and the rejuvenation of Geneva's Cornavin main station. 2014 will see the opening of the first stage of the Zurich cross-city line, a project of both regional and national importance, and also of the rail link between Mendrisio in Ticino and the Italian town of Varese. The cross-border route between Geneva and Annemasse (CEVA) will commence operations in 2017.

The eyes of the world will be on Switzerland for the opening of the Gotthard Base Tunnel. For SBB, the new tunnel will mark a major milestone as it equips itself for the future. The Gotthard Base Tunnel will reduce journey times between northern and southern Switzerland and permit the transfer of traffic from road to rail. From an international perspective, the event is a unique opportunity for Switzerland to present public transport as the embodiment of the country's values of reliability and innovation.

SBB Group: Key figures

Consolidated income statement (CHF millions)


2012 2011 Change (in percent)

Operating income

8,168.5 8,021.7 1.8
Operating expenses
–7,677.7 –7,492.1 –2.5
Operating result/EBIT
490.9 529.7 –7.3

Financial result

–121.8 –250.1 51.3
Non-operating result
65.3 66.9 –2.4
Profit before tax
434.4 346.5 25.4
Taxes & minority interests
–11.9 –7.7 –53.9

Consolidated net income

422.5 338.7
24.7

Segment results (CHF millions)

2012 2011
Passenger
268.9
213.9

Freight

–51.2
–45.9
Infrastructure
37.1 72.4

Real Estate*

192.4 182.5

* before annual transfer payments

Traffic volumes

2012 2011 Change (in percent)
Passenger
Passengers carried (per day)
Passenger kilometres (millions)

967,000
17,545

977,000
17,749

–1.0
–1.2
Freight
Net tonne-km (millions)

12,132

12,346

–1.7
Infrastructure
Train-path kilometres (millions)

165.6

165.1

0.3

The complete 2012 SBB Annual and Sustainability Report in German, French and Italian may be downloaded free of charge from www.sbb.ch/en/annual_reportLink opens in new window..

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