I. Germany
(I) Development Overview
In the challenging background of ongoing inflation and
continuously declining freight rates in the international freight market,
Deutsche Bahn AG (DB AG) experienced poor operational performance and failed to
continue its profitability in 2022 in the first half of 2023 despite a
favorable passenger transport situation. Operating revenue
in the first half of 2023 was EUR 25 billion, with a year-on-year decrease of
10% compared with EUR 28 billion over the same period of the previous year, and
the adjusted EBIT was EUR 331 million, reflecting a year-on-year decrease of EUR 500 million or 62% compared to the same period in 2022. The significant deviation in
performance in the first half of 2023 compared to the same period in 2022 was
directly attributed to the normalization of air and ocean
freight
rates, increased transportation costs, and substantially higher expenses
incurred by DB AG in infrastructure maintenance, upgrade,
and
renovation. Due to the neglect of infrastructure investment over the past
decade, outdated infrastructure has failed to meet the rapidly recovering
transportation demand. Insufficient transport capacity and declining
punctuality have become common problems faced by DB AG. In response, DB AG,
with the support of the federal government, has invested
at record levels in the renewal and construction of the rail network in
order to create
a high-performance network in the next decade.
(II) Operation
The railway passenger transportation business of DB AG
experienced significant growth, becoming the main driver of operating revenue
growth for DB AG. In the first half of 2023, the volume of passenger traffic
and the
turnover volume of passenger transport of DB AG reached 990 million passengers
and 41.196 billion person-kilometers respectively, representing a respective
year-on-year increase of 7.9% and 13.1%. The operating revenue of long-distance
and short-distance railway passenger transport reached EUR 2.872 billion and
EUR 4.749 billion respectively, representing a respective increase of 35.2% and
5.8%. The volume of long-distance passenger turnover
of DB AG
reached 21.7 billion person-kilometers in the first half of 2023, with an
increase of 19% compared with that over the same period in 2022, breaking the
passenger transport record set in the first half of 2019. The introduction of Germany-Ticket,
which is valid for local public transport nationwide, has to some extent driven the growth of
passenger demand. Priced at EUR 49 per month, this ticket allows unlimited
rides on all local commuter trains and on
local public
transport nationwide. However, long-distance passenger
trains, including high-speed trains, are not included. The
punctuality of
DB Long-Distance
fell from 69.6% in the first half of 2022 to 68.7% in the first half of 2023
due to railway network renewal in Germany progressing at record levels.
DB Cargo, the freight subsidiary of DB AG, continued to
suffer losses, mainly due to a challenging environment in rail freight transport,
significantly increased electricity prices compared to
fuel,
and low market dynamic. In the first half of 2023, the volume
of freight traffic and turnover of DB AG were 104
million tons and 38.644 billion ton-kilometers respectively, with a respective
year-on-year decrease of 10% and 11.2%. The operating revenue
of DB Cargo
was EUR 2.889 billion, with a year-on-year increase of 9.8%.
The development of the global logistics market directly
influenced the performance of DB Schenker, a logistics subsidiary of DB AG. DB
Schenker’s positive contribution to the group’s performance is three times higher
than that before the COVID-19. In 2022, DB Schenker achieved its highest revenues
and profits
in its
history, with one of the key reasons being that global air and ocean freight rates were at their peak at
that time. In the first half of 2023, with the normalization of global freight
rates, DB Schenker’s operating revenue was EUR 10.08
billion, with a year-on-year decrease of 28.8%; the EBIT was EUR 628 million,
with a year-on-year decrease of 32%.
Despite financial difficulties, DB AG still significantly
increased investment spending to provide better infrastructure. In the first
half of 2023, the net capital expenditure of DB AG increased by 13.1% to EUR
3.1 billion, setting an all-time record for investment in the first half. The total
subsidies for infrastructure investment from DB AG and the federal government
increased by 16.7%, reaching EUR 6.3 billion, setting a new record. More than
90% of the investment expenditure was spent on improving railway
operations in Germany, including lines, stations, and trains.
