SNCF strike may hasten partial sale of Geodis

By Stuart Todd Jan 14 2020 / Lloyds Loading List

Estimated €700m costs of current industrial action mean French group’s objective to break even by 2022 can only be achieved through the disposal of non-core assets, with its logistics subsidiary among the likely sell-off candidates

SNCF’s objective to attain a break-even position by 2022 has been dealt a severe blow by a prolonged strike that could hasten a disposal  of assets at France’s state railway, including the partial sale of its freight transport and logistics arm Geodis.

In an interview with Paris Match  published at the end of last week, newly appointed SNCF chief Jean-Pierre Farandou estimated the cost in lost business so far from the current period of industrial action – which began in early-December – at around €700 million, making the task of breaking even in the next couple of years even more daunting than had been initially the case.

“Are we capable of turning things round (financially)? For the operating margin, it will be difficult,” Farandou told Paris Match. “But we could achieve the breakeven we are looking for by getting the (group’s) debt under control, including through the disposal of assets.”

While it was “premature” to say which assets could be sold off, he said: “We can look at our portfolio and see what would it be possible to relinquish in the coming months.”

An SNCF spokesperson confirmed to Lloyd’s Loading List it was “too early to determine which assets could be relinquished”.

In recent years, the SNCF Group’s high level of debt has been cited as a principal factor in Geodis failing to obtain the necessary funds to make the transformative acquisition it has been seeking for some time to propel it into the Top 5 of freight transport and logistics groups in the world, against a backdrop of fast-paced consolidation in the sector. The intended acquisition strategy was outlined following the acquisition of US firm Ozburn-Hessey Logistics (OHL), since rebranded Geodis USA, in late 2015.

In September 2017, it was reported that Geodis had dropped plans to acquire CEVA Logistics, SNCF appearing to be reluctant to put up the estimated €2-3 billion required for the purchase.

However, there has been speculation in recent months that plans are afoot to allow Geodis to make a transformative acquisition, closely followed by a partial sale that would reduce SNCF’s shareholding in the company to 30-40%.

“There is no reason for SNCF to retain a majority stake (in Geodis); there are no synergies with the group’s other activities,” a source familiar with the matter told Les Échos. The business newspaper also questioned the strategic value of SNCF maintaining a minority shareholding in Geodis and that a complete sale was a possibility.

When contacted by Lloyd’s Loading List, no one at Geodis was immediately able to comment on these assertions.

Employing more than 40,000 staff, Geodis has a direct presence in 67 countries while its network connects more than 120 countries. The company posted an annual turnover of €8.2 billion in 2018.

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