The VTG Group and its business model

Version: 20 April 2010

VTG Aktiengesellschaft is a leading global wagon hire and rail logistics company.. With its headquarters in Hamburg, the group owns the largest private fleet of rail freight cars in Europe and possesses some 50,000 wagons worldwide. In additional to the hire services, VTG organizes rail freight transports as well as global transports of liquids in tank containers, which can be forwarded by rail, road or ship.

With the synergies of the three divisions of wagon hire, rail logistics and tank container logistics, VTG provides a highly efficient platform for domestic and international transport of goods. Its customer base consists of about 1,000 companies from almost every industry, for example from the chemical, petrochemical, automotive and paper industries. VTG provides an unmatched unmatched, flexible wagon infrastructure to transport products required by industrial enterprises to secure their production processes. Its customer relationships are founded on longer term contracts, with some long-standing partnerships going back decades. This delivers stable, foreseeable growth in the company’s operations.

In the largest division, wagon hire, VTG offers a rail freight car hire service in Europe and North America. Beyond this, the company also operates and manages external wagon fleets. The worldwide fleet of some 50,000 wagons comprises more than 1,000 different wagon types. These include chemical, petroleum, compressed gas tank wagons and modern high-capacity, flat and sliding wall wagons. The wagon fleet is constantly being expanded and diversified to open up new market segments. Finally, the division has its own wagon repair workshops and wagon construction plant, offering a platform for VTG to develop and implement innovative technical concepts.

In the second division, rail logistics, VTG organizes Europe-wide transports of goods by rail. In particular, the company forwards petroleum and chemical products, liquid gases and other bulk and piece goods such as steel and automotive parts as well as other components for mechanical engineering and construction. To achieve this, VTG makes use of its wide network of domestic and international haulage partners as well as the wagon fleet from the wagon hire division. The core competencies of the specialist in the transport of hazardous goods is the right selection and combination of various carriers as well as providing customized quality, emergency and safety management. The largest company in this division of VTG is Transpetrol GmbH.

The third division, tank container logistics, covers global transport and logistics services with tank containers. The company employs a fleet of some 8,000 containers for this. Since these transports are independent of the mode of transport, they are especially suited to door-to-door transports, i.e. the transport of goods from the place of production directly to the recipient. Tank containers are used primarily for transporting liquid and temperature-controlled products from the chemical, petroleum and compressed gas industries. This type of transport incurs fewer costs since it is not the goods themselves but the tank container as a whole unit that is handled and loaded. At the same time, goods can be transported in this way without endangering the environment, since the risks when reloading are minimized. The largest company in this division of VTG is VOTG Tanktainer GmbH. 

Market environment and opportunities for growth for VTG

In all three divisions, VTG is one of the market leaders and is aiming to expand its market position continually. The company is benefiting from the rising volume of freight due to economic globalization. The volume in the European rail freight transport sector will grow by 3.6 percent annually by 2019 (source: SCI Verkehr, 2008).  According to an estimate by SCI Verkehr GmbH, the volume of rail freight traffic in Europe alone should rise between 2006 and 2015 by 28 percent. The strengths of the railway lie primarily in the cross-border transport of large quantities over long distances.

This competitive advantage is further strengthened by the increasing demand for transport solutions that are much more energy efficient due to greater environmental awareness and – on the long term – rising energy costs. Compared with other modes of transport, the railway has a clear advantage in this respect: with rail transports, CO2 emissions are just a fifth of those for road transports, and also just a fifth for energy consumption per tonne kilometer (source: German Pro-Rail Alliance, Allianz pro Schiene).

VTG is also benefiting from the increasing liberalization of the European railway network and the accompanying simplification of cross-border traffic. Rail transports can be performed more rapidly, cost-effectively and flexibly than ever before. The step by step elimination of technical barriers between countries is boosting demand for cross-border transports.

With its close-knit European network of sales and service points, the company provides a uniform international platform for hire and transport services. Whereas VTG mainly strengthens its leading role in Europe through organic growth, it wants to expand centrally in North America, Asia and – starting in Russia - the Commonwealth of Independent States (CIS). The CIS has the second largest rail network in the world. The emphasis on raw materials in the region and the long transport routes in particular offer excellent conditions for profitably entering the market.

