Income development under pressure
Reconciliation to the adjusted statement of income
The transition to the adjusted income statement is a two-step process. The reclassification and adjustment procedure has not changed.
Operating profit figures declined
The following presentation of profit development describes the adjusted changes in the key items of the statement of income for the first half of 2018 versus the first half of 2017. The effects of the changes in the scope of consolidation and in exchange rates are presented in the following table and are not explained further in the following section.
During the first half of 2018, exchange rate effects reduced income and expenses overall. Effects resulting from changes to the scope of consolidation were not significant.
Adjusted EBIT was weaker than in the first half of 2017. The burdens resulting from operational restrictions, factor cost increases (especially in Germany) and expenses for additional measures to improve quality and digitalization clearly exceeded growth on the income side.
- Revenue development was positive.
- The decline in other operating income resulted primarily from the omission of one-time effects during the first half of 2017, such as the reimbursement of nuclear fuel tax and compensation for damages received. This was partly offset by income from the release of provisions.
Transition to the adjusted | H1 | Change | ||||||||||
2018 | Reclassifications | Adjust- | 2018 | 2017 | absolute | thereof | therof due to exchange rate efffects | % | ||||
IFRS com- | Net | PPA | ||||||||||
Revenues | 21,555 | – | – | – | –7 | 21,548 | 21,070 | + 478 | +26 | –359 | + 2.3 | |
Inventory changes and other internally | 1,446 | – | – | – | – | 1,446 | 1,376 | + 70 | –0 | –0 | + 5.1 | |
Other operating income | 1,206 | – | – | – | –2 | 1,204 | 1,232 | – 28 | +1 | –5 | – 2.3 | |
Cost of materials | – 10,743 | – | – | – | –0 | – 10,743 | – 10,396 | – 347 | –10 | +217 | + 3.3 | |
Personnel expenses | – 8,495 | – | – | – | 72 | – 8,423 | – 8,148 | – 275 | –9 | +83 | + 3.4 | |
Other operating expenses | – 2,727 | – | – | – | –1 | – 2,728 | – 2,560 | – 168 | –7 | +54 | + 6.6 | |
EBITDA/EBITDA adjusted | 2,242 | – | – | – | 62 | 2,304 | 2,574 | – 270 | +1 | –10 | – 10.5 | |
Depreciation | – 1,360 | – | – | 30 | – | – 1,330 | – 1,395 | + 65 | –2 | +5 | – 4.7 | |
Operating profit (EBIT) | EBIT adjusted | 882 | – | – | 30 | 62 | 974 | 1,179 | – 205 | –1 | –5 | – 17.4 | |
Net interest income | Net operating interest | – 330 | 13 | – | – | 2 | – 315 | – 332 | + 17 | –0 | +1 | – 5.1 | |
Operating income after interest | 552 | 13 | – | 30 | 64 | 659 | 847 | – 188 | –1 | –4 | – 22.2 | |
Result from investments accounted for using | 8 | – | – | – | – | 8 | 14 | – 6 | – | –0 | – 42.9 | |
Other financial result | 0 | –13 | – | – | – | – 13 | – 23 | + 10 | +2 | +2 | – 43.5 | |
PPA amortization customer contracts | – | – | – | –30 | – | – 30 | – 38 | + 8 | – | +0 | – 21.1 | |
Extraordinary result | – | – | – | – | –64 | – 64 | – 67 | + 3 | – | +1 | – 4.5 | |
Profit before taxes on income | 560 | – | – | – | – | 560 | 733 | – 173 | +1 | –1 | – 23. | |
- The cost of materials increased. This affected higher purchased transport services at DB Schenker as a result of volume gains and increased freight rates. In addition, higher energy costs were a burden on development.
- Personnel expenses also increased significantly. In addition to tariff effects, especially in Germany, the higher number of employees also had an impact.
- Other operating expenses increased significantly. This development was driven by higher rental expenses, in particular for DB Schenker, as well as cost burdens for additional measures in the area of quality and digitalization in Germany.
On balance, expenses increased more than income. Adjusted EBITDA decreased noticeably.
- The decline in depreciation in particular resulted from the adjustment of useful lives of facilities at DB Netze Track due to the change from an accounting approach to an economic approach. This was offset by higher depreciation due to capital expenditures, among other things, for ICE 4 trains.
