Die Alpinisten.

Geschäftsbericht 2011

Brief Profile

BLS Cargo is a leading rail freight transport under-taking operating on transalpine routes through Switzerland. Its activity is concentrated on the movement of trainload traffics and the company provides services for unaccompanied intermodal traffic, conventional wagonload traffic as well as the Rolling Highway. Transit services are operated in conjunction with its partner, DB Schenker Rail, and other European railway partners. An addi-tional source of income is the domestic trainload business within Switzerland as well as Swiss import / export traffics.

Since 2003, BLS Cargo has been focussing on crossborder production systems and uses both locomotives and drivers on crossborder services. Through its subsidiaries, BLS Cargo Deutschland GmbH and BLS Cargo Italia S.r.l. plus its service centre in Chiasso, BLS Cargo maintains a pres-ence at key border points, enabling it to have a direct influence on the services provided for its trains which, in turn, improves the quality of its transportation services.

BLS Cargo’s market share of Swiss transit rail traf-fic is 43%. This makes BLS Cargo a key player on the Swiss rail transport scene, where it makes

We’re masters at providing professional, flexible transalpine transport

services through Switzerland. As alpinists and experts at moving freight

by rail, we understand what our customers want and achieve this

through lasting partnerships. This is why BLS Cargo is the choice

for transport efficiency on the north – south corridor as well as within

Switzerland.

BLS Cargo. The alpinists

a major contribution towards helping achieve the roadtorail freight transfer objectives of the federal government.

BLS Cargo was established in 2001. Apart from BLS AG which enjoys a 52 % shareholding, DB Schenker Rail Deutschland AG with 45 % and IMT AG (Italian Ambrogio Group) with 3 % also hold shares in BLS Cargo AG.

Rail freight hauled or jointly hauled by BLS Cargo

Key figures at a glance

In 2011 BLS Cargo increased business by 14%.

Following a statistical adjustment to train kilome-

tres (from standard to real values), this corre-

sponds to a real increase of 4% over the previous

year.

0

500

1000

1500

2000

2500

3000

3500

4000

+32%

2823

32553368

3699

2981

3362

+15%+3% +13%

–19%

+10%+14%

3826

2005 2006 2007 2008 2009 2010 2011

Key figures at a glance

The above-average growth on the Lötschberg-

Simplon route is partly due to restoration of traffic,

which was temporarily switched to the Gotthard

route in 2010. This also explains the downturn in

intermodal traffic on the Gotthard route.

Transport performance (in million ntkm)

Growth (in million ntkm)

Transport services rendered

in million ntkm

Jan. – Dec.

2010

Jan. – Dec.

2011

Change

Lötschberg / Simplon Transit 1633.7 2142.3 31 %

UCT Transit Lötschberg 546.9 898.2 64 %

WLT Transit Lötschberg 377.9 488.7 29 %

Rolling highway 709.0 755.5 7 %

Gotthard Transit 1589.6 1602.1 1 %

UCT Gotthard 1144.6 1060.5 – 7 %

WLT Gotthard 445.0 541.5 22 %

Switzerland 138.9 81.7 – 41 %

Block trains, remaining Switzerland 138.9 81.7 – 41%

Sum 3362.3 3826.1 14%

2005 2006 2007 2008 2009 2010 20110

100

200

300

400

500

600

Development of Wagonload traffic (in million ntkm)

2011 key figures

Turnover: 37.41 Mio. CHF

Transport performance (in Mill. Ntkm):

Lötschberg-Simplon: 488.7 (+ 29.3 %)

Gotthard: 541.5 (+21.7 %)

Domestic, import / export: 73.9 (– 42.9 %)

Number of trains: 7 794 (0%)

WLT Lötschberg / Simplon

WLT Gotthard

WLT domestic, import / export

BLS Cargo was able to maintain its 43% market share of traffic in transit through Switzerland.

Lötschberg-Simplon

Gotthard

Transalpine transport totally

Number of employees

2010 2011 Change

Total no. of employees 127 126 – 0.8 %

BLS Cargo AG, Bern 79 81 2.5%

BLS Cargo Italia 19 18 – 5.3%

BLS Cargo Deutschland 8 8 0%

Service centres (Chiasso, Bern) 19 18 – 5.3%

Indirectly employed by BLS* 270 270 0%

* Locomotive drivers, employees at the Spiez workshops

BLS Cargo relies on a lean organisation and close

cooperation with BLS AG to buy in services such

as drivers and workshop facilities.

