Deutsche Bahn ready for partial privatization in 2008

2006 most successful year in the company's history. Significant rise in transport performance, revenues up 20 percent, EBIT increases to EUR 2.5 bn

News Item Entered: Thursday, March 29, 2007

(Berlin, March 29, 2007) In the 2006 financial year, Deutsche Bahn AG achieved all its business goals on its way to partial privatization. “From the company's viewpoint, private investors will be able to invest in DB in 2008,” said DB's Chairman and CEO Hartmut Mehdorn today in Berlin at the Annual Results Press Conference. At the same time, jobs in the Group were secured. This means that the most successful year in DB's history will also benefit the workforce and Germany's economy. Mehdorn: “We again attracted more traffic to rail, significantly increased revenues and profit and expanded our position as a leading international logistics service provider.”

DB AG has never before achieved such a high level of rail passenger and freight transport performance. This is also one of the reasons why the annual report presented today revealed improvements in all key operational and financial performance figures. The number of passengers was up 3.9 percent to 1.85 billion, while DB AG achieved an increase of 10 percent in rail freight to 96.4 billion ton kilometers. The shipment volume in European land transport increased by 10 percent. On the global air freight market, 16 percent growth in export volume was reported, with an increase of 18 percent in global ocean freight.
The financial performance figures also showed positive growth. Revenues were up EUR 5.0 billion to EUR 30.1 billion, operating profit (EBIT - Earnings Before Interest and Taxes) was up EUR 1.1 billion to EUR 2.5 billion; adjusted for special items, to EUR 2.1 billion. Net profit for the year came to EUR 1.7 billion and was thus EUR 1.1 billion above the previous year's level.

For the 2007 financial year, the DB Group anticipates a slight increase in revenues and operating profit before special items. “In 2006, we demonstrated that our strategy is the right one and that DB AG is a dynamic company that is fit for the future,” said Mehdorn.

Significant improvement in revenues and profitability
The year under review was positively influenced in particular by an excellent economic environment, extensive improvements in rail services, the opening of new rail infrastructure, the success of the World Cup, plus the excellent and strengthened presence of the DB Group in all international growth regions. This has allowed us to consolidate and even expand the leading position the DB Group holds in its target markets.

Significant increases in rail passenger and freight transport performance and in the company's global logistics business were major factors leading to 20 percent or EUR 5.0 billion growth in revenues to a total of EUR 30.1 billion (previous year: EUR 25.1 billion). On a year-on-year basis, i.e. excluding in particular the US logistics service provider BAX Global acquired in 2006, the increase in revenues amounted to 8 percent.

Chief Financial Officer Diethelm Sack: “In the 2006 financial year we reported a further significant increase in profitability. This means we are still on schedule on the way to achieving our target performance figures.”

Gross capital expenditures at EUR 6.6 billion were again at a high level (previous year: EUR 6.4 billion), which meant that the DB Group in 2006 was once again one of the biggest investors in Germany.

Positive performance of business units
The positive performance of the DB Group was due to the contributions made by the business units. The operational and financial performance reported by the business units was overall very positive. Outstanding performance was achieved by the Railion business unit in particular, where it was possible to return to clearly positive operating results earlier than expected. The Long-Distance Transport business unit confirmed the turnaround achieved in the previous year and once again reported improved earnings. Schenker achieved strong growth rates both in absolute and in relative terms. This is the case when including recently acquired companies (in particular BAX) as well as on a comparable basis. The Regional Transport business unit was able to further increase the positive results of the previous year. The Urban Transport business unit also developed positively and increased its result compared with 2005.

Rail increases market share
Rail passenger transport performance reported by the DB Group in the 2006 financial year was up 3 percent to 74.8 billion passenger kilometers. This represents a further increase in market share in an overall slightly declining German passenger transport market. Transport performance in rail freight was up 10 percent to 96.4 billion ton kilometers. Rail transport in Germany overall – i.e. including DB's competitors – reported excellent performance, with double-digit growth rates in both the passenger and freight transport. At 12 percent in 2006, rail reported the highest growth rate of all modes of transport in the German freight transport market.

DB CEO Mehdorn: “The significant increase in rail transport performance in Germany and the increase in market share show that environment-friendly rail can compete successfully with other modes of transport.”

The global logistics markets also reported high growth rates in 2006. Even without the inclusion of BAX, Schenker performed very well: with the integration of the US logistics service provider BAX Global into the Schenker business unit, which began in the 2006 financial year, the DB Group has significantly strengthened its competitive position in the global transport and logistics markets and now ranks second worldwide in this sector.

2007 financial year: further increases in revenues and EBIT targeted
The DB Group expects an overall positive business performance for the current year, with a slight increase in revenues. The outstanding EBIT improvement reported in the 2006 financial year reflects the impact of special items, in particular the effects of the decision taken by the German Federal Administrative Court on policing services provided to Deutsche Bahn by the Federal Border Police. As a result, EBIT is not likely to reach the level it achieved in the 2006 financial year. Adjusted for special items, the DB Group however expects EBIT to increase further. The DB Group will thus continue its upward trend that it has been pursuing for some years.

“The year 2007 will be a very decisive one for the DB Group,” said Mehdorn. “We got off to a good start. At the end of the first two months, the Group's financial performance is once again better than in the previous year. Of vital importance for the further development of the DB Group now, of course, is the debate on how the privatization of Deutsche Bahn AG will be handled. The general conditions will now have to be created to ensure that the DB Group is able to compete in all of its markets as a European champion deeply rooted in its German domestic market.”