Sustainable supply chain

“Geodis’ ambition is to support the transformation of Naos’ logistics master plan, both in Europe and around the globe. Together, we are developing innovative and responsible solutions, especially for new distribution projects, to build a supply chain that is ever more efficient and environmentally friendly,” Marc Vollet, managing director of Geodis’ European Road Network commented.

Geodis uses secured containers for the full duration of the ‘combi’ service and assigns dedicated drivers for both pickup and delivery operations. This approach ensures a high level of confidentiality and operational control, suited to the demands of the cosmetics sector, it noted.

The deployment of what Geodis describes as “innovative, low-carbon land transport solutions”, is only one of a number of logistics-related services which Geodis currently provides to Naos. They includes centralised maritime transport for its group brands (Bioderma, Institut Esthederm, Etat Pur); international warehouse management; and expertise in customs issues.

Domestic and international train network

As well as being a major provider of road haulage, Geodis has approximately 120 trains in circulation every week operating across France and Europe. Domestic routes include Lille/Dourges-Avignon and Metz-Hendaye, each with five round trips weekly. Geodis also has a service dedicated to liquid bulk chemicals traffic operating several times weekly between Lavera, near Marseille to Puyoo, in south-west France, where Geodis has a ‘combi’ rail-road terminal.

On international routes, Geodis has a number of trains running between Łódź, in Poland and Baltic Sea ports, transporting maritime traffic for import and export; a daily service between Noisy-le-Sec, in the Paris region and Novara, in Italy; as well as a number round trips weekly between Łódź and Piacenza, also in Italy.

“That continuity and the market positions achieved through our diversification strategy have paid off, securing solid positions in our markets and generating profitable growth while stabilizing our debt.”

Positive results from the rail freight cluster

Rail Logistics Europe (RLE), which groups all of the French state railways freight subsidiaries, posted an EBITDA of 211 million euros, an increase of 11.4 per cent on the previous 12 months. Turnover rose 7.9 per cent to just over 1.8 billion euros driven by dynamic activity in certain market segments. Year-over-year growth was also due in part to the fact that 2023 results had been negatively affected by prolonged industrial action.

Last year was characterised by major upheaval for RLE with the discontinuity of Fret SNCF, ordered by the European Commission following suspicions of receiving illegal state aid. The rail freight unit was forced to relinquish 23 traffic routes. “Yet, in addition to the favourable basis of comparison resulting from the strikes in 2023 which disrupted access to the rail network, the withdrawal of these routes was offset by an aggressive push to expand business overall, despite competition from road transport. Volumes were thus higher than projected, particularly for chemicals and petroleum products,” SNCF noted.

Captrain’s pan-European business was resilient in a tough macroeconomic environment. In France, Captrain teamed up with Eiffage Rail to win a contract for renovating high-speed and conventional lines using special works trains. This contract will run from 2025 to 2030. Naviland Cargo, which specialises in the transport of maritime containers by rail, posted a solid year, boosted by its acquisition of Lardon at the end of 2023. Forwarding arm Forwardis posted a record year in terms of traffic volumes in the gas, petrol and chemicals segments.

As for RLE’s rolling highway operator, VIIA, 2024 was a buoyant year with an increase in frequencies and load factors. The Bettembourg-Le Boulou Lorry Rail service, stretching from Luxembourg to the French-Spanish border, achieved record load factors. As for the Alpine Rail Motorway (AFA), linking France and Italy, it has been suspended since a major landslide in the Maurienne Valley with its resumption expected in the second quarter of 2025.

Towards decarbonisation

Moves to streamline RLE’s business portfolio continued last year, SNCF added. Turning to the development of modal shift and the decarbonisation of goods transport in France, RLE transported more than 30 billion tonne/kilometres of freight in 2024, with 80 per cent of the traction powered by electricity. It was thus able to reduce CO2 emissions by 1.7 million tonnes.

All-by-truck mindset

The French group is one of Europe’s leading providers of road haulage, a segment in which it earns a significant percentage of its global turnover. Nevertheless, Geodis is committed to an intermodal/multimodal approach to freight transport, Vollet emphasised.