2007 2008 20090

20

40

60

80

2010 2011

43%

28%

66%67%

22%

39%

58%

28%

41%

60%

31%

43%

59%

29%

43%

2011 key figures

Turnover: 115.82 Mio. CHF

Transport performance (in Mill. Ntkm):

Lötschberg-Simplon: 898.2 (+64.2 %)

Rolling Highway: 755.5 (+ 6.6 %)

Gotthard: 1 060.5 (– 7.3 %)

Domestic, import / export: 7.9 (– 16.4 %)

Number of trains: 15 299 (+ 6.1%)

UCT Lötschberg / Simplon

UCT Gotthard

Rolling Highway Lötschberg / Simplon

Development of intermodal traffic (in million ntkm)

2005 2006 2007 2008 20090

200

400

600

800

1000

1200

1400

2010 2011

Market share in transalpine transport (percentages, based on gross tonnes)

Contents

Contents

Foreword 2 – 3

Our services 6 – 7

Product Management / Sales 8 – 11

«Benvenuti in Italia» 14 – 15

Transport policy 18– 19

Lean organisation 22

Shareholdings 23

Finance 26 – 27

4

Foreword

BLS Cargo can look back on an eventful and chal-lenging 2011. The debt crisis and turbulent situa-tion surrounding the euro defined the financial and transport markets and also affected BLS Cargo. In the wake of the economic crisis in 2008 / 2009, we once again had to prove our competitiveness despite difficult conditions.

Cross-border production systems were particu-larly effective, allowing us to increase the produc-tivity and quality of our services by deploying our resources on an international basis. We have been investing in multi-system locomotives since 2003, capable of operating on foreign rail networks. Last year we achieved a further milestone in cross-border production methods: since the timetable changeover in December 2011, BLS Cargo drivers have been working through to Italy in close coop-eration with our Italian partner, Nordcargo.

Transport performance on track

In 2011 we boosted performance to 3’826.1 net tonne kilometres1, thanks in particular to strong growth in the first half of 2011. In addition, we were able to secure the Rolling Highway business for a further six years. The losses incurred as a result of the economic crisis were largely compensated in 2011 and we were able to maintain our 43 % mar-ket share of rail transit traffic through Switzerland. This is a notable achievement, given the fact that in the past two years, engineering works have meant that the two main routes through Switzerland were practically never entirely free of restrictions. There

were times when tracks were closed completely, making it necessary to switch traffic from one route to another, and this involved considerable extra planning.

In June, a BLS Cargo train caught fire in the Sim-plon tunnel. The cause of the incident is not clear and is still being investigated, but we were pleased that there were no human casualties. Damage to the tunnel was extensive and the clear-up opera-tion was extremely complex. The days immediate-ly following the incident and the subsequent repair work placed great strain on BLS Cargo personnel. We were deeply impressed by their efforts and would like to express our special thanks to them. In retrospect, we can say that we reacted profes-sionally to the incident and were able to call upon a reliable, robust crisis management team.

Weak euro affects results

As a result of very favourable growth in both traf-fic and volumes in the first 6 months of 2011, we achieved a positive operating result (EBIT) of 4.2 Mill. CHF (previous year 2.4 Mill. CHF). The profit and loss statement as per 31st December 2011 shows a loss of -0.5 Mill. CHF (last year -2.6 Mill. CHF). The principal reason for the negative result was the weak euro, resulting in heavy currency losses. Despite intensive efforts to improve pro-ductivity and increase efficiency, we were not able to compensate the negative currency effect. In the short term, we can only re-establish our financial position by increasing our rates to the market. This

High traffic volumes and successful cross-border production

systems contrast with the effects of the euro’s weakness

Staying alert in an unstable

environment

1 This equates to a nominal 14 % increase compared to the previous year. Following a statistical adjustment to train kilometres (from standard to real values), this corresponds to a real increase of 4 % over the previous year.

5

Dr. Dirk Stahl, CEO; Bernard Guillelmon, President of the Board

is putting a heavy strain on our relationship with customers and we appear to have reached the lim-its of what can be borne by the market.

In order to cushion the effect of the strong Swiss franc in 2011, the Federal Office of Transport (FOT) made 21 Mill. CHF available to support transalpine intermodal traffic and the companies’ active in this sector. BLS Cargo also benefited from the sub-sidy, enabling us to keep our negative result under control.

Sticking to the modal switch

We believe in the success of the Swiss modal switch policy and support continued use of exist-ing instruments (including subsidies for intermodal traffic and the heavy vehicle fee) and adherence to the modal switch policy. At the same time, a limit must be set for the financial burden being placed on freight traffic as a result of the new train path pricing system in 2013. This is the only way to ensure that rail’s competitiveness vis-à-vis road transport is maintained. European transport policy also wants rail freight to be competitive. Corridor A Rotterdam-Genua, which is important for BLS Cargo, is a central element of this. In December, together with the CEOs of Europe’s leading rail freight operators, we presented our demands for an attractive, competitive corridor to the media.

Keeping a watchful eye on the future

We need to adjust to the fact that the markets and events on the currency front will continue to be

volatile and that we will have to expect a greater degree of uncertainty in our planning. This means we must monitor the market closely, improve the efficiency of our resources and, together with our partners in neighbouring countries, optimize cross-border production processes.

