2017 Integrated Report – Departure into a new era

Development in the year under review

  • Limitations, above all in Germany, due to operating restrictions and strained transport quality (resource problems with personnel, and in some cases locomotives and cars).
  • Persistent weak development in France due to quality-related transport losses and a refocusing of the customer portfolio.
  • Restructuring carried forward in France and Great Britain.

DB Cargo

2017

2016

Change

 


2015

absolute

%

Punctuality (%)

72.7

75.6

73.9

Customer satisfaction (SI)

67

64

Freight carried (million t)

271.0

277.4

– 6.4

– 2.3

300.2

Volume sold (million tkm)

92,651

94,698

– 2,047

– 2.2

98,445

Volume produced (million train-path km)

175.6

179.1

– 3.5

– 2.0

187.0

Capacity utilization (t per train)

527.5

528.8

–1.3

–0.2

526.5

Total revenues (€ million)

4,528

4,560

– 32

– 0.7

4,767

External revenues (€ million)

4,209

4,230

– 21

– 0.5

4,417

EBITDA adjusted (€ million)

130

108

+ 22

+ 20.4

120

EBIT adjusted (€ million)

– 90

– 81

– 9

+ 11.1

–183

EBIT margin (adjusted) (%)

– 2.0

– 1.8

–3.8

Gross capital expenditures (€ million)

328

304

+ 24

+ 7.9

451

Employees as of Dec 31 (FTE)

28,257

29,671

– 1,414

– 4.8

30,303

Employee satisfaction (SI)

3.4

Employee satisfaction – follow-up workshop implementation rate (%)

96.5

99.0

Share of women in Germany as of Dec 31 (%)

10.6

11.2

11.4

Specific final energy consumption compared to 2006 (related to tkm) (%)

–17.1

–17.1

–16.8

Total number of quiet freight cars in Germany as of Dec 31

39,604

32,396

+7,208

+22.2

20,460

Punctuality fell in the year under review. This was driven in particular by the trend in Germany, where start-up difficulties in the introduction of a new production system and operating restrictions imposed burdens. #Punctuality

However, customer satisfaction improved due to the positive development of important customer interfaces such as advising and transport performance. We survey about 1,000 customers each year regarding customer satisfaction.

Performance development was disappointing. It was mainly driven by developments in regions West and Central. The volume of freight carried and volume sold fell slightly, as did capacity utilization per train.

The economic trend remained tense. Slightly lower in­­come was offset by lower expenses, so that adjusted EBITDA rose. The development was driven by region West, while the development in region Central had a dampening effect. Due to the increased depreciation, the development of the adjusted EBIT was negative.

  • 82% of revenues are generated in region Central, 13% in region West and 5% in region East. Revenues remained nearly the same. Performance-based increases, especially in region East, were offset by negative ex­­change rate effects and decreases in revenues in region West.
  • Other operating income (– 0.6%) fell based on exchange rate differences. Adjusted for exchange rates, there was a rise, mainly due to the reimbursement of the nuclear fuel tax.
  • Above all, higher purchased transport services and increased maintenance expenses in Germany led to a slight increase in the cost of materials (+ 1.6%). Lower energy costs and exchange rate effects, among other things, partially made up for it.
  • Because of lower employee numbers, due especially to restructuring measures in Great Britain and because of exchange rate effects, personnel expenses (– 1.7%) were lower than in the previous year. The decrease was offset by the effects of wage increases.
  • Other operating expenses (– 9.7%) declined due to lower expenses for damage compensation and vehicle rents, among other things.
  • Depreciation (+ 16.4%) rose due to the capitalization of IT development expenses in the previous year and due to increased capital expenditures in locomotives and freight cars.

Capital expenditure activities increased. Capital expenditure rose in region Central due to the capitalization of IT development expenses and higher capital expenditures in locomotives and freight cars. In contrast, capital expenditures in regions West and East declined.

65% of employees work in region Central, 15% in region West and 14% in region East. The number of employees declined. This was caused essentially by a decline in staffing in Germany related to the restructuring, additionally supported by natural fluctuation, part-time working in the lead-­­­­up to retirement and transfers within the Group, adjustments to the business situation in Great Britain and France and optimization measures in Poland.

Employee satisfaction is measured every two years. In the year under review, the focus was on follow-up processes. The follow-up workshop implementation rate for the 2016 employee survey was once again very high, though somewhat lower than two years ago.

The share of women fell slightly compared to the previous year. In the context of the declining employee numbers, this is attributable to demographically related departures, natural fluctuation, part-time working in the lead-up to retirement and intra-Group transfers.

The reduction of final energy consumption compared to 2006 remained stable.

Nearly two-thirds of DB Cargo’s active freight cars in Germany now feature whisper brakesno. 05. The refitting continued in the year under review.

Region Central

  • Hindrances due to operating restrictions with impact on performance quality in Germany.
  • Stabilizing impact from positive development of the steel sector, which is predisposed to rail transport.
  • Profitability increase due to efficiency-boosting actions in the sales companies.

Region Central
Selected key figures
(€ million)

2017

2016

Change

absolute

%

Freight carried (million t)

246.2

246.9

– 0.7

– 0.3

Volume sold (million tkm)

74,780

75,771

– 991

– 1.3

Volume produced
(million train-path km)

140.9

142.0

– 1.1

– 0.8

Total revenues

4,836

4,827

+ 9

+ 0.2

External revenues

3,431

3,421

+ 10

+ 0.3

EBITDA adjusted

160

181

– 21

– 11.6

EBIT adjusted

6

57

– 51

– 89.5

Gross capital expenditures

270

222

+ 48

+ 21.6

Employees as of Dec 31 (FTE)

18,494

19,332

– 838

– 4.3

Performance development declined in region Central. This was driven by the trend in Germany as a result of structural effects in goods predisposed to rail transport, such as coal, and due to operating restrictions. The implementation of optimization programs enabled us to keep capacity utilization largely at the level of the previous year.