(III) Future
Development Trend
Although the demand for railway passenger and freight
transport in Germany recovered faster than expected from the impact of the
COVID-19, and the use of railway infrastructure reached the level before the
COVID-19, the declining ocean freight rates, rising interest
rates, and continuous inflation resulted in the overall
challenging situation for DB AG in 2023. DB AG will have to offset the negative
impact of rising costs with higher productivity and
profitability.
Due to the ongoing market fluctuations, all forecasts are subject to
significant uncertainty.
II. France
(I)
Development Overview
From 2022 to the first half of 2023, SNCF has significantly
improved its business performance. SNCF Voyageurs saw a significant increase in
volume of passenger traffic in terms of the business performance
of various sectors of SNCF Group, reflecting the attractiveness of
rail and high-speed rail to the commuters and leisure travelers in France and
Europe;
Geodis continued to grow at a high rate, confirming its position as the second
pillar of SNCF Group; Keolis consolidated its market position through the
renewal of major contracts; Fret SNCF continuously made profits; SNCF Réseau achieved
its multi-billion euro target aimed at renewing the core network. By the end of
June 2023, SNCF Group had a total of 280,220 employees.
(II)
Transport Operation
In terms of railway transport, according to the statistics
of the UIC, for SNCF Mobilités, the volume
of passenger traffic
was 1.132 billion persons in 2022, increasing 28.6% from 880 million persons in
2021; the volume of passenger turnover was 100.814 billion person-kilometers,
with an increase of 34.3% from 75.058 billion person-kilometers in 2021; the
volume of freight transport was 31 million tons, with a decrease
of 6.1% compared with 33 million tons in 2021; the volume of freight turnover
reached 15.869 billion ton-kilometers, being basically equal to that (15.87
billion ton-kilometers) in 2021.
In terms of the profitability, SNCF Group showed strong
performance in 2022, with revenue reaching EUR 41.45 billion, representing an
increase of 19% compared to 2021 and 18% compared to 2019. EBITDA increased by
55% compared to 2021, and the EBITDA-to-revenue ratio was 16%, higher than
12.5% in 2021. In the first half of 2023, SNCF Group posted a turnover of EUR
20,723 million, with an increase of 2.2% compared to EUR 20,270 million in the
first half of 2022. EBITDA was EUR 2,771 million, with a decrease from EUR
2,983 million in the same period in 2022; the Group’s net profit was almost EUR 200
million and the EBITDA-to-turnover ratio was 13.4%; SNCF Group’s net debt amounted to EUR 23,893
million, representing a decrease of EUR 546 million compared with EUR 24,439
million at the end of 2022.
In
terms of profit and reinvestment, SNCF Group’s net profit increased from EUR 900
million in 2021 to EUR 2.42 billion in 2022 thanks to the railway reform
program of the Government of France (including the assumption by the state of SNCF
Réseau’s debt of EUR 35 billion in two
tranches) as well as the group’s dynamic sales strategy and strict
management. All profits will be used to reinvest in the railway, with major
areas of expenditure including improving the network, driving growth, funding
the group’s core railway business and controlling debts. SNCF Group’s international business revenue
continued to grow, with 40% of its operating revenue in
2022 coming
from the international market.
(III) Future
Development Trend
SNCF
Group is a major industrial consumer of electricity in France, committed to tackling the
energy crisis by accelerating the transition towards renewable energy and
continuing to contribute to sustainable development of its business. SNCF has launched an energy
efficiency program with the goal of reducing energy consumption by 10% by 2024,
increasing the use of renewable energy, making rolling stock more
environmentally friendly, thus advancing a
circular economy.
SNCF
Group said that 2022 witnessed strong performance; in the first half of 2023,
the operating revenue continued to increase and the net debt continued to
decrease. In the future, SNCF will continue to increase the share of railways
in daily traffic, invest in renovating railway networks and stations, purchase
new high-speed trains, and continuously improve passenger satisfaction.
