Deutsche Bahn publishes the Half-Year 2024 results

The structural weaknesses of Germany's rail network and the challenging operational situation, due in part to strikes and severe weather, had a negative impact on the economic performance of Deutsche Bahn Group (DB Group) in the first half of 2024. To ensure that urgently needed infrastructure measures could begin quickly, DB Group also made significant pre-financings of additional maintenance expenses for the Government, as it did in the first half of 2023.

DB Group closed the first half of 2024 with an operating loss (adjusted EBIT) of EUR 677 million – a decline of more than EUR 950 million compared to the first half of 2023. The net loss after taxes was EUR 1.2 billion (compared with a loss of EUR 71 million in the first half of 2023). DB Schenker, DB Group's highly profitable logistics subsidiary, again made considerable positive contributions to the overall result, but could only partially offset the losses in DB Group's core business. DB Group reported an operating loss from its core business, the Integrated Rail System (mainly comprising the mobility, rail freight and rail infrastructure business), of EUR 1.2 billion in the first half of 2024 (compared with a loss of EUR 339 million in the first half of 2023). Group revenues fell slightly, by 3%, to EUR 22.3 billion.

DB Group once again increased its capital expenditures in the rail network and in better rail services in the first half of 2024 thanks to a major increase in Government funding. In doing so, it continued to systematically implement its expansion strategy for Strong Rail in Germany. Net capital expenditures (including Government equity support) increased by about 35% compared with the first half of 2023 to EUR 4 billion. Gross capital expenditures totaled EUR 7.3 billion, an increase of 18%. Despite the loss in the first half of 2024, DB Group is standing by its target to improve its EBIT in the Integrated Rail System by about EUR 2 billion in 2024 as a whole compared with the previous year, essentially confirming its forecast from March 2024. The new Government support for infrastructure maintenance expenses, which the Government plans to implement in the second half of 2024, will contribute to this, among other things. This includes reimbursements for maintenance expenses pre-financed in 2023 and 2024 by DB Group. At the same time, DB Group is continuing its measures to reduce costs and improve efficiency, especially in administration.

More powerful rail services start with the rail network, says DB CEO Lutz

"Unprecedented extreme weather events have stretched the rail infrastructure, which was already in need of a modernization, beyond its limits, and worsened the operational and financial situation in passenger and freight transport. On top of that, there were strikes and accidents, such as the one that happened at the Raueberg Tunnel," said DB CEO Dr. Richard Lutz. "In long distance transport, the extreme weather burdened punctuality by seven percentage points in the first half of 2024 and also dampened demand. Despite these challenges, we want to return to generating an operating profit in 2024 as a whole. Therefore, in addition to modernizing the infrastructure, we have also introduced short-term measures to stabilize the operational and economic situation," Lutz said.

All businesses must become profitable again, says DB CFO Holle

DB Group's logistics subsidiary, DB Schenker, continued to perform very well in the first half of 2024 despite the further normalization of freight rates in air and ocean freight. With an operating profit (adjusted EBIT) of EUR 520 million, DB Schenker continued to perform more than twice as well as before the Covid-19 pandemic. "Thanks to a successful efficiency program, DB Schenker has good opportunities to leverage additional profit potential in the future too," said DB CFO Dr. Levin Holle.

DB Group is also pressing ahead with structural changes in its core business in order to work more efficiently through more standardization, automation and digitalization. "All business units in the Integrated Rail System must become profitable again. To do this, we need to significantly improve our cost efficiency," said Holle. He put the financial burdens due to strikes in the first half of 2024 at about EUR 300 million.

The implementation of the significant expansion of support for rail as decided by the Government has begun in June, with DB Group receiving roughly EUR 3 billion, the first tranche of the equity injection planned for 2024. This has stabilized DB Group's indebtedness. DB Group's net financial debt as of June 30, 2024, was about EUR 1 billion lower than at the end of the previous year.

Outlook

DB Group will make every effort in the second half of 2024 to successfully complete the general modernization of the Riedbahn line between Frankfurt am Main and Mannheim, which is already under way. This project is the first in DB Group's plans to transform Germany's highly congested network into a high-performance network. The modernization of the Riedbahn will reduce disruptions caused by infrastructure problems by up to 80%.

DB Group will also plan future construction sites differently from now on, and not only major sites on main corridors. Construction will be grouped in scheduled windows and the construction volume will be increased.

DB Group is largely sticking to its full-year outlook from March, with only minor downward revisions. It expects capital expenditures in a powerful infrastructure, which are already at a very high level, to continue to rise in 2024, with gross capital expenditures for the year as a whole at about EUR 21 billion and net capital expenditures, including the Federal Government's equity contributions, at about EUR 11 billion.

DB Group lowered its forecast for revenues slightly, matching the previous year's level at about EUR 45 billion. DB Group aims to generate an operating profit (adjusted EBIT) of about EUR 1 billion for the year as a whole.

All forecasts will depend on factors such as the development of the operational situation and the further inflow of expected Government funding.