2011 also saw personnel changes in BLS Car-go’s management team, with the resignation of Joachim Schöpfer, Head of Production and Ray-mond Baraké, Head of Finance. We extend our thanks to them for their many years of dedicated commitment to BLS Cargo. Both positions as well as that of Head of Product Management / Sales were filled during 2011 and in January 2012 and we look forward to working with the new team. This year’s Annual Report focuses on the new members of the Management team and in the in-terviews on the following pages, they talk about the past year and their outlook for 2012.

Bernard Guillelmon Dr. Dirk StahlChairman of the Board of Directors CEO

You may call it top performance.

We call it standard.

7

Our Services

8

Our Services

All your needs

from one supplier

BLS Cargo AG has acquired an excellent reputation for itself as a

provider of transit as well as domestic and import / export services.

It operates over the entire Swiss standard-gauge network and

offers access to the whole of Europe via its cooperation partners.

Ever since the establishment of BLS Cargo, we have concentrated exclusively on block trains as well as on customized solutions in Switzerland and in transit services through Switzerland. We pro-vide services beyond the Swiss border and take charge on behalf of our customers of the entire transport, acting as a one-stop shop for the cus-tomer, who is kept up to date with the progress of his train so that he can organise connecting logistic operations. Where we cannot operate ourselves, we work in partnership with other railways, with which we have agreed quality standards. This ena-bles us to offer high-quality services and through resolute incident management, to respond imme-diately and competently to unforeseen problems.

Customer partnerships

The customer base of BLS Cargo AG has devel-oped as diversely as the company itself. Over the years a close partnership has developed with our customers, who particularly appreciate BLS Car-go’s ability to tailor offers to their needs. Our long-standing, respected, key direct customers include shippers such as Awilog and Esso, as well as freight forwarders and intermodal operators such as Ambrogio, Hangartner and RAlpin. In addition, partner railways buying transit services through Switzerland from BLS Cargo also form part of our customer portfolio.

Competent customer care

BLS Cargo has a lean sales organisation which is focused on customer needs. All customers have a designated account manager who serves them as a single point of contact. Our employees have many years of railway experience behind them, are multilingual and regard it as their duty to un-derstand customer needs and to meet these in the most expedient manner possible. Short decision-making processes plus the organisational proxim-ity of sales and production allow us to provide fast and flexible solutions, whether it be for regular scheduled services or extra services provided at short notice. A special feature of our service is that, linguistically and culturally, we unite our cus-tomers and partners north and south of the Alps with one another – we build bridges.

A local presence

We operate over the entire Swiss standard-gauge network and provide traction services throughout Europe. Our planning is increasingly of a cross-border nature when it comes to deployment of locomotives and drivers. We operate the key Swiss border crossing points without external as-sistance. Our own personnel, which handles BLS Cargo’s freight services reliably and promptly, is stationed in Domodossola and Chiasso as well as in Weil am Rhein. By maintaining a local presence we are able to respond quickly to the special re-quirements of our customers and ensure a con-sistently high standard of service.

Geschäftsbericht 2011

9

10

Product Management / Sales

What sort of year was 2011 for BLS Cargo?

2011 was a year of ups and downs for Product Management and Sales. There were highlights, particularly in the first half of 2011, when we were able to detect a strong demand for services, con-tinuing the positive trend of the previous year. The speedy economic recovery led to record levels of traffic in the first six months. At the Transport Fair in Munich, we were able to detect an on-going optimism, almost bordering on the euphoric, among visitors and exhibitors. The only concern was the already noticeable shortage of resources: where were we going to find enough locomotives, drivers and train paths? BLS Cargo also had a cor-respondingly optimistic view of the way traffic would evolve during the following months.

And then came the second half of the year…

In the following six months the euro crisis came to a head as did the USA’s debt crisis, causing a nervous reaction in the financial markets. The euro seemed to go into free fall and this, of course, had a profound effect on our business, since we sell most of our services to customers in euro-based countries. The euro crisis affected the mood of the market. On top of this, engineering works on the Simplon route caused a number of restrictions and, as result of all this, volumes in the second half of the year were slightly down compared to the first half of 2011.

The euro crisis and unstable market influenced the way customers

reacted in 2011. Dr. Dirk Pfister, Head of Product Management / Sales,

reveals how this affected business and the benefits of long-term

partnerships

Active engagement with the market

How have customers reacted?

When speaking to customers, we notice much uncertainty about how the situation should be as-sessed. Basically, people are not so much pessi-mistic as playing a waiting game. Customers don’t appear to be thinking of withdrawing services or backtracking. What we do notice, however, is that the number of cancellations is on the increase, customers are postponing plans to expand exist-ing services or to introduce new ones. The eupho-ria in the first half of the year is no longer there.

How is Product Management adapting to the

changed situation?

Strong demand in the first half of the year forced us to prioritise our resources. As a result, follow-ing a reappraisal of our portfolio, we focused our attention primarily on our main traffic flows and on those customers with whom we have maintained a close partnership over the years. In addition, we were obliged to negotiate price increases with customers, in order to compensate loss of earn-ings due to currency problems.