III. Japan
(I) Development
Overview
In 2022, volumes of
passenger traffic and
turnover of Japan’s national railways rebounded sharply, both recovering
to about 80%
of the normal levels before the COVID-191; both volumes of
freight traffic and turnover
declined slightly year on year, basically about 90% of the normal levels before
the COVID-19. The volumes of
passenger traffic and
turnover of JR East have been improving day by day, and the operating
income
increased by 21.6% year-on-year. The income from
passenger transport has
continued to increase, and the income of diversified operations has increased steadily. JR East has
successfully made up the deficit states during the COVID-19, with a profit
of JPY 99.232 billion.
(II) Transport
Operation
In terms of transport, in the fiscal year 2022 (April 1,
2022-March 31, 2023), Japan’s national volumes
of passenger traffic
and turnover
increased steadily to 21.05 billion passengers and 352.85 billion
person-kilometers respectively, with a respective year-on-year increase of 12%
and 21.7%. JR’s volumes of
passenger traffic and
turnover were 7.88 billion passengers and 217.51 billion person-kilometers
respectively, with a respective year-on-year increase of 11.7% and 27.8%. The volumes of
freight traffic and turnover
of national railways decreased slightly, with a
year-on-year decrease of about 1.7% and 0.3% respectively to 38.264 million tons
and 17.98 billion ton-kilometers. The volumes
of passenger traffic
and turnover
of JR East, a representative enterprise, increased by about 11%
and 17.8% respectively to 5.32 billion passengers and 107.48 billion
person-kilometers. From April to September 20232, the volumes
of passenger traffic
and turnover
of JR East continued to increase, with a year-on-year increase of about 8% and
13.7% respectively to 2.85 billion passengers and 59.66 billion
person-kilometers. The volume of passenger turnover of Shinkansen was
10.3 billion person-kilometers, with a year-on-year increase of about 40.5%,
showing a steady recovery trend in passenger flow.
In terms of operation, JR East has significantly improved
its operating performance, make up the deficits and get
surpluses in fiscal year 2022. The operating income rose by
21.6%
year-on-year to JPY 2.4055 trillion, and the net profit stood at
JPY 99.232 billion. From April to September 2022, Both the
operating
income and the operating revenue
of JR East
increased, and the operating income was about JPY 1.29983 trillion, with a year-on-year increase
of about 16.57%, including revenue from passenger transport
of about JPY
903.196 billion, with a year-on-year increase of about 16.6%; With the steady
recovery of passenger flow and the ongoing development of non-transport business, the company’s operating performance continued to
improve, with the operating revenue of about JPY 191.8 billion. The growth
rates of the passenger transport business and non-transport business reached 584% and 52% respectively.
In October 2022, JR East planned to achieve the operating
income of about JPY 2.696 trillion in the 2023 fiscal year, with
an increase of about 12% over the previous year; the operating revenue was
expected to reach JPY 270 billion, with an increase of about 92% over the
previous year. It shows a
trend of
continuous improving
business recovery of JR East.
(III) Future
Development Trend
As the pioneer of Japan’s railway industry, JR East will lead the transformation of the railway operation mode, realize development of main business and diversified business with equal priority, reform the personnel and salary system, etc., to meet many challenges such as negative population growth and aging society in the post-COVID-19 era, and stabilize the operating foundation. The main measures include: developing railway tourism and sightseeing business, expanding population mobility, supporting the development of core cities centered in local economy, driving the development of local industries, promoting local digitalization through MaaS and Suica binding services, and allowing company employees to work part time in the company’s planning department or other companies to accumulate rich work experience. In addition, under the impact of the COVID-19, in order to better achieve the goal of the company’s strategic plan “Move Up” 2027, JR East adjusted some target values in its strategic plan in April 2023. It planned to achieve the following objectives by the end of March 2028: an operating income of JPY 3.276 trillion, operating revenue of JPY 410 billion, and a visitors-to-Japan tourism income of JPY 56 billion; no major safety accidents or railway accidents due to external causes; PSDs to be installed in 330 stations, 100 locations of 5G
