Our Business

Value Creation Model

GRI G4-8, G4-12

Business model

The Group’s activity covers a wide range of services connected with rail freight transport. The Group’s revenue from rail transportation and freight forwarding services makes up 83 % of the Group’s total operating revenue. The PKP CARGO Group offers services supplementing rail transport, such as comprehensive intermodal services, freight forwarding services, transshipment services on terminals, rail siding service and rolling stock repair and maintenance services.

Business Model
Strategy

Resources

Resources

Key Suppliers

Key Suppliers

Clients

Clients

 

Values

Financial capital

Values

Financial capital

Operating capital

Values

Operating capital

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Human capital

Values

Human capital

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Intellectual capital

Values

Intellectual capital

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Environmental capital

Values

Environmental capital

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Social Capital

Values

Social Capital

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Outcome

Financial capital

Outcome

Financial capital

  • Available funding sources amount to PLN 940 mn and are in over 80% cash*
  • Capital expenditures in 2017 are PLN 562 mn
  • ROE achieved in 2017 reached the level of 2,4%
  • Debt structure: 17% short-term, 83% long-term

* Cash and cash equivalents, bank deposits over 3 months

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Production capital

Outcome

Production capital

  • Diesel locomotives - 1272
  • Electric locomotives - 1062
  • Wagons owned - 63 737
  • Wagons in operational lease or rented - 1023

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Human capital

Outcome

Human capital

  • 96% of employees contracts are employment contracts
  • Employment structure : 77% men and 23 % women
  • PKP CARGO has been awarded with many prestigious awards such as.: „ Leader in Human Resources Management” and „ Trustworthy Employer”

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Intellectual capital

Outcome

Intellectual capital

  • State-of-the art. technologies applied in production and repairs of rolling stock
  • Implementation of Quality Management Systems that commit to quality improvement of rail transportation
  • Safety Management Systems and Maintenance Management System for freight wagons
  • PKP CARGO worked out and implemented the policies in following areas: social , environment, respect for human rights and counteracting corruption and bribery

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Environmental capital

Outcome

Environmental capital

  • Expenditures on environment protection in 2017 amounted to over PLN 157 mn
  • PKP Cargo implemented process concerning environmental review
  • PKP CARGO monitors cyclically 13 environmental aspects marked as significant

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Social Capital

Outcome

Social Capital

  • PKP CARGO business activities are based on 5 values: Responsibility; Knowledge; Growth; Flexibility; Energy
  • Development of corporate social responsibility is integral element of business conduct of PKP CARGO
  • PKP CAEGO Group including PKP Cargo S.A. is one of the biggest Polish employers
  • PKP CARGO Group is member of many domestic and international organisations and associations

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Leading Logistic Operator in Central and Eastern Europe

Leader on the domestic transport market

Operational Excellence

Optimizing the execution of the freight transport process

Confirming the extent of strategy execution

Leader on the domestic transport market

The activity of the Group in the Polish rail freight market is oriented at consolidating the position of leader in servicing all cargo categories transported by railway. Forecasted and observed characteristics of the market (incl. planned numerous infrastructural investments, trends in mining, metallurgical and chemical industries) are the priority for the Group in shaping and securing the assets and appropriate offer. The expected effect of the actions is both the satisfaction of service recipients and the growth in freigth turnover and in margins obtained on services. Regardless of the actions aimed at competitiveness and high quality of services of the PKP CARGO Group in the current market environment. The Group conducts a series of actions aimed at promotion of railway transport, whose expected effect is an increased share of railway in the transport industry, thereby shaping the foundations and additional space for further development.

