Deutsche Post AG

Business and Financial Review • Nov 10, 2008

News Details

Ad-hoc | 10 November 2008 13:48

Deutsche Post AG: Deutsche Post World Net takes strong action to reduce U.S. Express loss, improve Group performance in light of economic downturn

Deutsche Post AG / Strategic Company Decision

Release of an Ad hoc announcement according to § 15 WpHG, transmitted by
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The issuer is solely responsible for the content of this announcement.

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Deutsche Post World Net takes strong action to reduce U.S. Express loss,
improve Group performance in light of economic downturn

• DHL Express to focus on international competencies in the U.S. and exit
U.S. domestic air and ground business
• Roadmap to Value program intensified amid challenging economic
environment – savings of 1 billion euros targeted

Bonn, Nov. 10, 2008: Deutsche Post World Net will focus its express
business in the U.S. on its core international competencies and exit the
domestic air and ground express service in the country by the end of
January. The international express offering in the U.S. will be maintained
on today’s levels and the region will remain an integral part of DHL’s
global Express network. Deutsche Post World Net also plans to accelerate
its Roadmap to Value measures aimed at improving profitability throughout
the Group by reducing operating and non-operating expenses in order to
prepare the company for the economic challenges ahead.

The Group today also reported results for the first nine months of the
year. Nine-month underlying EBIT from continuing operations rose 1.3
percent to 1.6 billion euros, with revenue in the period increasing by 2.3
percent to 40.5 billion euros. About 70 percent of revenue in the first
nine months was generated outside of Germany.

DHL U.S. EXPRESS restructuring

In order to minimize future uncertainties at its DHL U.S. Express business
to a minimum, the Group will discontinue U.S. domestic-only air and ground
products on January 30 to focus entirely on its international offering.
Annual operating costs at DHL U.S. Express will be reduced from the current
$5.4 billion (4.2 billion euros) to less than $1 billion (770 million
euros). In order to reach this target, DHL U.S. Express will close all
ground hubs and reduce the number of stations from 412 to 103. A total of
9,500 jobs at DHL Express in the U.S. will be cut as a result of the
measures on top of the approximately 5,400 positions already reduced since
the beginning of the year. The Group expects to spend an additional $1.9
billion (1.5 billion euros) on the restructuring, bringing the total Group
costs to $3.9 billion (3 billion euros) over two years, the majority of
which will be booked in 2008. As a result of the restructuring measures,
losses at the DHL U.S. Express business are now likely to amount to $1.5
billion (1.2 billion euros) in 2008 before one-off costs. For 2009, the
loss is expected not to exceed $900 million (692 million euros) and to
stabilize at an annualized level of below $400 million (308 million euros)
in the fourth quarter of 2009. By ceasing domestic Express offerings in the
U.S., DHL retains an operating business in the country with a more
predictable performance going forward. The value the U.S. Express business
generates for the global Express network will clearly exceed the annual
losses. The Group still aims for the global DHL Express business to
generate its cost of capital in 2010.

The retained U.S. international express network with a total of 3,000 to
4,000 employees will be tailored to the needs of the Group’s international
express service customers. All international shipments into the U.S. will
still be delivered, while 99 percent of the outbound shipments will be
picked up.

The U.S. remains a key market for Deutsche Post World Net. The service of
DHL’s other business in the U.S. - Supply Chain/CIS, Global
Forwarding/Freight and Global Mail – will be unaffected by the
restructuring measures at Express. The Group will continue to invest in
these successful U.S. units, which together employ more than 25,000 people
in the country, and remains committed to developing their businesses in the
future.

Roadmap to Value

The Group has made sound progress with its Roadmap to Value initiatives
aimed at improving profitability and strengthening its focus on cash
generation throughout the company. Deutsche Post World Net is on track to
achieve the targeted 500 million euros in profit improvements and cost
reductions in 2008. Good progress has also been made in reducing working
capital with an improvement of 380 million euros year-on-year, putting it
on track to meet its target of cutting 700 million euros in net working
capital by the end of next year. Transparency has been improved over the
past year by providing more detailed figures and will improve further. For
example, the Group intends to change the way it reports pensions: Starting
in the first quarter of 2009, expected return on plan assets will no longer
be included in EBIT but booked in the financial result. The change will
have no impact on profit before taxes.

To prepare the business for a more challenging economic environment,
Deutsche Post World Net has stepped up its Roadmap to Value program with
additional initiatives. Putting a strong focus on strict cost reduction,
the Group now aims to reduce operating and non-operating spending across
all businesses by 1 billion euros by the end of 2010. This target replaces
the previous profit improvement target of another 500 million euros in
2009. These programs will substantially underpin the Group’s ability to
make profit progress in the challenging economic times it expects to lie
ahead.

Deutsche Post World Net reiterated the Group’s 2008 underlying EBIT target
of 2.4 billion euros. The company also confirmed that it expects underlying
EBIT to grow in 2009, however, the management board will only give a
specific outlook for 2009 once the economic prospects have become
sufficiently clear. Due to increased costs for the U.S. Express
restructuring, now totaling 3 billion euros, one-off charges of between 400
million euros and 500 million euros in other businesses and possible
write-downs on goodwill and intangible assets of around 1 billion euros
within the Supply Chain/Corporate Information Solutions Corporate Division
in anticipation of a further economic downturn, the Group will probably see
a full-year reported net loss for 2008.

Contact:
Martin Ziegenbalg
EVP Investor Relations
Tel: 0228-182-63000

10.11.2008 Financial News transmitted by DGAP

Language: English
Issuer: Deutsche Post AG
Charles-de-Gaulle-Straße 20
53113 Bonn
Deutschland
Phone: +49 (0)228 182 - 63 100
Fax: +49 (0)228 182 - 63 199
E-mail: ir@deutschepost.de
Internet: www.dpwn.de
ISIN: DE0005552004
WKN: 555200
Indices: DAX
Listed: Regulierter Markt in Berlin, Frankfurt (Prime Standard),
Hannover, Düsseldorf, Hamburg, München, Stuttgart;
Terminbörse EUREX

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