Deutsche Post AG

Earnings Release • Aug 2, 2012

News Details

Corporate | 2 August 2012 07:00

Deutsche Post DHL remains on growth path

Deutsche Post AG / Key word(s): Quarter Results

02.08.2012 / 07:00

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Deutsche Post DHL remains on growth path

– DHL revenues increase in Q2, particularly in Asia; MAIL turnover slightly improved, fueled by dynamic parcel business

– One-time effects impact EBIT and net profit development in Q2

– Operating profit adjusted for one-time effects up 8 percent

– Group adjusts full-year earnings guidance for 2012 upwards: EBIT of EUR 2.6 billion to EUR 2.7 billion expected

– CEO Frank Appel: 'We continue to perform well'

Bonn, August 2, 2012: The growth trend at Deutsche Post DHL, the world's leading postal and logistics group, remained firmly in place during the second quarter of 2012. At EUR 13.7 billion, revenues generated between April and June rose 7.3 percent above the previous year's level. Supported by favorable exchange rate effects this increase exceeded the growth rate produced in the first quarter of the year. The positive development was largely due to the performance of the DHL divisions which continue to benefit from their exceptional market position in the rapidly growing regions of the world – particularly in Asia. In addition, the company's parcel business generated double-digit growth in volume and revenues, making a significant contribution to the Group's strong performance. While the company also made further strides in its drive to improve profitability, a one-time subsequent VAT payment negatively impacted earnings in the MAIL division in the second quarter. On the other hand, overall positive one-time effects at DHL further bolstered the operational improvements in the Group's logistics division. As a result of these developments, the company has made an upward adjustment to its earnings guidance for the current fiscal year and now expects to generate Group EBIT of between EUR 2.6 billion and EUR 2.7 billion.

'We continue to perform well,' said Frank Appel, the CEO of Deutsche Post DHL. 'The excellent market positions of our brands and divisions in the world's growth markets are paying off. We have a strong foundation for generating long-term improvements in revenues and earnings.'

Second quarter of 2012: profitable growth continues

After the company generated revenues of EUR 12.8 billion in the second quarter of 2011, the Group increased its turnover by nearly EUR 1 billion to EUR 13.7 billion between April and June 2012. All four divisions contributed to this gain.

Despite further profitability improvements, Group EBIT fell by 3 percent to EUR 543 million during the same period (2011: EUR 562 million). The decrease resulted largely from a subsequent VAT payment, which had a one-time negative impact on second-quarter earnings totaling EUR 181 million. By contrast, DHL Express recorded positive one-time effects resulting from the reversal of provisions that the Group set up in 2008 as part of the restructuring of its business in the United States as well as from the disposal of company units that were not part of the core business. