2018 Integrated Interim Report – Departure into a new era!

Development in the first half of 2018

  • Restrictions, above all in Germany, due to continuing strained transport quality (resource problems with personnel and cars).
  • Strikes in France had adverse effects on development.
  • Positive business development in Eastern Europe.

DB Cargo

H1

Change

2018

2017

absolute

%

Punctuality (%)

73.5

73.9

Freight carried (million t)

129.4

139.2

9.8

7.0

Volume sold (million tkm)

44,534

47,756

3,222

6.7

Volume produced (million train-path km)

83.3

89.1

5.8

6.5

Capacity utilization (t per train)

534.7

535.7

1.0

0.2

Total revenues (€ million)

2,255

2,306

51

2.2

External revenues (€ million)

2,112

2,150

38

1.8

EBITDA adjusted (€ million)

1

82

83

EBIT adjusted (€ million)

127

28

99

Gross capital expenditures (€ million)

140

110

+ 30

+ 27.3

Employees as of Jun 30 (FTE)

28,709

28,964

255

0.9

The punctuality of DB Cargo declined slightly, mainly due to the weak development in Germany. It was adversely affected by construction activity in the network, scarcity of resources particular in relation to train drivers, and operational restrictions due among others to the Storm Friederike.

The performance development was unfortunate and was driven by Western Europe and Central Europe. Freight carried, volume sold and volume produced fell, while capacity utilization per train remained roughly stable.

The economic development was also weak. The lower in­­­­­come was not offset by expenses, which remained roughly unchanged, so that adjusted EBITDA declined significantly. Due to the increased depreciation, the development of the adjusted EBIT was even weaker. The development was driven by Central Europe.

  • 83% of revenues were generated in Central Europe, 12% in Western Europe and 5% in Eastern Europe. Revenues declined. Performance-related declines, particularly in Germany and Great Britain, strikes in France and ad-
    verse exchange rate effects were only slightly offset by a performance-related increase in Eastern Europe.
  • Other operating income (– 12.7%) fell, partly due to reimbursement of the nuclear fuel tax in the first half of 2017 and adjustments to leases in Great Britain with no impact on profit and loss.
  • The cost of materials (+ 0.2%) was at the level of the first half of 2017. The increase in purchased transport services as well as higher energy prices in Germany were offset by lower train-path expenses as a result of price and vol­ume effects, a decline in energy consumption for per­formance-­­related reasons and exchange rate effects.
  • Personnel expenses (– 0.9%) declined slightly due to the decrease in the number of employees despite the negative impact of collective wage increases.
  • Other operating expenses (+ 3.1%) increased, mainly due to higher expenses for vehicle rents and higher purchases of IT services.
  • Depreciation (+ 14.5%) rose, mainly due to capital ex­­pen­­­­­­ditures but also impairments on IT projects.

Capital expenditure activities increased significantly due to higher capital expenditures in locomotives in Central Europe. In contrast, capital expenditures fell in Western Europe.

A total of 66% of employees are employed in Central Europe, 15% in Western Europe and 14% in Eastern Europe. The number of employees declined slightly. This was mainly due to reductions in Great Britain and France in connection with restructuring. The number of employees also fell in Poland as a result of a decline in the sidings business and sand mining business. 

Region Central Europe

  • Significant restrictions due to strikes in France and storm Friederike.
  • Strained transport quality due to resource bottlenecks.
  • Production quality causes performance losses.

Region Central Europe

H1

Change

2018

2017

absolute

%

Freight carried (million t)

119.2

126.5

7.3

5.8

Volume sold (million tkm)

36,240

38,721

2,481

6.4

Volume produced (million train-path km)

67.8

71.3

3.5

4.9

Total revenues (€ million)

2,465

2,465

External revenues (€ million)

1,750

1,764

14

0.8

EBITDA adjusted (€ million)

23

111

88

79.3

EBIT adjusted (€ million)

66

34

100

Gross capital expenditures (€ million)

124

91

+ 33

+ 36.3

Employees as of Jun 30 (FTE)

18,934

18,757

+ 177

+ 0.9

The performance development in Central Europe declined.
This was driven by development in Germany − storm Friederike, the impact of the strikes in France
and resource problems with personnel and freight cars caused performance losses.

The economic development decreased significantly: since noticeable burdens, in the cost of materials in particular, were not offset by the slight rise in income, adjusted EBITDA and adjusted EBIT decreased significantly.

  • Revenues remained virtually unchanged despite the decline in performance, due in part to the positive effects on revenues of switching from the freight settlement procedure with foreign railways to a service procurement model. Nominal price levels were also increased.
  • Other operating income (+ 12.7%) increased due to higher Government subsidies, for example for conversion to whisper brakes, and a one-time reimbursement from the Bremen Customs Office under a judicial settlement.
  • The cost of materials (+ 5.5%) increased, mainly as a result of higher purchased transport services. This was partially offset by lower expenses for utilization of train-paths as a result of price and volume effects.
  • Personnel expenses (– 0.7%) were at the level of the first half of 2017.
  • The increase in other operating expenses (+ 5.9%) resulted from higher expenses on vehicle rents and purchases of IT services, among other things.
  • Depreciation (+ 17.1%) rose significantly, mainly due to capital expenditures but also impairments on IT projects.