Are customers sympathetic towards your

request for price increases?

The euro’s weakness puts us in a very difficult position vis-à-vis our customers when negotiat-ing prices. The exchange rate effect alone means we need to increase our prices to a level that can-not be absorbed by the market in the short term. In most cases, however, we were able to have a constructive dialogue with customers and come up with amicable solutions.

11

How is the euro crisis affecting BLS Cargo’s

market strategy?

The caution displayed in the second half of the year in particular has shown that we have to be actively present in the marketplace and that we cannot afford to sit back and wait for the customer to come to us. Our Product Managers are out and about in the marketplace, speaking to many exist-ing and potential customers.

Which customers is BLS Cargo particularly

speaking to?

These are mainly customers requiring block train services with a Swiss connection. We are suited to customers, who are looking for reliability, qual-ity and a business partner who is accessible and where the customer’s needs are not overlooked within a complex organisation. We claim to of-fer our customers all-in solutions and to organise these with our railway partners to produce a good overall service quality. In this context it is sec-ondary whether we provide the service outside Switzerland ourselves or whether we subcontract it to a railway partner. The main point is for the customer to have one contact partner for his in-ternational transport requirements.

How do customers, who have been using

BLS Cargo for many years, profit?

Our main focus of attention is on meeting the needs of our long-term customers. For example, we allocate our key resources such as cross-bor-der locomotives to traffics where we can achieve optimal production schemes for these customers. The aim is to optimise transport operations for our customers. By responding to his needs, we reas-sure the customer that he benefits from entrust-ing his business to BLS Cargo. We are aware that customers are faced with much uncertainty in the market. What we can offer is flexibility in the plan-ning and production of services as well as reliable, long-term partnerships.

What is your outlook for 2012?

The current uncertainty in the market is not yet over und will be with us for a while. On the other hand, I remain optimistic and think that the more people talk about the crisis, the more unlikely it is to happen. In 2008 / 2009, there was a bang and the economic crisis had arrived. Today we have the situation that, whilst the market environment is indeed very volatile and uncertain, we cannot say that the economy is in a deep recession. We are keeping a close eye on developments in order to be ready, but we are not in a position to directly affect matters.

After completing a physics course and gain-ing his doctorate in economics, Dirk Pfister (42) started with McKinsey, where he was a consultant and project leader for six years. In 2003 he joined SBB Cargo, working in vari-ous different departments and finally taking charge of business development in the inter-national sector, where he acquired a high de-gree of expertise and experience in the field of international rail freight transport. Dirk Pfister took up the post of Head of Product Management / Sales with BLS Cargo on 1st May 2011.

Intermodal traffic

In terms of transport performance, unaccompa-nied intermodal traffic plus the Rolling Highway are BLS Cargo’s largest business segments. In partnership with other European railway under-takings, we are able to offer customers with inter-modal traffics a service for the entire international transport movement on our own. We also provide high-quality services for traffic in transit through Switzerland on behalf of various partner rail-ways. Thanks to modern traction equipment and our specialised know-how on Swiss transalpine routes, we implement imaginative new produc-tion methods in partnership with our customers. For example, in intermodal transport, we are able to run trains of up to 700 metres in length with a trailing load of more than 1,600 gross tonnes over the Lötschberg-Simplon route.

2011 results

In unaccompanied intermodal traffic, performance in terms of net tonne kilometres rose by 15.7 % in 2011, the number of trains operated by 7.4 %. Unaccompanied intermodal traffic on the Lötsch-berg-Simplon route reached an all-time high, de-spite major line restrictions. This strong growth was due to the positive economic climate in the first half of the year as well as extension of exist-ing customer relationships.

As a result of increasing the number of daily ser-vices to 11 trains in each direction, Rolling High-way performance in 2011 increased by 6.6 %. Last

year, an agreement was signed between RAlpin, which operates the Rolling Highway, and BLS Cargo for provision of services 2012-2018. This not only ensures that BLS Cargo retains a major flow of traffic for the next six years, but also that we continue in future to play a significant part in transferring traffic from road to rail.

Contact Intermodal traffic

Headed by: Christian Stäubli Silvan MunzTel: +41 58 327 28 73 Tel. +41 58 327 32 20Mobile +41 79 689 49 18 Mobile +41 79 248 25 51christian.staeubli@bls.ch silvan.munz@bls.ch

Annette KöberleinTel. +41 58 327 30 46Mobile: +41 79 949 12 32annette.koeberlein@bls.ch

Product Management / Sales

13

Contact Wagonload traffic

Headed by: Daniel Bertschi Angelika ZurbrüggTel: +41 58 327 28 57 Tel: +41 58 327 31 61Mobile: +41 79 308 80 49 Mobile: +41 79 739 07 39daniel.bertschi@bls.ch angelika.zurbruegg@bls.ch Building materials, timber / paper, special cargoes, waste removal, automotive

Wagonload traffic

Conventional traffic has formed an important part of BLS Cargo’s business for many years. For sev-eral years, BLS Cargo has been operating block trains carrying cars, building materials, fertilizers, steel, timber and paper across transit routes. The company also works closely with DB Schenker to haul large numbers of «mixed» trains (for various customers) between Germany and Italy. Our busi-ness model is based on close partnerships with co-operation partners in the north and south. On their behalf we organise reliable services across the Alps based on a professional traction service through Switzerland.

