For months there has been much speculation about a spin-off of the logistics giant from parent Deutsche Bahn Group. On Thu, 15DEC, the government in Berlin made a preliminary decision. It envisages two options: Sale or no sale.
What at first glance seems to be contradictive makes sense when taking a closer look: Schenker should only be sold, the government says, if this step is "financially advantageous compared to DB Schenker remaining part of the DB Group." So far, it is completely nebulous which criteria are decisive for or against a spin-off decision. Will it be annual sales figures, profitability, future growth and earnings prospects? And if so, for what period of time? To this date, the government has not provided any answers to these questions.
Only one person raised his voice: Transport Minister Volker Wissing, from the Liberal party, the smallest in the three-party coalition with the Social Democrats and the Greens being the other members. “I think selling Schenker is the right step, because it is key for Deutsche Bahn to focus on its core business," Wissing told TV station RTL on Friday (16DEC22). In the interview he questioned whether a logistics provider like Schenker needs to be part of Deutsche Bahn at all: "Because such a company must focus on its international business, while Deutsche Bahn’s priority is to ensure that rails, trains and the network are in proper condition." To get DB out of the vale of tears, much money is needed for modernization measures coupled with digitalization, the market-oriented Liberal said.
Waiting has to go on
Schenker is currently DB Group's only earnings machine. With an operating profit of 1.2 billion euros in the past fiscal year, the logistics company was the main financial pillar of the otherwise loss-making rail group. In stock market circles, it is estimated that a sale of the logistics company could channel between 22 to 25 billion euros into the coffers of the rail group. Taking this profit as a yardstick for the coming decades, Schenker would need around 20 years to match this sum. In the end, politicians are likely to prefer quick money, market experts predict. This is also because the rail company’s deficits continue to rise. In July, when half-year figures were presented, they stood at 30.5 billion euros.
Now the government will put the two options, to sell or not to sell, under the microscope. Insiders expect a final decision in the second quarter of 2023
Air freight is one of DB Schenker’s mainstay of earnings. We spoke to the Chairman of the German Air Cargo Association (ACD), Christopher Stoller, about his organization's position on a possible sale of DB’s logistics pillar.
CFG: Exactly 20 years ago, Deutsche Bahn purchased Schenker. The reason at the time was to create an integrated logistics group that would cover all modes of transport under one roof. Now the partition of Schenker from the group becomes apparent. Does that make sense or not?
CS: A logistics company like Schenker is part of the critical infrastructure, just like the fire department or the technical relief organization, for example. The pandemic has shown how important the services of such companies are. Spinning-off Schenker from the Deutsche Bahn Group would be a big mistake.
CFG: The parent company is heavily indebted, and enormous funds are needed to restructure Deutsche Bahn. Billions channeled by a future Schenker investor into the empty coffers of DB could certainly contribute to the group’s financial recovery.
CS: It's the state's responsibility to keep trains, tracks and the entire rail network in proper shape. This must be paid for out of taxpayers' money and not by selling off a highly profitable logistics subsidiary. Germany should take France as an example. There, Geodis has become the logistics arm of the national rail group SNCF. What’s good for France might be beneficial for Germany as well.
CFG: If Schenker were to be sold, its rail business, which it jointly operates with DB rail subsidiary DB Cargo, would presumably also disappear. That could drive the company’s sales price south.
CS: In that case, the question is how Schenker can organize its rail transports in the future, which are an important part of the service portfolio. But irrespective of this specific aspect, we at the ACD believe that it is the government’s task to safeguard the supply chains by means of an integrated logistics group. This requires an excellently networked global service provider like DB Schenker, equally engaged in air and ocean freight, surface transportation, warehousing, and project logistics.
CFG: Professor Stoller, thank you for your considerations.
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