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Shareholders and Trade Unions Support the Restructuring of PKP CARGO, but in Different Ways

Shareholders and Trade Unions Support the Restructuring of PKP CARGO, but in Different Ways
foto: PKP Cargo / Public domain/PKP Cargo
30 / 05 / 2024

Polish rail freight carrier PKP CARGO is facing a significant decline in transport volumes and rising staff costs. To adapt to the market situation, the company plans to reduce costs and optimize operational processes. At the same time, the Management Board is facing challenges in the form of loss of orders and the need to refinance debt.

On Tuesday, the Warsaw Stock Exchange's information portal "" published a recording of a discussion between PKP CARGO's management board and shareholders. The Board of Directors reiterated the general information that the rail freight market in Poland has been declining since Q2 2023, with a 6.8% year-on-year decline in transport volumes, with the largest relative losses recorded by large carriers. PKP CARGO Group ended 2023 with a 17.8% year-on-year decline in transport volumes. From the beginning of 2024, the negative trend continues, and large companies are losing market share.

In contrast, PKP CARGO's personnel costs increased by 12.7% year-on-year despite the decline in employment. The figures speak for themselves. In such a situation, any responsible management must immediately adjust costs to the market situation. Moving workers into a work restriction scheme from 1 June will not only reduce costs but will allow the company to retain staff. Once the market rebounds from the bottom, they will need qualified employees. The Board announced that it is optimizing operational issues and processes, which it hopes will improve the long-term efficiency of the company.

When asked by shareholders how the business situation and new orders were developing, the Board announced that it had issued a tender for a new Sales Director and launched a new business policy in the market a month ago. In the meantime, as a result of the passive approach of the former management, PKP failed in the tender for the coal transport for the Polaniec power plant. It also reported that it was exploring the possibility of recovering lost profits for coal shipments made by the company on the instructions of the Prime Minister during the energy crisis.

Another query focused on the savings that PKP CARGO could make by transferring its fleet to a leaseback scheme. The Board said that the scope is not large; the company already has a significant part of its rolling stock in use under leasing contracts from 2023 onwards due to a decision of the previous management. The company is analyzing the situation and is also looking at options to refinance its debt in the future.

Shareholders also asked about savings in the company's operating costs. An external audit is ongoing to analyze all cost-consuming processes in the company to improve the economic efficiency of the management. The biggest costs are directed to repairs and modernization of the rolling stock because, without it, it is impossible to serve the customers that PKP CARGO still holds.

On the possibility of regaining market share, the Board of Directors cautiously said that PKP CARGO needs to be more flexible and better respond to market needs. However, it is impossible to predict what the market will look like in a year, two years, or five years. On the development of the share price, it said that in 2013, when the company went public, the shares were selling at PLN 76, with the first listing immediately rising above PLN 80. For some time, the shares were trading in triple digits in PLN. The board wants to communicate the situation and individual management actions in the company openly to shareholders and sees this as an investment in itself. The chairman of the board of directors said in a chat, "I believe in our company #MakeCargoGreatAgain."

The largest trade unions wrote a letter to Minister Klimczak attributing the dramatic situation at PKP CARGO to "disastrous management and absenteeism." The recovery cannot be carried out at the expense of the employees. One of the reasons is the "anti-rail" transport policy in Poland. The letter states that despite multi-billion investments in rail infrastructure, the rail freight share in Poland has fallen to less than 10%. This is due to the unfavorable ratio of rail infrastructure access tariffs to road hauliers' costs. PKP CARGO's potential thus remains untapped, and therefore mere personnel changes cannot change the company's condition. According to the trade unions, the degradation of the PKP CARGO group structure is proceeding rapidly, and is irreversible, and the fleet subsidiary PKP CARGO Tabor is directly threatened with bankruptcy.

The trade unionists also point to other indirect consequences of the situation: the consequences will be felt by the entire Polish economy, which will affect the planned large investments (CPK high-speed railway). National security will be threatened, especially in the event of an armed conflict, because destabilization and reduction of rolling stock and personnel, or even its liquidation, will have an impact on Poland's defense capabilities. The trade unions demand that the Minister personally devote himself to restoring fair competition in transport; otherwise, there is a risk of social unrest. We will defend our jobs by all means and at all costs.

According to Business Insider, Transport Minister Dariusz Klimczak responded to the letter by saying, "No private company will replace PKP CARGO. I have tasked the new Supervisory Board and Management Board to ensure that PKP CARGO does everything possible to reach an agreement with the unions, win new contracts, and make savings." He stressed that this is one of the most important companies in the country.