Our customers for domestic and import / export traffics come mainly from the waste disposal, construction, petroleum and timber industries. We work directly with customers to organise their in-house logistics chain and take charge of rail transport from the departure point through to the destination. When it comes to haulage within Switzerland, we are your sole and direct contact. With network access authorisation for all routes on the Swiss standard-gauge network, we can of-fer our services in Switzerland without restriction or limitation.

2011 results

Conventional wagonload traffic boosted its perfor-mance by 25 %, spread over both transit routes through Switzerland. The increase on the Gotthard route was 22 % and on the Lötschberg-Simplon route 29 %. Domestic and import / export traffic

decreased by 41 %, largely due to the loss of a significant traffic flow to one of our competitors. Shortly before the end of the year we succeeded in acquiring business from a major new Swiss cus-tomer, which fits well into our portfolio of products and is due to commence in February 2012.

Lutz Richter Armin G. LeibundgutTel: +41 58 327 31 64 Tel: +41 58 327 28 87Mobile: +41 79 361 15 95 Mobile: +41 79 432 53 52lutz.richter@bls.ch armin.leibundgut@bls.chCoal and steel, agriculture, Petroleum, chemicalscommercial goods

Flexibility: important in the Alps,

vital in business.

Geschäftsbericht 2011

15

Production

16

Production

What were the defining moments for

you in 2011?

The strong increase in volumes during the first half of the year presented a positive challenge for our production department. Our resources were al-ready well utilised early on in the year and, in order to carry all the traffic acquired by our sales dept. we needed to analyse and above all optimise our methods of working outside Switzerland, together with our partner railways. Thus, during the course of the year, we were able, for example, to reduce the time our locomotives stood idle through im-proved planning and processes.

Were there any changes in the way

cross-border operations were organi-

sed?

Yes, some very fundamental ones. Since the start of the new timetable, we have begun to operate through into Italy on the Gotthard route using BLS drivers. Their turn of duty begins in Bellinzona and ends in Novara or Gallarate. Through-working of our drivers in conjunction with our Italian partner NordCargo has enabled us to improve production quality and meant one less break in the overall pro-duction scheme. In addition, drivers’ rosters have become more efficient, which also positively af-fects productivity.

On the Lötschberg route, we strengthened our working relationship with SERFER 1 during 2011, as a result of which part of our fleet of Re 486 multi-current locomotives now operates on cross-border services into Italy.

The goal is to operate BLS Cargo locomotives and drivers efficiently

across the border. Markus Zgraggen explains how this was achieved

in 2011

«Benvenuti in Italia»

And in the north?

Cross-border co-operation with DB Schenker into Germany has re-established itself in the past year. Through-running of Re 485 locomotives on Roll-ing Highway services has proved most successful. We are heavily involved in DB’s production net-work and projects, the objective being to integrate international production systems and processes more closely.

Were there bottlenecks on the rail net-

work during 2011?

Unfortunately there were. For the first time, we were involved in a bidding process with a com-petitor for train paths in 2011 on the Lötschberg-Simplon route. Particularly with regard to so-called SIM paths 2, demand exceeds supply. Despite in-tensive discussions we were not able to resolve all train path conflicts completely and so it came to the bidding process, which in my opinion is an unsatisfactory solution for all concerned.

For what reason?

The winner pays a supplement for his right to the SIM path, which he is not in a position to recover entirely from the customer. The loser on the other hand cannot offer his customer the service he requires and has to look for alternative solutions. We expect that there will be a bidding process for SIM paths in the future, which is why we are now working closely together with the Federal Of-fice of Transport and other railway operators to improve the process.

1 SERFER Servizi Ferroviari s.r.l is a subsidiary of Trenitalia Spa.

2 SIM stands for Simplon-Inter-Modal and refers to the train paths on the Lötschberg-Simplon route, which can accommodate high-capacity intermodal units and semi-trailers.

17

Does this problem only occur on the

Lötschberg-Simplon route?

Yes; this is the only transit route through Switzer-land on which high-capacity units are permitted. For this reason, we are pressing for an expansion of the Lötschberg corridor (Bern-Thun, completion of the Lötschberg base tunnel) as well as for the Gotthard route to be built as a 4m corridor. The latter would provide an alternative if there were a shortage of SIM paths on the Lötschberg-Simplon route, as was the case last year.

I also recall the BLS Cargo train which caught fire in the Simplon Tunnel. Use of the tunnel was re-stricted for half a year whilst the clean-up opera-tion and repairs were taking place.

How was BLS Cargo affected by the

incident?

