Deutsche Bahn IPO still set for 2006
Deutsche Bahn, the German rail operator and owner of freight companies Stinnes and Schenker, has released its results for the first quarter of 2004. Its losses in the quarter decreased to €82m from €120m on sales of €5.7bn, largely as a result of the consolidation of the profitable Stinnes group within its freight transport division. However this was €17m more than expected due to losses in the company’s long-distance division.
The company made a forecast that it would achieve sales of €23bn in 2004, with a positive operating result after interest. The Chairman has also re-iterated his intention to take the company public through an IPO in early 2006. However this intention has come under attack from many German politicians and it will need agreement by both German legislative assemblies if it is to be possible. Critics believe that the company should only be privatized if it has been able to show a number of years’ profitability. The company made an operating loss of €177m in 2003 which shows this will be difficult to achieve.
However the chairman may well find support for the privatisation of the company at the highest level in the German government. This is due to the need to plug the country’s budget deficit which is likely to breach the eurozone’s stability and growth pact. This limits deficits to only 3% and with indications that federal tax revenues will be €8.3bn short of forecasts in 2004 and €9.3bn in 2005, there is a considerable probability that the limit will be exceeded. Given that raising taxes or cutting public expenditure would, in the view of the government, stifle economic recovery, selling off state owned organizations such as Deutsche Bahn and its remaining stake in Deutsche Post, could be the most acceptable political solution.