Significant position on the international market

Operational Excellence

Aligning the level of resources to needs

Confirming the extent of strategy execution

Significant position on the international market

The ambition of the Group is further dynamic development and building a significant position in Central and Eastern Europe. Activity in servicing international transport is based on part B safety certificates authorizing PKP CARGO S.A. to provide on its own transport on the territory of 7 EU countries. The Group’s transport activity is supported by subsidiaries specialized in international shipping. An important element of strategic development of the PKP CARGO Group in foreign markets is the servicing of transport from/to the North Sea and Adriatic Sea ports. The key and promising project dynamically developed by the Group is transport from/to China. It should be noted that the established strategic alliances with foreign partners are an asset for the Group. The Group consistently pursues the strategy of developing international transport along the main transport corridors in north-south and east-west directions. The effect of synergies with entities of the AWT Group will be used to increase the presence in servicing the markets in the so-called Three-Sea among the Baltic Sea, Adriatic Sea and the Black Sea.

Leader of the intermodal market in CEE

Operational Excellence

Modern rolling stock and IT tools

Confirming the extent of strategy execution

Leader of the intermodal market in CEE

In view of the observed dynamic development of intermodal transport and the prospect for further growth of containerization of goods transported in international traffic, the key pillar of development of the PKP CARGO Group is its activity and building a strong international position in servicing the transport of the analyzed cargo category. The Group’s development in the intermodal market is based on improving product logistics, implementing modern technologies of transport process management, shaping new service distribution channels, building competences in the operations as intermodal operator, and offering clients the place on constantly and regularly launched services. An important element in the development of intermodal products is the activity of PKP CARGO S.A. in servicing transport along the New Silk Road. The servicing of goods transported from China by railway, apart from the planned increased transshipment for Polish ports, is also the basis of growth in the Company’s transport of intermodal loads.

The development in adjacent elements of the value chain

Operational Excellence

Leveraging PKP CARGO’s resources outside Poland

Confirming the extent of strategy execution

The development in adjacent elements of the value chain

Within the pillar the Group constantly expands its offer with services complementary to railway transport, including railway shipping and road transport, and optimizes its terminal activity. Thanks to actions in this area, the offer of the PKP CARGO Group will be able to secure efficient service of complicated and demanding logistic chains. The adopted CARGO’20 strategy also envisages acquisitions, however, these will depend on market situation and attractiveness of potential acquisition targets. The activities conducted within the four pillars, along with further improvement of service quality, efficient utilization of strategic assets, modernization of the rolling stock and cooperation with other carriers will translate into further dynamic development of comprehensive services provided by the PKP CARGO Group and into the consolidation of market position in the following years. As part of the Strategy implementation, in 2018 and in the following years the PKP CARGO Group intends to:

  • gradually increase quality standards of the provided services and of flexibility in meeting clients’ needs with the full utilization of the potential of companies in the PKP CARGO Group,
  • continue to build its position in foreign markets, including its position in the region of Central and Eastern Europe and develop transport from/to China,
  • improve the efficiency of wagon and locomotive utilization by increasing their availability as a result of improved standards and maintenance and repair quality as well as optimization of the transport process,
  • continue to optimize IT activities to improve the Company operations,
  • continue to optimize transport organization,
  • adjust resources, costs and processes to actual needs,
  • optimize the operations of business units of the PKP CARGO Group.

The Group’s key customers include steel mills, coking plants, power plants, mines, steel works and shipping companies. The PKP CARGO Group collaborates with the largest Polish and global groups, including ArcelorMittal, PKN Orlen, PGNiG, Lafarge Group, Azoty Group, Jastrzębska Spółka Węglowa, Węglokoks, Enea Group, PGE Group, Tauron Group, Polska Grupa Górnicza and International Paper. The contracts with these business partners are regularly renewed, which confirms the high quality of the transportation services provided by the PKP CARGO Group.

Services provided by the Group allow for participation in the entire logistic value chain, including railway shipping, siding services, freight transport, transshipment and storage services and using the Group's terminals. The above services offer a natural competitive advantage in terms of customer acquisition and service.

The Group’s operations are also based on relations with key suppliers, in particular contracts for access to rail infrastructure, traction power supply, property leasing, diesel oil sales and rolling stock repair and modernization.

PKP CARGO Group employs competent employees with extensive experience, who ensure the highest quality of services and form the foundation of the Group's operations. As at 31 December 2017, the Group employed 23 thousand employees.