“Road accounts for around 90 per cent of Geodis’ overland freight volumes but we have a strategy that focuses on offering more than one modal solution – as our weekly programme of around 120 trains operating across France and Europe testifies. This contributes to reducing the risk to supply chains and is also in line with our decarbonisation road map to reduce CO2 emissions by 42 per cent by 2030.“

However, he is under no illusion of the task in hand to convince shippers to depart from a long-established ‘all-by-truck’ mindset and transfer part of their goods flows to rail.

“The prevailing environment in road haulage at any one time, particularly in terms of rates, often determines the state of a good part of the rail freight market. Rail freight/intermodal transport has traditionally been a little more expensive than road. Since 2023, road haulage rates have fallen to a fairly low level, exerting pressures on the attractiveness of rail freight.”

‘Intermodal’ thrived during pandemic

Vollet recalled the COVID-19 years during which rail/intermodal freight transport came out of the shadow of road haulage as supply chains slid into chaos and there were far fewer trucks than normal on the roads.

“2021-2022, we were able to create a lot of things, because road haulage rates had rocketed. Customers were looking for capacity and rail freight was able to provide it in abundance. I would go as far to say that everything at the time was conducive to the development of intermodal transport. Everyone wanted to get their cargo on board the trains because it was cheaper and the railways were extraordinarily reliable and everything ran smoothly.”

However, the end of that year and early-2023 saw a steady decrease in road haulage rates, the market normalising as the pandemic regressed and the intermodal segment entered a more complicated period.

Shortage of train drivers, reliability of locomotives

As for other issues facing rail freight, Vollet noted that it is starting to experience the same difficulties as road haulage which has been dogged for some time by a shortage of truck drivers.

“There’s a dwindling pool of train drivers and while rail firms have for several years undertaken major recruitment and training programmes, it’s not uncommon these days for trains to be delayed because of a lack of available drivers.”

The reliability of rolling stock is also a concern despite rail operators investing heavily in new locomotives. “Train breakdowns can happen and when they do, it’s effectively the equivalent of 40 trucks that are immobilised, not just one when compared to road haulage.”

Market outlook

In conclusion, Vollet underlined that as long as the economic argument continues to favour road haulage, rail freight will be in a battle to retain existing customers and attract new ones.

“One can’t deny that the market is going through a challenging phase. For a year, year and a half now, road haulage rates – notably in the long-distance sector where there is head-on competition with intermodal – have fallen sharply. Speaking for Geodis, over the past few months our rail-borne volumes have been a little lower than expected.”

As for convincing shippers to take the train, Vollet observed there were those who simply did not want to entertain the idea of rail freight at all, leaving two categories of potential new customers: firstly, those who are very motivated when it comes to the ‘greening’ or decarbonisation of their transport provision and secondly, shippers who could envisage a shift to rail provided the price differential with road was marginal.

“Today, in general, I would say a shipper switching to rail does so primarily out of a real desire to decarbonise and is ready to take on the constraints of intermodal transport such as punctuality and the uncertainty of on-time delivery. They know that there may be a few problems down the line but are ready to accept them in the name of sustainable transport solutions.”

“The service, which after all was in its test phase, has been shelved rather than abandoned,” he underlined. “We experienced some significant rail traffic problems in Germany where a good deal of maintenance and re-development work is currently taking place. Sometimes trains were delayed by up to a week on the scheduled transit times which was just too much for our shipper customers to accept given the efforts they had made to switch from truck to train.”

Unbalanced volumes from Spain

A slowdown in economic and industrial activity, particularly in Spain, causing an unexpected imbalance in volumes, was also a factor in Geodis’ decision, Vollet added. “We are ready to resume the service as soon as we have the necessary guarantees from the rail operator of more constant and better quality operating conditions for trains as well as the assurance of the return of substantial volumes of traffic, in both directions. “It’s an important route for us, ideal for intermodal traffic, given the long distance covered (well over 2,000 kilometers) and there is definitely growth potential there. We also have other prospective projects in mind from Łódź, to France in particular.”

Geodis and rail freight

As well as being a major provider of road haulage, Geodis has almost 120 trains in circulation every week operating across France and Europe. Domestic routes include Lille/Dourges-Avignon and Metz-Hendaye, each with five round trips weekly. Geodis also has a service dedicated to liquid bulk chemicals traffic operating several times weekly between Lavera, near Marseille to Puyoo, in south-west France, where Geodis has a ‘combi’ rail-road terminal.