The development of the adjusted profit figures for the business units was mainly weak. The business units of the integrated rail system generally declined due to factor cost increases, operational restrictions and cost burdens resulting from additional quality measures. In addition, there were operational difficulties at DB Regional and DB Cargo. The Other area also saw a noticeable decline as a result of higher personal expenses and higher project expenses. On the other hand, the profit development of DB Netze Track was positive. Despite burdens, including operational restrictions, DB Arriva was only slightly below the level of the first half of 2017. The results of DB Schenker were slightly better.
EBIT adjusted by | H1 | Change | |||
2018 | 2017 | absolute | % | ||
DB Long-Distance | 206 | 216 | – 10 | – 4.6 | |
DB Regional | 214 | 314 | – 100 | – 31.8 | |
DB Arriva | 106 | 110 | – 4 | – 3.6 | |
DB Cargo | – 127 | – 28 | – 99 | – | |
DB Schenker | 216 | 208 | + 8 | + 3.8 | |
DB Netze Track | 483 | 389 | + 94 | + 24.2 | |
DB Netze Stations | 158 | 150 | + 8 | + 5.3 | |
DB Netze Energy | 12 | 44 | – 32 | – 72.7 | |
Other/consolidation | – 294 | – 224 | – 70 | + 31.3 | |
DB Group | 974 | 1,179 | – 205 | – 17.4 | |
The development of operating income after interest was slightly less negative due to an improvement of the net operating interest. Effects from lower interest rates on refinancing primarily had an effect here.
The decline in net investment income was largely driven by changes at Etihad Rail and London Overground (business was transferred to the fully consolidated Arriva Rail London in the second half of 2017).
The development in other financial result was mainly caused by effects from hedging transactions.
The extraordinary charges were somewhat lower than in the first half of 2017, but this did not materially affect the decline in profit before taxes on income.
Extraordinary charges slightly lower
Extraordinary result | H1 | ||||
2018 | thereof | 2017 | thereof | ||
DB Long-Distance | – | – | – | – | |
DB Regional | 0 | 0 | 28 | 28 | |
DB Arriva | 1 | 1 | 0 | 0 | |
DB Cargo | – 3 | –3 | – 1 | –1 | |
DB Schenker | 0 | 0 | – 1 | –1 | |
DB Netze Track | – 1 | 0 | – 3 | –3 | |
DB Netze Stations | 7 | 7 | – 3 | –3 | |
DB Netze Energy | – | – | – 15 | –15 | |
Other/consolidation | – 68 | –67 | – 72 | –72 | |
DB Group | – 64 | –62 | – 67 | –67 | |
There was no substantial change in the extraordinary result, which was composed inter alia of the following special items:
- Expenses in connection with restructuring measures (DB Cargo),
- Effects of civil proceedings in connection with infrastructure charges (DB Netze Track, DB Netze Stations),
- Expenses from the formation of provisions for employee contractual obligations (Other).
In the first half of 2017, the extraordinary result comprised, among other things, the following special items:
- Effects from vehicle assignments (DB Regional),
- Effects associated with the financing of Germany’s nuclear phase-out (DB Netze Energy) and
- Expenses from the formation of provisions for employee contractual obligations (Other).
Profit after taxes also weaker
Excerpt from statement | H1 | Change | |||
2018 | 2017 | absolute | % | ||
Profit before taxes on income | 560 | 733 | – 173 | – 23.6 | |
Taxes on income | 2 | 46 | – 44 | – 95.7 | |
Actual taxes on income | – 99 | – 82 | – 17 | + 20.7 | |
Deferred tax expenses | 101 | 128 | – 27 | – 21.1 | |
Net profit (after taxes) | 562 | 779 | – 217 | – 27.9 | |
DB AG shareholders | 554 | 766 | – 212 | – 27.7 | |
Other shareholders | 8 | 13 | – 5 | – 38.5 | |
The decline in profit before taxes on income was exacerbated by the development of the income tax position. Higher income tax risks abroad as well as the declining development of the deferred tax position at DBAG had an effect here. The improvement in the expected use of tax loss carryforwards did not reach the level of the first half of 2017. Net profit (after taxes) therefore fell more sharply.