Value chain

Value chain – key activities

PKP CARGO’s key value-building processes include sales, preparation and execution of transport services. Value chain encompassing subsidiaries serving as suppliers and purchasers of PKP CARGO’s services.  

Value chain - logistic chains

The key logistics chains served by members of the Group include domestic rail transport of bulk cargo and transshipment. The Group's development is focused on international rail transport, relations between distinct types of transport, in particular intermodal and forwarding services.

Logistic chains

Description of the organization's supply chain

The PKP CARGO Group’s business activity is rooted in relations with its key suppliers, especially on contracts that secure access to rail infrastructure, supply of traction electricity and diesel fuel, on real party lease contracts and on modernization and repairs of rolling stock.

As it operates on the freight transport market, the Group is dependent on PKP PLK as the largest supplier of access services to rail infrastructure in Poland. This company is a domestic supplier that provides access to the prevalent portion of rail infrastructure in Poland in accordance with the price list approved annually by the President of the Office of Rail Transport. Such infrastructure is made available for a fee based on conditions that apply across the board to all carriers providing both freight and passenger rail transport services. The AWT Group also purchases the services provided by PKP PLK for its transport operations performed in Poland. For the AWT Group, key suppliers of rail infrastructure are local suppliers in the Czech Republic where the AWT Group renders the majority of its transport services. These local suppliers include SŽDC s.o., a state-owned company and the owner of the majority of rail lines in the Czech Republic, and ČD a.s., the leader of the Czech passenger and freight rail transport market. PKP PLK’s percentage of procurement costs in 2017 (meaning the sum of the costs of external services and of the consumption of raw materials and supplies) was 27.3% in the PKP CARGO Group.

PKP Energetyka S.A. is a monopolist in the provision of traction electricity distribution services in Poland and as such supplies electricity to the PKP CARGO Group for its transport operations carried out using electric traction. PKP PLK’s contact system is supplied with electricity from substations operated by PKP Energetyka S.A. In addition to the business of electricity sales and distribution, PKP Energetyka S.A. is also the operator of fuel stations for rail carriers and a supplier of traction fuel to PKP CARGO Group companies, except for the AWT Group which purchases the fuel and traction electricity it needs from domestic suppliers in the Czech Republic. PKP Energetyka S.A.’s total share in procurement costs in 2017 (meaning the sum of the costs of external services and of the consumption of raw materials and supplies) was 17.9% in the PKP CARGO Group.

Procurement in the other key categories, such as traction fuel and rolling stock upgrade and repair services, is performed pursuant to Procurement Bylaws and the Procurement Instructions in place both at PKP CARGO S.A. and in most subsidiaries. The Bylaws, published on the so-called procurement platform of each such company’s website, lay down the general rules of procurement and serve as a set of guidelines for both the purchaser and the contractor. The Procurement Instructions are intended for the exclusive use by the purchaser and as such describe in detail all phases of the procurement process from planning and needs analysis to market intelligence, preparation and execution of the purchase procedure, selection of the contractor, signing of the contract and evaluation of the contractor. Procurement procedures executed within the PKP CARGO Group are conducted on an as-needed basis separately by each company or by what is called the Procurement Group as a whole. In certain procurement categories, such procedures are executed by the Procurement Group led by PKP S.A. as PKP CARGO S.A.’s parent company. In 2017, the following companies were key suppliers of traction fuel to the PKP CARGO Group: Lotos Paliwa, Petrodom Venna, PKN Orlen, Petrojet, PKP Energetyka S.A., DRACAR CZ a.s., BAMONAFT a.s., PREOL a.s., Jitka Huňková s.r.o.

In 2017, a total of over 5,000 procurement procedures were completed by the PKP CARGO Group. The main procurement categories were rolling stock, fuel, IT and transport. PKP CARGO S.A. cooperates with approx. 760 suppliers, of which 94% are local suppliers, construed as domestic companies. In 2017, the PKP CARGO Group as a whole was served by several thousand suppliers.