The incident resulted in a lot of extra work for our staff, especially in the planning department and traffic control centre. From June until the end of November, they were involved in the aftermath of the incident, re-scheduling services and agree-ing new timetables with customers and all other infrastructure users.

What particularly impressed you duri-

ng this time?

The enormous efforts of BLS Cargo staff. Every-one got stuck in and supported each other. Also, there was a positive approach to the problem, both by the various different rail operators and by the infrastructure operator, which resulted in an incredibly large number of trains being run despite the line restrictions.

What are your expectations for 2012?

We have to react more flexibly and swiftly to cus-tomer demands and to better anticipate market developments. For this, you need a modern or-ganisation, which is process-oriented. My aim is to continue to develop our production department in this way in 2012. At the same time, we will

continue to work on the existing cross-border pro-duction models and our co-operation with partner railways outside Switzerland. As a result of refur-bishment of the Simplon tunnel, SIM paths will again be in short supply and we fear will mean an-other bidding process. In addition, we are already looking ahead to the opening of the Gotthard Base Tunnel and beginning to draw up initial production concepts.

2011 results

BLS Cargo’s production team was responsible for running 23’000 trains in 2011. Some 180 BLS drivers as well as 90 locomotives were deployed. Whilst use of resources was almost strained to the limit in the first half of the year, the situation eased in the second half due to the decline in demand from the market.

BLS Cargo is involved in exchanging services with its parent company, BLS, and operates a common pool of locomotives and drivers. Services are planned jointly and contracted for through service level agreements.

Following completion of a biology course, Markus Zgraggen (44) trained as a locomo-tive driver with SBB Cargo. After some years in the cab, he moved on to the production department of SBB Cargo, where he held various posts, becoming area leader for wagonload traffic in Switzerland and project leader for wagonload traffic strategy. With this comprehensive expertise in the field of rail freight transport, he switched to BLS Cargo in 2011 and has been Head of Produc-tion since 1st January 2012.

For real mountaineers there’s more

than one route to the summit.

Geschäftsbericht 2011

19

Transport policy

20

Transport policy

With a 43 % rail freight market share, BLS Cargo is an important and strong supporter in helping to implement Swiss modal shift policy. Along with SBB Cargo and other railway companies, BLS Cargo campaigns for a continuation of the political instruments, which have so far proved success-ful and have enabled around 600’000 annual lorry journeys across the Alps to be avoided. Together with SBB Cargo and the Public Transport Association, we have produced a joint paper set-ting out our position on freight transport across the Alps. In it, we request that sufficient trans-port capacity be reserved for freight traffic to meet market demands for quality services, a sensible strategy for freight terminals, support for national intermodal traffic and the same basic conditions for both rail and road. Since their introduction, cur-rent instruments such as the heavy vehicle fee (LSVA) have had a beneficial effect on rail freight transport and in BLS Cargo’s opinion, it is essential to refine and maximize the use of these instru-ments and to push forward with implementation of the Alpine Crossing Exchange.

Pricing system for train paths will

make transport dearer

We are concerned about the reform of train path pricing, which is due to come into effect in 2013. The background to this is the increased need for infrastructure maintenance by the infrastructure operator. These costs will be shared by infrastruc-ture users through the new path pricing system. From 2013, rail freight will have to support an ad-ditional 20 Mill. CHF despite train path prices hav-ing risen several times between 2008 and 2011. The additional cost cannot be absorbed through improvements in efficiency by the railways alone.

Transport policy on the

move

Important transport policy decisions were reached in 2011. For the first

time, Europe has defined mandatory objectives for switching traffic from

road to rail and in Switzerland pricing of train paths is being reformed.

Against the background of a strong Swiss franc and the resultant increase in prices to customers, the cost cannot be passed on in its entirety to the customer. The significant rise in train path prices will decrease rail freight’s competitiveness vis-à-vis road transport and the pain threshold for freight will be reached if not exceeded. We therefore re-quest that a price limit be set for 2013 and that freight traffic is not penalised more.

EU transport policy

With its White Paper 2020 the EU followed the Swiss model in 2011 and set clear objectives for switching traffic from road to rail: 30 % of long-distance freight traffic by road over 300 kms is

2010

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2001

2000

1999

1998

1997

1995

1990

1985

1981

732

Actual situation transalpine journeysSituation without LSVA and supporting measuresModal shift objective: 650000 journeys in 2018

Heavy goods vehicle journeys across the Alps

Actual situation vs, situation without heavy goods fee (LSVA) / 40 t limit / supporting measures

Traffic growth under the old and new transport regimes.

Source: FOT December 2011 report on modal shift

21

to be transferred to rail or barge by 2030. Also on the agenda is the need to promote co-modality, to fix safety standards and to further the cause of interoperability in Europe. At the same time, a new regulation for freight traffic was adopted, the main proposal of which is to prioritise freight on the Eu-ropean rail corridors. The network is to operate in such a way that, in future, the principal European industrial centres are connected by more reliable, faster freight services, enjoying increased capac-ity. Nine international rail freight corridors are to be established by 2015. Corridor A, Rotterdam – Genua, is of particular relevance for BLS Cargo and it is important that the new infrastructure of the Betuwe line, the Lötschberg Tunnel and the Gotthard Base Tunnel are linked to create an ef-ficient end-to-end corridor.