Gross capital expenditures increased significantly due to higher capital expenditures in locomotives.

The number of employees increased compared with June 30, 2017. Personnel increased particularly in Germany as a result of new hirings to meet the need for staffing in operational functional groups, takeover of vocational trainees and intra-Group reassignments. Personnel were also ac­­quired as a result of new business in Belgium and Italy, among other countries. 

Region Western Europe

  • Strikes in France and decreases in demand in Great Britain had adverse effects on development.
  • Continuing quality restrictions in France.
  • Restructuring measures in Great Britain move ahead.

Region Western Europe

H1

Change

2018

2017

absolute

%

Freight carried (million t)

24.5

29.2

4.7

16.1

Volume sold (million tkm)

5,868

6,831

963

14.1

Volume produced (million train-path km)

11.5

13.9

2.4

17.3

Total revenues (€ million)

324

353

29

8.2

External revenues (€ million)

259

288

29

10.1

EBITDA adjusted (€ million)

6

3

+ 3

+ 100

EBIT adjusted (€ million)

25

24

1

+ 4.2

Gross capital expenditures (€ million)

13

18

5

27.8

Employees as of Jun 30 (FTE)

4,320

4,694

374

8.0

In Western Europe freight carried, volume sold and volume produced fell considerably, driven by strikes in France. A decline in demand in Great Britain in intermodal, coal and construction among other areas, as well as declines in performance in France as a result of quality restrictions, also had an adverse effect on development.

The economic development was weak: the decline in income was largely offset by lower expenses; operating profit figures thus remained virtually unchanged.

  • Revenues declined for performance and exchange rate reasons.
  • Other operating income (– 12.7%) fell, partly due to adjustments to leases in Great Britain with no impact on profit and loss (offset by a fall in other operating expenses).
  • The cost of materials (– 5.8%) declined for performance and exchange rate reasons.
  • Personnel expenses (– 12.3%) fell due to a decrease in the number of employees (implementation of restructuring measures in Great Britain and France) and to a small extent for exchange rate reasons.
  • Other operating expenses (– 12.6%) fell significantly, mainly due to adjustments to leases in Great Britain with no impact on profit and loss (offset by a fall in other operating income) and exchange rate effects.
  • Depreciation (+ 14.8%) rose significantly, mainly due to impairments on IT projects.

Gross capital expenditures decreased. This was the result of delays to capital expenditures in Great Britain and lower capital expenditures in Spain.

The number of employees fell, mainly due to adjustment to the business conditions (implementation of restructuring measures begun in 2017) in Great Britain and France. 

Region Eastern Europe

  • Positive performance development, particularly in Poland.
  • Adjustments to the transport portfolio in Poland.
  • Personnel expenses under pressure due to labor market situation.

Region Eastern Europe

H1

Change

2018

2017

absolute

%

Freight carried (million t)

8.4

8.4

Volume sold (million tkm)

2,426

2,204

+ 222

+ 10.1

Volume produced (million train-path km)

4.0

3.9

+ 0.1

+ 2.6

Total revenues (€ million)

151

141

+ 10

+ 7.1

External revenues (€ million)

103

98

+ 5

+ 5.1

EBITDA adjusted (€ million)

14

10

+ 4

+ 40.0

EBIT adjusted (€ million)

7

3

+ 4

+ 133

Gross capital expenditures (€ million)

3

2

+ 1

+ 50.0

Employees as of Jun 30 (FTE)

3,985

4,068

83

2.0

The performance development in Eastern Europe was positive and driven by DB Cargo Polska. A major factor here were higher volumes in industrials due to new coal and ore transports.

The economic development was weakened: the improvement in EBITDA and EBIT was mainly due to income from the sale of locomotives.

  • Revenue development was positive, mainly for performance-related reasons. The inclusion of Trans-Eurasia Logistics, acquired in the previous year, was supportive.
  • Other operating income (+ 57.1%) increased mainly as a result of sales of locomotives in Romania.
  • The cost of materials (+ 3.6%) increased, mainly for performance-related reasons and as a result of increased maintenance expenses in Poland.
  • Personnel expenses (+ 8.8%) increased despite a cut in the number of employees mainly as a result of collective bargaining agreements (including an increase in the minimum wage).
  • Other operating expenses (+ 28.6%) also increased. This was due in particular to the costs of disposal incurred during locomotive sales in Romania.
  • Depreciation was at the level of the first half of 2017.

Capital expenditure activities increased at a low level. This increase is mainly due to the postponement of capital ex­­penditures at DB Cargo Polska to the second half of 2017.

The number of employees declined, mainly due to optimization measures in Poland. This was offset by an increase in the number of employees in Southeastern Europe.