Profit development under pressure
Transition to the adjusted statement of income
The transition to the adjusted statement takes place in two stages. The procedure for reclassification and adjustments (2018 Integrated Report) is unchanged.
Operating profit figures declined
The following presentation describes the changes in the key items on the statement of income, adjusted for special items. The effects of the changes in the scope of consolidation and exchange rate effects are presented in the above table and are not explained further in the following section.
Exchange rate effects in the first half of 2019 had a negligible boosting effect on income and expenses overall. Effects resulting from changes to the scope of consolidation were not significant.
Economic development remains challenging. Adjusted EBIT developed significantly weaker. Offsetting the burden of additional expenses for measures to expand capacity (especially personnel), improve quality and for digitalization and factor cost increases (especially in Germany) was only partly possible with revenue increases. The growth in adjusted EBITDA was influenced by effects from the first-time application of IFRS 16.
- The revenue development remained positive.
- Other operating income was lower primarily as the result of lower income from the release of provisions, the drop in income from the sale of a building and lower compensation by the Federal Government for level crossings due to accounting factors. The effects of train-path price support for rail freight traffic (opposing effects in revenues) had a key positive influence.
On the expense side, there were noticeable additional strains, above all in the case of personnel expenses:
- Cost of materials increased slightly. Higher purchased transport services had an impact on this at DB Schenker and DB Cargo, among other things as a result of volume increases. In addition, higher infrastructure usage fees and maintenance expenses negatively impacted development.
- Personnel expenses increased significantly. In addition to tariff effects, especially in Germany, the higher number of employees also had an impact.
- Other operating expenses fell significantly in comparison. The main reason for this was the absence of leasing expenses as operating expenses through the firsttime application of IFRS 16 (opposite effect in depreciation).
- Depreciation increased, mainly due to the IFRS 16 effect. Higher depreciation on vehicles also had an effect.
The operating income after interest fell even more sharply due to the weaker net operating interest. This was mainly due to effects from higher interest rates for leases as a result of the capitalization of rental agreements previously treated as operate leases (IFRS 16). Interest effects from the valuation of pensions and effects from hedges partly offset each other.
The net investment income developed at a significantly weaker rate. The key factor here is GHT Mobility GmbH, which has been included in the consolidated financial statements since 2019 as an at-equity company.
The development in the other financial result resulted mainly from securities from hedging transactions.
The extraordinary charges rose significantly at a low level.
| Extraordinary result (€ million) | H1 | ||||
2019 | thereof | 2018 | thereof affecting EBIT | ||
DB Long-Distance | – | – | – | – | |
DB Regional | 0 | 0 | 0 | 0 | |
DB Arriva | – 26 | –26 | 1 | 1 | |
DB Cargo | – 2 | –2 | – 3 | –3 | |
DB Schenker | – 1 | –1 | 0 | 0 | |
DB Netze Track | – 2 | –1 | – 1 | 0 | |
DB Netze Stations | 3 | 3 | 7 | 7 | |
DB Netze Energy | – | – | – | – | |
Other / consolidation | – 69 | –69 | – 68 | –67 | |
DB Group | – 97 | –96 | – 64 | –62 | |
The extraordinary result in the first half of 2019 consisted of the following special items, among other items:
- Expenses from the formation of provisions for employee contractual obligations (other).
- Effects of adjusting pension provisions as a result of the mandatory abolition of gender inequalities in guaranteed minimum pensions in Great Britain (DB Arriva).
- Effects arising from restructuring measures (DB Cargo, DB Arriva and DB Schenker).
The composition of the extraordinary result in the first half of 2018 is shown in the 2018 Integrated Interim Report shown.
Profit after taxes clearly strained
Excerpt from statement of income (€ million) | H1 | Change | |||
2019 | 2018 | absolute | % | ||
Income before taxes on income | 277 | 560 | – 283 | – 50.5 | |
Taxes on income | – 72 | 2 | – 74 | – | |
Actual taxes on income | – 90 | – 99 | + 9 | – 9.1 | |
Deffered tax income | 18 | 101 | – 83 | – 82.2 | |
Net profit (after taxes) | 205 | 562 | – 357 | – 63.5 | |
DB AG shareholders | 198 | 554 | – 356 | – 64.3 | |
Other shareholders | 7 | 8 | – 1 | – 12.5 | |
The significant decline in profit before taxes on income was exacerbated by the development of the income tax position. The driver was the growth in deferred taxes. Better use of tax loss carryforwards was still expected for DB AG in the first half of 2018. Taxes on income therefore fell even more sharply.
Development of business units mostly strained
| EBIT adjusted by business units (€ million) | H1 | Change | |||
2019 | 2018 | absolute | % | ||
DB Long-Distance | 224 | 206 | + 18 | + 8.7 | |
DB Regional | 186 | 214 | – 28 | – 13.1 | |
DB Arriva | 101 | 106 | – 5 | – 4.7 | |
DB Cargo | – 132 | – 127 | – 5 | + 3.9 | |
DB Schenker | 238 | 216 | + 22 | + 10.2 | |
DB Netze Track | 379 | 483 | – 104 | – 21.5 | |
DB Netze Stations | 123 | 158 | – 35 | – 22.2 | |
DB Netze Energy | 23 | 12 | + 11 | + 91.7 | |
Other / consolidation | – 385 | – 294 | – 91 | + 31.0 | |
DB Group | 757 | 974 | – 217 | – 22.3 | |
The development of the adjusted profit figures varied between the business units, but was largely challenging. The business units in the integrated rail system declined significantly overall due to additional expenses for capacity and quality measures as well as factor cost increases. The division Other also recorded a noticeable decline due to higher expenses for Group projects to improve quality, high performance and safety, along with personnel expenses. The profit development of DB Schenker, DB Long-Distance and DB Netze Energy had a positive effect.