The principal requirements for rail freight were set out in a joint paper submitted by BLS Cargo, DB Schenker Rail, TX Logistik and SBB Cargo. The central element of the paper was for infrastruc-ture bottlenecks to be eliminated, which on the Rotterdam – Genua corridor include those in the Oberhausen – Emmerich region, between Offen-burg and Basel and, of particular importance for

BLS Cargo, the sections between Basel and Olten as well as Bern and Thun. Additional capacity can only be achieved if priority is also given to freight trains and if train paths are adapted to customer and market needs. Harmonized operational pro-cesses also help to make the route attractive. The railway companies call for new infrastructures to be constructed so that they can accommodate 750 metre-long trains (later up to 1500 metres).Implementation of the EU regulation and the rail companies’ strategy paper will be discussed more thoroughly with the infrastructure managers and transport ministries concerned in the coming months.

Customs

The EU Customs commission (DG TAXUD) is plan-ning to introduce a new Customs code, which among other things will standardise all existing Customs procedures. Goods transiting Switzer-land by rail are currently subject to two Customs procedures: » the simplified community transit system » T2 transit procedure, which involves consi-derably less administration for railway compa-nies.

The two Swiss Customs procedures would disap-pear under the new arrangements. The new Cus-toms code will cause additional costs involving a regularly-recurring sum going into tens of millions. We have spoken up strongly in favour of retaining the T2 system. Negotiations between Customs and railway representatives from Italy, Germany and Switzerland and members of DG TAXUD are due to continue in 2012.

Zeebrugge

Gent

Mechelen

VorkBarendrecht

Rotterdam

Antwerpen

Kijfhoek

Zevenaar

Emmerich

Oberhausen

Duisburg

Cologne

Wiesbaden

Mannheim

AachenMontzenB

L

D

F

CH

I

Karlsruhe

Offenburg

Freiburg

Brugg

Gotthard

Luino

Chiasso

MilanNovara

Domodossola

Lötschberg

Bern

Olten

Basel

NL

A

Source: DB

With so many unknowns, a partner

you can count on is a big help.

23

Together to success

Lean organisation

24

Management

Dr. Dirk Stahl

CEO Member of Management BLS AG

Markus Zgraggen

Head of Production / Procurement

Dr. Dirk Pfister

Head of Product Management / Sales

Marco Guntern

Head of Finance

Stefanie Burri

Head of Management Section / Communication

Board of Directors (as of 01.01.12)

» Bernard Guillelmon (CH, F), President

CEO BLS AG » Hans Flury (CH), Vice President

Senior Consultant BLS AG » Josef Küttel (CH),

CEO ERMEWA SA Group » Livio Ambrogio (I)

CEO Ambrogio Trasporti Spa » Otto G. Niederhofer (D)

Board Member DB Schenker Rail Deutschland AG

» Dr. Markus Hunkel (D)

CEO DB Schenker Rail GmbH

Lean organisation

Shareholders

BLS AG 52 %DB Schweiz Holding AG 45 %IMT AG (Ambrogio-Gruppe) 3 %

Shareholdings

BLS Cargo Italia S.r.l 100 %BLS Cargo Deutschland GmbH 100 %

as of 1. 1. 2012

Product management /

Sales

Production /

ProcurementFinance

Management /

Communications

BD

CEO

25

Having its own subsidiaries gives BLS Cargo direct access to

the key processes in international rail freight services at national

borders

The subsidiaries of BLS Cargo

BLS Cargo Italia S.r.l.

BLS Cargo Italia S.r.l. was founded on 6th April 2006 as a wholly-owned subsidiary of BLS Cargo AG. The company’s head office is in the Domo-dossola II freight depot in the municipality of Beu-ra-Cardezza. The object of BLS Cargo Italia S.r.l. is the provision of services for BLS Cargo freight trains at the Domodossola I + II border railway sta-tions.

Members of the Board of Directors

» Dr. Dirk Stahl, President, CEO BLS Cargo AG » Markus Zgraggen, Head of Production / Pro-curement BLS Cargo AG

» Gianfranco Albini, CEO BLS Cargo Italia S.r.l.

CEO

BLS Cargo Deutschland GmbH

On 18 July 2007, BLS Cargo Deutschland GmbH was founded as a wholly-owned subsidiary of BLS Cargo AG. The head office of the company is in Weil am Rhein. The object of BLS Cargo Deutschland GmbH is the provision of services for BLS Cargo freight trains in the Basel region.

