The German railway holding is considering resuming plans to sell a small stake in its international subsidiaries, Arriva (passenger transport) and Schenker (logistics division). The idea has been resumed with the intention of getting additional funds for much-needed investments in the modernisation of the national railway transport system.
“In the next months, we will discuss whether to resume plans of launching an initial public offering (IPO)”, declared for the German press Richard Lutz, the CEO of Deutsche Bahn. He added that the final decision also depends on the vision of the German Federal Government. Lutz said he was grateful for the support of the governing coalition, led by German Chancellor Angela Merkel, a support according to which the railways need development in order to reduce carbon dioxide levels. In the past couple of years, the German railway transport has enjoyed political support. In 2016, Deutsche Bahn postponed the idea of selling stakes in its international subsidiaries, Arriva and Schenker, after the UK announced plans to exit the European Union.
But now, in 2018, the German holding is considering this decision once again.
Although in September Deutsche Bahn received funds of EUR 1 billion from the German Treasury to buy new high-speed trains and upgrade its existing fleet of vehicles, the infrastructure division of the company continues to record debts. The level of these debts amounts to EUR 20 billion and the necessity of investing in infrastructure is critical.
“We definitely need to invest more to upgrade the German railway infrastructure”, declared Richard Lutz reminding of the numerous train delays and cancellations, caused mainly by obsolete rolling stock and specific constraints imposed by the railway infrastructure capacity.
Its logistic division, Schenker, has a value of EUR 16 billion which means more than third the sales of DB Holding. Moreover, Schenker and Arriva provide reliable profits. Arriva generates revenues of over EUR 5 billion. However, the national railway activity has been struggling in Germany for years, mostly in the freight sector.
In the first six months of 2018, Deutsche Bahn has a 2.3% increase of revenues, to EUR 21.6 billion, but its operational profit dropped by 17.5% to EUR 974 million.