On international routes, Geodis has a number of trains running between Łódź and Baltic Sea ports, transporting maritime traffic for import and export; a daily service between Noisy-le-Sec, in the Paris region and Novara, in Italy; as well as three round trips weekly between Łódź and Piacenza, also in Italy. “We’re also considering projects to link Łódź and Lille/Dourges and potentially a little further afield, to the UK while a number of our customers would welcome the launch of a service connecting the Atlantic-facing French-Spanish border and the Paris region and beyond to northern France.”

Vollet estimates that today Geodis generates around 80-85 million euros in turnover from its multimodal offering, rail being an integral part. “Back in 2022, we set ourselves a target of 150 million euros in turnover in the mid-term, roughly 10-12% of the global turnover of Geodis’ overland transport division. So we are a little bit behind our target at present. But as the suspension of the Łódź-Barcelona service illustrates, the market is going through yet another challenging phase.”

The fourth initiative revolves around Norske Skog, a Norwegian pulp and paper company, and combined transport services to move recycled paper between Noisy le Sec and Golbey. The fifth rail project selected by ADEME in this first round will affect Geodis, a logistics subsidiary of the national SNCF Group and a modal shift for the transport of chemical products along the Martigues-Puyoo route. The sixth and last company benefitting from this initiative is IFCO and the flow of reusable containers for packaging fresh produce between Lisses and Perpignan/Cavaillon.

The REMOVE project

The initiative launched by ADEME is part of the so-called REMOVE project, which promotes the shift from road transport to more environmentally friendly modes. There were two rounds of Call for Projects (CFP) throughout 2024. The six rail projects, together with three more concerning inland waterways, are the nine winners of the first round, which saw 18 applications coming in. During the second round of CFPs, 77 applications were submitted and the winners should be announced in 2025. Moreover, next year there will be another CFP.

In total, ADEME is putting almost 19 million euros on the table. Of these 2,8 million euros will be deployed for the nine projects selected out of the first round, 10 million will go to the winners of the second round of applications, and six million euros will be kept for next year’s CFP. The funds will be used for software development, salaries for project management, transport costs and equipment, among others.

Long rail freight connections in Europe

Over the past couple of years, an increasing number of rail freight services covering massive distances have been launched in Europe. For example, CFL launched a rail freight connection between Sète, France, and Poznan, Poland. Moreover, GTS established a connection between Bari, Italy, and Zeebrugge, Belgium. This last one was labelled as the longest intermodal rail service in Europe, but the new one launched by Geodis might beat it by a few kilometres.

Also read:

• What are the limits of rail for project cargo?
• PKP Cargo and COSCO to expand intermodal flows all over Europe
• Helrom to launch new Germany-Austria service

Not bad, not great for the Group’s freight business

The profitability last year of Rail Logistics Europe (RLE), which groups all of the French state railways freight subsidiaries, led by Fret SNCF, expressed as EBITDA, totalled 128 million euros versus 208 million euros for the previous 12 months. Turnover was “virtually stable, despite the difficult environment,” totalling 1.7 billion (-0.5 per cent).
Commenting on the 2023 results and the outlook, a spokesperson for RLE told Railfreight.com: “Increasing energy costs and the resulting crisis in volumes, a strong recovery in the road haulage sector, with competitive rates and a renewed driver pool, all weighed on the performance of RLE’s subsidiaries in 2023.

“We have also suffered the consequences of industrial action linked to pensions and the discontinuity at Fret SNCF, the interruption of a major European rail freight route – through the Maurienne Valley. Against this backdrop, our financial results are not up to scratch,” he added.

Another negative factor last year was the sharp economic slowdown, particularly in the steel and chemicals industries. At the same time, one should not overlook the negative impact that the penalisation of ‘rail motorway’ activity by works on the rail network had, making it necessary to reduce the size of trains or lengthen their journey times.

‘RLE’s business model is strong’

As for RLE’s Europe-wide network, grouped around Captrain, the activity level varied but, overall, “held up well in an unfavourable macroeconomic climate.” Last year saw RLE subsidiary Naviland Cargo strengthen its multimodal road/rail offering with the acquisition of Lardon Transport, a specialist in multimodal transport and container storage. Naviland Cargo has also benefited from investment in wagons totalling 45 million euros.

