Opportunity and risk report
Our business activities are associated with risks as well as opportunities. Our business policy therefore aims to take advantage of opportunities through our opportunity management system, while also actively managing those risks identified within the framework of our risk management system. There were no material changes in DB Group’s risk management system in the first half of 2024.
The opportunity and risk assessment is based on the updated anticipated development of DB Group in 2024 in relation to the adjusted operating profit (adjusted EBIT).
- For the forecast of EBIT development for the 2024 financial year factoring in countermeasures, there are further risks in the amount of € 0.7 billion (thereof very likely (> 70% probability of occurrence): € 0.0 billion). These risks arise primarily in the areas of production and technology, procurement and the energy market, the economy, market and competition, legal matters and contracts, and human resources.
- The opportunities for EBIT development exist in the amount of € 0.1 billion (thereof very likely: € 0.0 billion) in the areas of production and technology as well as the procurement and energy market.
The poor state of the infrastructure is particularly relevant and may lead to further increases in maintenance expenses. In addition, poor punctuality figures have a negative impact on revenue development, particularly at DB Long-Distance. Finally, the amount of the Government expense grants is still subject to considerable uncertainty.
The current financial planning by the Federal government includes significantly less funds than required for the extensive program for renewal, modernization and digitalization of the infrastructure. This results in extensive risks, particularly in the form of a lower ramp-up of the network capacity and the non-achievability of the quality improvements aimed for (particularly punctuality). If the Government funds are not increased significantly, considerable risks for network quality, volume produced and economic development will materialize.
Depending on the market situation, purchase prices for commodities, energy, transport and construction services may continue to fluctuate. The easing of raw material and transport prices that became apparent at the end of 2023 has materialized.
The producer prices of commercial products decreased in the first half of 2024 compared to the previous year as a result of lower prices for gas and electricity.
We counter the risk of energy price increases through a stringent price adjustment strategy and the conclusion of long-term procurement contracts, among other things. However, these hedging measures only have an effect for a limited time and must be weighed against potential opportunities arising from falling energy prices. Depending on the market and competitive situation, it may not be possible or may only be possible to a very limited extent to pass increased costs on to the customer in the short term. This in turn has a negative impact on margins. The consolidation of requirements and the optimization of long-term volume commitments result in opportunities to raise potential in procurement prices, even in a challenging market environment.
The European Commission is carrying out state aid proceedings against the Federal Republic of Germany relating to possible support measures for DB Cargo AG. In 2022, it opened a formal investigation procedure into the matter. The investigation is based on a complaint from a competitor. The question at issue is whether the assumption of losses resulting from the profit transfer agreement between DB Cargo AG and DB AG and certain other measures represent competition-distorting aid. In the view of the Federal Government and DB AG, the measures do not in fact contain any aid. However, in the light of the transformation program underway at DB Cargo AG, it also seems possible that the European Commission will adopt a compatibility decision with conditions attached. This may have implications for the business of DB Cargo AG (e.g. profitability taking precedence over growth, sale of investments or rolling stock). Another important aspect could be the swift ending of the automatic assumption of losses and thus the termination of the profit transfer agreement. The procedure could be formally completed in 2024.
At DB Regional, there is a risk that financial liabilities and corresponding receivables will have to be recognized in the future for the obligation to pay lease installments from transport contracts with vehicle financing under the Baden- Württemberg model.
According to our analyses of risks, countermeasures (including financial support from the Federal Government), hedging and provisions, as well as in line with the opinion of the Management Board based on the current risk assessment and our mid-term planning, there are no risks that, individually or jointly, would pose a threat to the assets, financial situation or income situation of DB Group.