Source: E15 Date: 06.03.2025 Author: Ondřej Souček

The CE industrial group, which billionaire Jaroslav Strnad started building only five years ago, is already approaching a billion-dollar profit. Newly released figures for 2023 show that the group increased gross operating profit EBITDA by 140 percent year-on-year to CZK 785 million, and last year, according to the latest estimates, it earned CZK 910 million. It plans to improve its performance again this year to at least CZK 1.5 billion.

The Group has long been successful in two segments - the rail industry and Opportunities, the so-called opportunity investments. It did not break this rule in 2023, when growth was mostly supported by the development of the railway division, and also by the tolling financing of Vítkovice Steel, which generated about a third of EBITDA in 2023. 

So-called tolling is an agreement that the selected partner, i.e. the tolling company, finances the manufacturer's operations by, for example, purchasing materials and the like. The plant then produces the final products, delivers them to the tolling company for a processing fee, and the latter usually sells them on the market itself. In the case of Vítkovice Steel, this role was played by Jaroslav Strnad's CE Industries group. However, this form of cooperation ended at the end of 2023.

Therefore, the Croatian wagon driver Đuro Đaković already played a key role in last year's results. According to preliminary results, the entire railway division generated an operating profit of over CZK 400 million, almost half of the total estimated EBITDA.

Wagons, wagons, wagons

Meanwhile, Strnad Đuro Đaković, in cooperation with Promet Group, bought the Matera family out of insolvency at a time when it was completely paralysed due to debt. Today they are one of the largest manufacturers of freight wagons in Europe. "We are fulfilling our restructuring plan and should attack the 1,000 wagons sold mark this year. We are now the European number three in the market in the number of wagons produced and with the portfolio we offer," Pavel Maroušek, the head of Đuro Đaković, told to Hospodářské noviny at the end of the year.

The number one is Strnad's former business partner Alexey Belyaev and his Tatravagonka, and the number two is the American Greenbrier, which has branches in Poland and Romania. The former produces around 6,500 freight wagons a year, while the latter churns out around 4,500 units on the European market every year. 

According to Maroušek, the major Western European manufacturers no longer exist, they have gone bankrupt, and production is now taking place in Central Europe, South-Eastern Europe and Turkey. In total, between 15,000 and 18,000 railcars are produced in Europe annually, so CE Industries now controls around five per cent of the European market.

Production will grow even more

There is even more to come in the future. "In a few years' time, two thousand railcars a year will be rolling off our production lines. And by 2028, we want to increase this number even further," CE Industries writes in its annual report for 2023.

Big ambitions have almost disappeared from the Czech industry in recent years. In this case, however, the optimism is justified. The industry has the advantage of not having to face cheap Asian competition, as is the case in many other areas of industry. 

"Importing a wagon from Asia is not worthwhile because of the long distances involved, and local players are not yet rushing to build a factory there because they would need robust service. These are not easy to build. In this respect, the market of European wagon manufacturers is well protected," says Filip Budník, Investment Director of the Thein Industry Fund.

On the other hand, the industry also has its drawbacks. "Although the market has grown rapidly in recent years, it is very much influenced by the interest in freight transport and therefore by economic cycles. And now the situation is beginning to turn around and the market is experiencing a slight cooling in demand for wagons," says Budník, adding that manufacturing companies may experience a delay in the weakening demand, as they usually have orders for several years in advance.

This year, the results will be significantly influenced by the tolling cooperation with Liberty Ostrava, as well as the integration of the Helicopter Alliance group, which focuses on the modernization of American Black Hawk helicopters and which was previously majority owned by Jaroslav Strnad outside the CE Industries structure.

Rabiec is not yet willing to talk about the effect of tolling, as the company still does not know how long it will operate it. Still, he revealed the group's agreed plan for this year: "After the merger with Helicopter Alliance, and without counting the tolling, we are targeting an EBITDA of CZK 1.45 billion." For comparison, roughly the same profit in 2023 was generated by Zbyněk Frolik's well-known medical bed manufacturer Linet. One of the largest domestic industrial groups, Petr Otava's MTX Group, earned roughly double that in the same year.

CE Industries' economic director Jiří Rabiec agrees, but adds that the aforementioned ancillary services play an important role in the industry, reducing the group's susceptibility to economic cycles.

"We can design a wagon, we can manufacture it and we are able to service it. In addition to the Czech Republic, we can provide service in Slovakia, Hungary, parts of Poland and Croatia. We also have a company called Vítkovická doprava, where we can park wagons if leasing companies have no use for them. At the same time, we can dispose of the wagons ecologically through SPV Recycling," says Rabiec.