One bright spot last year was Germany, and the resilience of Captrain and Forwardis helped to offset the below-par performance in the French market. “RLE’s business model is strong, thanks to its group structure and without the effects of the strikes, we would not be far off the mark,” stressed the spokesperson.

Geodis performance dropped

As for Groupe SNCF’s logistics subsidiary, Geodis, after “two exceptional years” for the market, its turnover was down almost 22 per cent on a like-for-like basis last year to 11.6 billion euros (-15 per cent when the normalisation of air and sea freight rates is factored in), impacted by lower volumes due to the global economic slowdown. Nevertheless, it managed to maintain its margins “thanks to a diversified business model and cost productivity initiatives.” EBITDA was down very slightly at just over 1.1 billion euros.

New SNCF freight company to lead future growth

Last year was also marked by the announcement of “a transformation project” for Fret SNCF following the opening in January 2023 of an investigation by the European Commission into aid granted to the company between 2007 and 2019. The Commission suspected that the aid distorted competition in the rail freight market. An agreement reached with the French state made provision for Fret SNCF to relinquish more than 20 traffic routes – a currently ongoing process.

Concerning the discontinuity of Fret SNCF in particular, by January 2024, 15 traffic routes had been relinquished by rail competitors. The spokesperson revealed that the remaining eight will be handed over by the end of the first half of 2024, adding that it was necessary to note that there has been no modal shift to road.

“Despite the discontinuity, the new SNCF rail freight company, entering service in January 2025, with its workforce and turnover, will remain the leader in the French rail freight sector, with a market share of almost 35 per cent,” underlined the spokesperson. Their concluding remark concerned future turnover projections: “As for the outlook, RLE’s turnover is estimated to increase to 1.87 billion euros in 2024, and our objective is to pass the symbolic two billion euros mark within the next two to three years. This shows how ambitious we are in terms of growth and increasing market share.”

Increased capacity for combined transport and capillary lines

Mazataud underlined the progress that has been made in serving the intermodal segment and capillary or secondary rail lines. He said that for some time now, SNCF Réseau has been increasing the capacity of its combined transport terminals, with major investments at three major sites: Vénissieux (near Lyon), Valenton (southeast of Paris) and Les Aubrais (near Orléans). There is also another project in Rennes, in the northwest.

“These national-scale initiatives are accompanied by promising ones involving smaller sites”, Mazataud underlined. He mentioned that the French IM supported intermodal operator Geodis in starting up a small combined transport hub at Puyoô, in the Pyrénées Atlantiques region (in proximity to the border between France and Spain). This terminal was quickly put into service to meet buoyant local demand.”

He noted that investment in capillary lines has risen sharply, with commitments totalling 200 million euros for the years 2021-2022. Also envisioned is a 4-billion-euro rail freight investment plan for the period 2023-2032, which means the pace of spending should remain high over the next few years. A recently-completed project saw the reopening of a 33 km stretch of line between Saint-Varent and Parthenay (Centre-West France), with traffic expected to reach 1.5 million tonnes per year.

Frejus Railway closure still a challenge

Mazataud also addressed the situation regarding the Frejus Railway, the main connection between France and Italy, closed since August 2023, probably until the end of 2024, due to a landslide. Mazataud said that following the landslide, SNCF Réseau and the Swiss and Italian rail infrastructure managers are cooperating to find much needed solutions. Alternative routes were offered to SNCF Réseau’s customers to and from Italy, via the border points of Ventimiglia or via Basel. “Work to clear and secure the cliff is underway. At the end of this essential stage, we will be able to consolidate a schedule for the renewal of the rail installations and envisage a timeframe for the resumption of traffic.”

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• French intermodal sector sees a mediocre outlook for 2024
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‘Bounce back’ in traffic?

The main reason to explain the significant downturn in activity was repeated strikes at SNCF in protest to state pension reform, which deprived the sector of drivers, handlers and signalling staff essential to the night-time operation of the rail motorways.

Speaking to the business newspaper Les Echos, GNTC chairman Ivan Stempezynski said: “One more and one too many” (spates of strike action), who is now hopeful of a “bounce back” in traffic.