CEO

Dott. Gianfranco Albini

Berthold Gall

Markus Böhm

Key facts and figures BLS Cargo Italia

No. of trains despatched 2011:

8 297 (2010: 10 585)EBIT 2011:

€ 81 215 (2010: € 63 160)Profit 2011:

€ 32 562 (2010: € 6 884)Number of employees (as of 31.12.11):

18

Key facts and figures

BLS Cargo Deutschland

No. of trains despatched 2011:

20 421 (2010: 18 564)EBIT 2011:

€ 8 340 (2010: € 51 153)Profit 2011:

€ 5 828 (2010: € 45 374 )Number of employees (as of 31.12.11): 8

Shareholdings

Geschäftsbericht 2011

27

Finance

28

Finance

What preoccupied you in 2011?

The weakness of the euro was clearly the ma-jor issue in 2011. Because the euro is the lead-ing currency in the European transport market, we generate our revenue in euros. However, our costs for staff, train paths and locomotives are in-curred in Swiss francs. At the start of the year, the euro-Swiss franc exchange rate was already at an unsatisfactorily low level. Since the beginning of 2010, it has fallen by 18 % and this directly affects our financial results. It reached its lowest point in August 2011, when for a brief period it almost traded at parity with the Swiss franc.

How important has intervention by the

state been?

The decisive action taken by the Swiss National Bank to peg the euro at a rate of 1.20 CHF is wel-come. But even this exchange rate is not sufficient to enable the Swiss rail freight operators to stay in-ternationally competitive in the long term. As a re-sult of the important role we play under the policy of switching traffic from road to rail, we and other rail freight operators benefited from financial aid from the state. We are pleased to have received this compensation, which enabled us to cushion significantly the effects of the strong Swiss franc in our results.

What effect did the weakness of the

euro have on BLS Cargo?

Based on our experience the previous year, we calculated with a lower rate of exchange in the 2011 budget. Despite the intervention by the Na-

The euro-Swiss franc exchange rate directly affects BLS Cargo.

What is the company doing to reduce currency losses?

Marco Guntern, Head of Finance, comments.

In the euro storm

tional Bank, we were not able to fully compensate the losses we incurred last year due to the ex-change rate. However, the support we received from the state enabled us to contain the financial consequences for BLS Cargo. We closed the year with an EBIT of 4.2 Mill. CHF and a loss of 0.5 Mill. CHF.

What are you doing to tackle the pro-

blem of the euro’s weakness?

The weakness of the euro puts costs much more under pressure than would normally be the case. We need to do all we can to remain internation-ally competitive. We can only achieve this through extreme efficiency and productivity. We are also trying to balance the ratio of euro income to euro expenditure. Our goal must remain that of keeping production in Switzerland.

Was does that mean precisely?

We are in discussion with our Swiss suppliers with a view to sharing the currency risk in future. At the same time, where it makes sense, we are transferring certain activities to the eurozone; e.g. overhaul of wheelsets for our multi-system loco-motives. They are dismounted and reassembled at BLS workshops, but the actual overhaul takes place in Germany. We have had to agree price in-creases with our customers for the coming years. Where possible, we have negotiated new prices in Swiss francs. Alongside all this, we are actively managing our foreign currency reserves and en-deavouring to keep further currency risks to a mini-mum by trading in futures.

29

Did the financial turbulence affect BLS

Cargo’s controlling?

Yes, very much so. Up to 2008 it was a question of coming to grips with growth; now, we have to produce our services as efficiently and in as cost-effective a manner as possible. We want to restore our cost-effectiveness as quickly as pos-sible and make a profit, as this is essential for the long-term existence of the company.

What roles do process management

and the balanced scorecard play in

this?

We can draw upon a well-documented process management system, which we are continually improving and enhancing. At the same time we make use of a system of key performance fig-ures in the form of the balanced scorecard, which helps us to manage and control the company. In this way, we can measure whether the action we have taken is working and if we are achieving our objectives.

What is your outlook for 2012?

The debt crises in certain European countries will not be resolved quickly and we will continue to be strongly affected by the exchange rate situation. However, the minimum rate set by the Swiss Na-tional Bank gives us greater stability for planning. I am confident that we can successfully meet the challenges in 2012 and thus achieve a better re-sult.

Marco Guntern (38) is a federally-certified specialist for accounting and controlling. During his professional career he held vari-ous posts in the area of finance, culminating with his position as Head of Services / CFO and deputy CEO of a Swiss manufacturer of steel and metal products. Since 1st Septem-ber 2011, Marco Guntern has been in charge of BLS Cargo’s Finance department.

ImpressumPublishing Information

BLS Cargo AG

Bollwerk 27CH-3001 BernFon +41 58 327 28 44Fax +41 58 327 28 60freight@bls.chwww.blscargo.ch

Production

Stefanie Burri, Communication BLS Cargo

Photographs

BLS, Corbis, gettyimages, Christoph Ris, Markus Seeger

Design

raschle & kranz, Atelier für Kommunikation GmbHwww.raschlekranz.ch

Printing

Jost Druck AG, Hünibach