North America has the longest rail network in the world. Rail freight traffic on this continent accounts for over 40% of the total freight traffic in North America. Since entering this market at the end of 2007, VTG has been continually expanding its fleet here. In Asia, the company is stepping up its operations, particularly in tank container logistics. The company, through its subsidiary, VOTG Tanktainer, has been active in China for about ten years now and entered into a joint venture in June 2008 with Cosco Logistics, which operates under the name Shanghai Cosco VOTG Tanktainer Limited. Additionally, VTG entered the CIS market early 2009 by opening an office in Moscow. The CIS has the world‘s second-largest rail network after North America. Starting with Russia, VTG will build up a presence here in selected countries over the years to come. In particular, the richness of the region in raw materials and its long transportation routes represent good conditions for profitable entry to the market.

The stable VTG business model, with its three interconnected divisions, the market conditions favoring the railway and the group’s growth strategy  focusing on security and reliability are also reflected in its financial performance. Thus in the financial year 2009 VTG achieved sales of Euro 581.3 million and operating profit (EBITDA) of Euro 149.4 million. Thus in the financial year 2008 VTG achieved sales of Euro 608.7 million and operating profit (EBITDA) of Euro 156.4 million. This equals an increase in sales of 12.4 percent and an increase in operating profit of 14.2 percent on the previous year.  Therefore, despite the economic crisis, the results for the Group were only moderately below those of the previous year, with revenue 4.5 percent down and EBITDA 3.8 percent. The Group thus proved its stability even in a difficult environment. The VTG AG share is listed on the official Prime Standard market of the Frankfurt Stock Exchange and is also on the SDAX.

Expertise and overall economic advantage

Not only financial success and a solid development strategy lie at the heart of VTG's operational efficiency. Founded back in 1951, VTG has many years’ experience, and broad knowledge of and expertise in all aspects of wagon hire and rail logistics, particularly in relation to liquid and sensitive goods. In this area, VTG’s credentials even extend all the way back to the 19th century. Bitten by the rail logistics bug, employees remain loyal to the sector and the company for a long time and their commitment provides for the continuous enhancement of wagons and logistics services. The company has dedicated itself to safety, quality, and reliability as a part of this, and pursues these values with commitment and fervor. Not only that, but the impact of these developments is felt far beyond the confines of the company itself. VTG promotes industry-wide developments such as high safety standards, the use of low noise braking systems and emission reduction measures. VTG also participates in committees and associations, thereby playing a decisive role in pushing ahead with and influencing the legal and technical regulations relating to rail freight traffic. Today as before, conventional educational approaches are still unable to impart the broad knowledge and expertise required for wagon hire, rail logistics and the handling of sensitive goods. For this reason, the training and professional development of talented staff plays a very important role at VTG. Four out of every 100 members of staff at VTG are apprentices. VTG also provides training outside the company, delivering seminars and workshops on the handling of sensitive goods – not only to customers, but also to staff in public bodies, the fire service and the police. Since 2001, VTG has trained some  2,500 people on handling wagons transporting sensitive goods. Nearly half of these people are employed by the fire service, the police and various public authorities.

It is also thanks to this commitment that rail transports of hazardous goods rail are 40 times safer than those by road (source: European Commission/Eurostat, Panorama of Transport 2007). The task VTG has set itself is that of integrating the safest and – compared with air and road transport – most eco-friendly mode of transport into companies’ logistics chains. The company sees it as its duty to bring the advantages of rail as a carrier to the attention of industry and the public at large.

Using this market knowledge, experience and passion, VTG supplies customers around the world today with the basic products of everyday life – with the same enthusiasm as 60 years ago, but with the technical innovation of today. VTG transports are in operation 24 hours a day, 7 days a week and 365 days a year. Furthermore, the materials in these transports accompany people in their daily lives: the paper for the daily newspaper, the oil for the heating system, even the cement on which the house stands and the gas for the camping stove have probably already been transported in VTG wagons.

History of VTG in brief

Media contact:

Monika Gabler
Head of Corporate Communications

VTG Aktiengesellschaft
Nagelsweg 34
20097 Hamburg
Germany

Telephone:      +49 40 2354-1341
Fax:     +49 40 2354-1340
Email: monika.gabler@vtg.com