The economic trend was tense. The slight rise in revenue was eaten up mainly by an increased cost of materials, so that the adjusted EBITDA and EBIT fell.

  • Despite the operating difficulties in Germany, mild revenue growth was achieved. This resulted from the positive development in some sectors predisposed to rail transport and from newly forged purchasing and sales relationships.
  • Other operating income (– 1.3%) fell due to the elimination of a one-time effect from the disposal of rolling stock in the previous year. The reimbursement of nuclear fuel tax had a partially offsetting effect.
  • The increase in the cost of materials (+ 1.8%) was due to increased purchased transport services and higher service-related expenses for utilization of train-paths among the production companies. Lower energy costs had a moderating effect.
  • Personnel expenses (– 0.3%) decreased as the number of employees declined. This was offset by wage increases.
  • The decline in other operating expenses (– 4.7%) re­sulted from lower expenses for damage compensation and for transport services, among other things.
  • Depreciation (+ 24.2%) rose due to the capitalization of IT development expenses in the previous year and due to increased capital expenditures in locomotives and freight cars.

Gross capital expenditures increased significantly due to the capitalization of IT development costs and higher capital expenditures in locomotives and freight cars.

The number of employees fell mainly due to restructuring measures and natural fluctuation and intra-Group transfers in Germany.

Region West

  • Declining demand in the coal and chemicals segments with stable steel transports in Great Britain.
  • Weaker pound leads to exchange rate effects.
  • Quality restrictions in France.
  • Restructuring measures in Great Britain and France move ahead.

Region West
Selected key figures
(€ million)

2017

2016

Change

absolute

%

Freight carried (million t)

55.4

61.7

– 6.3

– 10.2

Volume sold (million tkm)

13,255

14,062

– 807

– 5.7

Volume produced
(million train-path km)

26.8

28.9

– 2.1

– 7.3

Total revenues

668

744

– 76

– 10.2

External revenues

544

607

– 63

– 10.4

EBITDA adjusted

41

7

+ 34

EBIT adjusted

– 12

– 46

+ 34

– 73.9

Gross capital expenditures

48

69

– 21

– 30.4

Employees as of Dec 31 (FTE)

4,207

5,055

– 848

– 16.8

In region West, freight carried, volume sold and volume produced fell, in some cases considerably. Quality-related service reductions in France were only partly offset by the rise in steel transports in Great Britain.

The economic trend improved. The decline in income was more than compensated by lower expenses, so that adjusted EBITDA and EBIT developed positively. Cost savings in France and Great Britain had a supporting effect in this case.

  • Revenue declined for performance and exchange rate reasons.
  • Other operating income (– 12.0%) declined due to the elimination of high settlement payments in the previous year in France and lower internal rental income for locomotives in Great Britain.
  • The decline in the cost of materials (– 7.6%) was due to exchange rate effects and a significant decrease in purchased services.
  • Personnel expenses (– 16.3%) decreased due to exchange rate effects and an adjustment of the number of em­­ployees to match the performance development.
  • Depreciation was stable.
  • Other operating expenses (– 24.5%) fell due to lower rent expenses in Great Britain, negative exchange rate effects and cost savings in France.

Gross capital expenditures fell sharply. This resulted from the postponement of capital expenditures in Great Britain.

The number of employees fell due to adjustment to the business conditions in Great Britain and France.

Region East

  • Positive business development essentially driven by Poland.
  • Structural adjustments in the customer portfolio in Southeastern Europe boost profitability and lead to proportional shifts from international to national transport services.

Region East
Selected key figures
(€ million)

2017

2016

Change

absolute

%

Freight carried (million t)

17.3

16.6

+ 0.7

+ 4.2

Volume sold (million tkm)

4,616

4,865

– 249

– 5.1

Volume produced
(million train-path km)

8.0

8.2

– 0.2

– 2.4

Total revenues

314

277

+ 37

+ 13.4

External revenues

216

202

+ 14

+ 6.9

EBITDA adjusted

21

16

+ 5

+ 31.3

EBIT adjusted

8

5

+ 3

+ 60.0

Gross capital expenditures

10

13

– 3

– 23.1

Employees as of Dec 31 (FTE)

4,076

4,205

– 129

– 3.1

Performance development in region East with respect to volume sold and produced was weaker, above all due to a reduction in international and national transport services in Southeastern Europe. Higher volumes in the intermodal and automotive sector in Poland had an offsetting effect. In contrast, the quantity of freight carried increased slightly as a result of, among other things, growth in Poland.

The economic trend was positive. Adjusted EBITDA and EBIT improved, driven in particular by the increase in revenues.

  • Revenue development was positive, especially in Poland. Exchange rate effects had an offsetting effect.
  • Other operating income (+ 7.7%) rose due to additional local transport services in Southeastern Europe. Ex­­change rate effects also contributed to the increase.
  • The cost of materials (+ 28.3%) increased, mainly as a result of increased maintenance expenses and higher transport services purchased in Poland.
  • Personnel expenses (+ 9.4%) rose in Poland as a result of collective bargaining agreements, in spite of a reduction in employees. In Southeastern Europe, personnel expenses rose because of additional hires and wage increases.
  • Other operating expenses (– 25.0%) fell due to optimization measures in Poland and lower auditing expenses in Southeastern Europe.
  • Depreciation (+ 16.7%) increased due to capital expenditures in Poland.

Gross capital expenditures fell due to eliminated grants from the previous year for the Port of Szczecin.

The number of employees declined, mainly due to optimization measures in Poland.