DB Cargo, the troubled German state-owned rail freight operator, is about to post further substantial losses. Our sister service, RailFreight.com has seen figures, ahead of their publication later this week, which make uncomfortable reading. The operator made a loss of around 350 million euros in 2024. That figure is an improvement on the record losses posted in the previous year.
Deutsche Bahn will present its 2024 figures on 27 March, but numbers on DB Cargo are already circulating. For example, the German publication Tagesspiegel reports an EBIT of minus 356 million euros. At the same time, the publication Deutsche Verkers Zeitung (DVZ) says that it had a similar number confirmed by DB Cargo CFO Martina Niemann in early February. The company, which the European Union has obliged to become profitable by 2026, is struggling to improve its financial position despite restructuring proceedings.
Divested of loss-making transports
“DB Cargo incurred by far the biggest share of the loss in the first half of the year: 291 million euros,” reported Dennis van der Laan at RailFreight.com. “The remaining 65 million euro losses appeared on the balance sheet in the second half of the year.” The second half losses were mitigated by a “single wagon load subsidy” during those months, which supported what was likely to be the least profitable part of the operation. That amounted to approximately €180m.
Remarkably, the €350m loss represents an improvement compared to 2023. In that year, DB Cargo lost almost half a billion euros and caused a national scandal. Earlier this year, Martina Niemann, the company’s chief financial officer, told German media that some parts of DB Cargo have been able to make financial improvements. She mentioned administrative and production management expenses (€60m) as well as portfolio streamlining. “We divested ourselves of loss-making transports, achieved price increases in all areas, and were thus able to offset losses from cyclically driven downturns”, Niemann is reported as saying to DVZ.
State subsidies must be repaid in future
State subsidy of the rail freight operation is not permitted under European Union frameworks. Last year, the EU banned any further financial aid to DB Cargo from its parent company, Deutsche Bahn. The freight operator will have to make do with its own financial resources. However, last year, the EU did approve €1.9bn in government aid to help the company implement a restructuring programme designed to make the operations more competitive.
There is pressure on DB Cargo to start turning profits. The rail freight operator may be required to start paying back government aid by requirement of the EU. To facilitate this, DB Cargo has set about a radical restructuring. However, this programme has been met with no enthusiasm.“These restructuring concepts are unconvincing, cause an annoying number of operational problems, and there is still a lack of adherence to the plans”, a supervisory board member is quoted in an interview with Tagesspiegel, and reported by RailFreight.com.
Radical restructuring meets lukewarm reception
The operator faces challenges on many fronts. In broad terms, other operators and other modes are already in the space DB Cargo seeks to occupy. German railways are also expensive to run. The fall in standards on the passenger network (once regarded as a paragon of efficiency) has rubbed off on the freight operation. Whether or not that is justified is a matter of debate. However, the industry in Germany is still considered an excellent career choice and German railway staff are well-paid. That, and other operational factors, are reflected in the charges levied by DB Cargo. All this is making it tough for DB Cargo to win business.
DB Cargo UK, which operates as a separate company, has had a similarly challenging financial history of late. Only last year, it faced up to a loss of around €100m, on a much smaller operation than its German counterpart. Unlike the UK, DB Cargo is proposing a restructuring that entails breaking up the company into six separate business units. They will be: Steel, Automotive, Liquids & Bulk, Full Load Solutions, and the largest single wagon network in Europe. Combined Transport (maritime and continental) will also remain within DB Cargo’s portfolio. The lead trade union EVG pressured heavily for the latter. However, the restructuring, if carried through, will lead to 2,300 jobs being lost. DB Cargo is far from seeing a green signal ahead.
Additional reporting by Dennis van der Laan at RailFreight.com