DB CEO Richard Lutz presents performance in first half of 2019: "We have made progress for our customers" New passenger record in long distance transport • Profit down
Deutsche Bahn (DB) continues to focus on growth and is progressively improving its quality and performance. Long distance patronage rose for the fifth time in a row in the first half of 2019: passenger numbers, which had already been high in the first half of 2018, increased by another 1.3% year on year. As of the end of June, a total of 71.8 million passengers – a new record – had used ICE and IC service. In all, DB expects to transport over 150 million long distance passengers in 2019, more than ever before in a single year.
At 77.2%, long distance punctuality in the first half of 2019 was also higher than the 2018 level (74.9%), and higher than DB's target of 76.5% for 2019. The DB Group's adjusted revenues rose 2.2% year on year, to EUR 22 billion, in the first half of 2019. "Our goal is to improve rail service for our customers, and we have made progress in our work toward that goal," said Dr. Richard Lutz, the CEO of Deutsche Bahn, in Berlin today. "But upgrading and expanding the German rail system on a massive scale is not the kind of challenge that can be solved overnight, and major investments will be necessary in the coming years and decades."
Adjusted earnings before interest and taxes (EBIT) was EUR 757 million in the first half of 2019, compared with EUR 974 million in the first half of 2018. The decrease of some 22% was due primarily to investment in additional measures to improve quality and performance. This investment in the future of rail would pay off financially in the long term, said DB CEO Lutz. DB had presented its new strategy, "Strong Rail," to the Supervisory Board in June. Accordingly, DB's full focus would be on benefiting customers by driving expansion, upgrades and growth in the rail system. In the coming years alone, DB would be hiring 100,000 new employees and making a key contribution to climate protection by transporting more traffic by rail.
And rail traffic continued to grow: in the first half of 2019, total volume produced on DB's rail network rose once again, with demand for train paths up 0.6% to 543.0 million train-path kilometers. The percentage of non-DB operators using the network also rose, from 31.9% in the first half of 2018 to 33.1% in the first half of 2019.
Despite intense, ongoing competition in rail freight transport, DB Cargo stabilized its traffic volumes. DB's rail freight transport subsidiary handled 43.7 billion metric ton kilometers in the first half of 2019, following 44.5 billion in the first half of 2018. DB Schenker, the DB Group's international logistics subsidiary, continued to deliver strong performance, raising revenues and adjusted EBIT considerably, by 2.3% and 10.2% respectively.
With a view to further growth, DB is continuing to invest at a high level. "Deutsche Bahn is making extensive investments with a lasting impact on all our business units, with a clear focus on rail operations in Germany," said DB CFO Alexander Doll. As a result, net capital expenditure remained at a very high level in the first half of 2019 and is expected to increase to more than EUR 5.5 billion – the highest it has ever been in DB's history – by the end of the year.
Due in large part to new accounting standards that all companies are now required to apply, DB's net financial debt rose to EUR 25.4 billion as of June 30, 2019 (following EUR 19.5 billion as of December 31, 2018). The new standards stipulate that operating leases must be included in debt; were they not to apply, DB would expect net financial debt to rise only slightly in 2019 as a whole, to roughly EUR 20 billion. "We will continue to monitor our debt levels while also investing more than ever before in a strong rail system," said Doll.
As previously forecasted, the DB Group expects to generate adjusted EBIT of at least EUR 1.9 billion for 2019 as a whole, and record full-year earnings of more than EUR 45 billion.