But in addition to cancelled trains and goods being transferred to trucks because of industrial action, other factors have weighed heavily on operations in the sector, notably soaring electricity costs, which have led to rate hikes and also the economic slowdown in Europe.

Alpine route disruption

More bad news for the sector, hampering the prospect of a recovery in the second half of the year, came at the end of August when a major landslide in Maurienne Valley brought rail freight traffic between France and Italy via Modane to an abrupt halt.

One service directly impacted was the Autoroute Ferroviaire Alpine (AFA) between Aiton, near Chambéry in France, and Orbassano, near Turin in Italy, operated by SNCF rail freight subsidiary Viia using Fret SNCF trains.

Before the rockfall, there were three roundtrips a day for accompanied and unaccompanied semi-trailers and tankers, and the AFA also offered connections to Calais, with possible on-forwarding to the UK.

No resumption before summer 2024

More than two months on, trains have yet to resume on this important Alpine crossing. “Rail operators have been informed that it will take longer than anticipated to restore the track – in fact, around one year,” a spokesperson for Rail Logistics Europe, which groups all of SNCF’s rail freight subsidiaries, told Railfreight.com. “We therefore expect traffic to resume in the area in the summer of 2024.”

French logistics firm Geodis normally uses the AFA and, following the rockfall, set up a road transport solution for its customers. Geodis continues to operate its combined road-rail service between Paris/Noisy-le-Sec and Novara, in north-west Italy, – routed via Switzerland, with several round trips a week. Another alternative rail route between France and Italy is via Nice.

Further market upheaval

France’s combined transport sector is also facing major upheaval as a result of Fret SNCF being poised to relinquish some of the best-performing elements of its core business from the start of 2024 as part of an agreement reached earlier this year between France and the European Commission on the rail freight operator’s debts.

Fret SNCF will give up 23 dedicated block train routes to its competitors, which account for 20 per cent of its turnover. Fret SNCF shipper customers have received a letter from the company informing them that they will have to find an alternative provider from January 1, 2024.

“2023? A year to forget as quickly as possible”, bemoaned Jean-Claude Brunier, CEO of French road-rail specialist Open Modal, also interviewed by Les Echos. His disgruntlement was echoed by his counterpart at Novatrans, Vincent Bellangé: “In terms of quality, we haven’t performed well for the past year or so.”

SNCF’s financial struggles

To understand the context of this statement, one should look at the recent financial history of SNCF. The Group’s turnaround has been negative for some years, with its freight subsidiary SNCF Fret scoring the worst figures, making it a revenue-loss business.

However, 2021 and at least the first half of 2022 have brought some optimism to the company’s financial department. Specifically, for 2021, the freight subsidiary saw a 6 per cent revenue increase, something that the CEO of SNCF Group Jean-Pierre Farandou framed as a ‘mission impossible’ yet delivered. The numbers in 2022, so far, show a turnaround of 928 million euros for the whole group, allowing even more space for optimistic future forecasts.

One fixed component

Both 2021 and 2022 as growth years for the SNCF Group have a shared component. This is the successful and profitable business of Geodis, the logistics and road transport subsidiary of the Group, which is also active in other continents like the US via company acquisitions.

Specifically, Geodis reported record revenues in 2021, with sales up 28 per cent at 10,9 billion euros, while in 2022, it was also framed as the Group’s financial bloodline since it contributed with a revenue increase of 34 per cent compared to H1 2021, buoyed by freight forwarding, distribution and express delivery and road transport. Contract logistics continued to expand, especially in the United States, even though cost inflation put pressure on its margins.

External investment seems logical

The figures provide a clear picture of Geodis’ significance in the revenue turnaround of the SNCF Group. However, while helping its mother company grow, Geodis also has expansion plans. As briefly highlighted, those plans include company acquisitions and contract logistics in European countries other than France and offshore.

The financial commitment and investment to undertake those acquisitions and long-term partnerships is quite demanding, currently looking like another ‘mission impossible’ for the SNCF Group. The company, which still balances between fragile revenue turnarounds and loss-making margins, cannot respond to or contribute to its subsidiary’s expansion plans. Thus, the search for external investors looks like a sensible option.

Also read:

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• SNCF back in the black: who would have thought?