German Rail says it is “back in the black”

GERMAN Rail (DB) has reported its first positive operating result since the beginning of the Covid-19 pandemic.

DB closed the first half of 2022 with an operating profit (adjusted for EBIT) of €876m, after consolidated sales increased by 28.4% to around €28bn compared with the first six months of 2021. By contrast, DB recorded an operating loss of €1.6bn in 2021 despite a double-digit percentage growth in revenues, and an after-tax loss of €5.7bn in the 2020 financial year.

In the first half of 2022, DB’s consolidated operating result improved by around €1.9bn compared with the same period in 2021. The logistics subsidiary DB Schenker made by far the largest contribution to the improving success of the group, almost doubling its operating profit compared with the first six months of 2021 to around €1.2bn.

However, earnings, revenue and output also increased significantly in DB’s core business, with 59.1 million passengers using its long-distance trains in the first six months of 2022 - 11.7% more than in the same period in 2021. In addition, around 725 million passengers used DB local services – an increase of 60% on the previous year.

"The turnaround has been successful,” says DB CEO, Dr Richard Lutz. “Demand is booming and we're back in the black. The quick return of our passengers shows that it was absolutely right to stay on course, even in difficult times, and to position ourselves for strong growth with new trains, better offers and more staff.”

Since 2019 DB has recruited around 90,000 new employees in Germany and has made around 19,500 job commitments by 2022.

“We have already done a lot to cope with the boom in demand,” Lutz says. “Never before have there been as many ICE trains in Germany and Europe as there are today.”

At DB Cargo, there was a 5.6% increase in revenue and a 1.2% rise in tonne-km recorded, but the freight sector suffered from the effects of the war in Ukraine and capacity restrictions on the German rail network due to ongoing upgrade work.

In addition, Germany’s rail infrastructure is currently unable to keep up with the growth in traffic, leading to delays to services which Lutz describes as “unacceptable”. In the first half of 2022, only 69.6% of long-distance trains reached their destination on time, compared with 79.5% in the first six months of 2021. Long distance punctuality fell to as low as 57% in June. Overall punctuality in DB rail passenger transport in Germany reached 92.5% in the first half of the year.

DB and the federal government have pledged to begin a comprehensive renewals programme on the busiest rail corridors from 2024, with some more immediate measures to remedy punctuality problems coming in sooner. Meanwhile, new construction and capacity enhancement projects on the rail network and digitisation of operating systems continue to ensure that rail infrastructure is fit for the future.

Together with the federal government, DB continued to invest heavily in the first half of 2022, with net investments climbing by 3% to €2.7bn compared with the first six months of 2021. Gross investments amounting to €5.4bn continued to flow into the rail infrastructure in Germany and as of June 30 this year, net financial debt was €30.5bn – 4.8% higher than at the end of 2021 but within the range expected.

DB chief financial officer, Dr Levin Holle, emphasises that DB Schenker’s performance in the first half of 2022 is the most successful in the company’s 150-year history. However, he said the sharp rise in inflation and in particular the “energy cost explosion” presented major economic challenges for DB.

He added that the forecasts for 2022 as a whole are subject to a high degree of uncertainty due to the war in Ukraine and the continuing impact of Covid-19 pandemic. Nevertheless, DB is expecting significantly more sales and a much better operating result for 2022 than was predicted in March.

For 2022 as a whole, DB currently expects to record an operating profit of over €1bn. Sales are expected to grow to more than €54bn and DB and the federal government intend to increase gross investment to over €16bn and net investment to more than €6.5bn.