Deutsche Bahn is falling short of its intended goal.
Despite its substantial debt, the conglomerate is projected to announce an operating profit in 2024, mainly due to the successful logistics division, Schenker. However, this profit is expected to fall significantly short of the intended figure. Moreover, the freight sector, aside from long-distance transit, is also struggling to perform.
As per corporate documents obtained by Reuters, the German railway company could make around 700 million euros in operating profits in 2024, largely attributable to Schenker. The initial target, meanwhile, was a billion euros in earnings before interest and taxes (EBIT). The persistent challenges in long-distance traffic, including IC and ICE, have hindered this goal. Even after servicing interest payments, the debt-ridden company, which holds around 33 billion euros in liabilities, will still record a considerable deficit. However, as per internal plans, this scenario might change in the coming years. By 2027, the final year of the S3 restructuring plan, the company aims to achieve a total profit of a billion euros. The German railway company did not provide comments on the figures.
This year, the corporation decided to sell its profitable international logistics subsidiary, Schenker, for roughly 14 billion euros. Despite Schenker's operating profit of nearly a billion euros, it will still be reported under the railway company's earnings in 2024, resulting in a positive outcome. However, this will not be the case in 2025. Instead, the sale proceeds are intended to reduce the net financial debt and subsequently lower interest payments, resulting in a loss of half a billion euros in 2025 and a profit of a billion euros in 2027.
Sister company DB Cargo records substantial loss
Meanwhile, the freight division, DB Cargo, of the German railway company is making slower progress in its restructuring than anticipated. As per recently disclosed corporate documents, the freight company is expected to incur a loss of nearly 300 million euros this year. Initially, the plan was to trim the loss before interest and taxes (EBIT) to approximately 60 million euros.
In 2023, the loss was still 500 million euros. The figures are highly significant for the railway company and DB Cargo, as the parent company will no longer be able to offset the loss starting from January due to EU pressure. By 2026, DB Cargo is required to record an overall profit, or it will effectively cease to exist. The German railway company remained silent on the figures.
DB Cargo has moved away from its growth strategy and, as per sources, increased prices for several transports significantly. Subsequently, the company has lost market share to competitors. Despite these increased prices, the turnover is also decreasing: According to the documents, it is expected to be around 5.5 billion euros in 2024, as compared to 5.7 billion euros in the preceding year.
The German Railways, known for its substantial debt, is projected to generate an operating profit of approximately 700 million euros in 2024, predominantly due to its successful logistics division, Schenker.
Despite selling its profitable subsidiary Schenker for 14 billion euros, DB Cargo, a sister company of German Railways, is expected to incur a loss of nearly 300 million euros this year.
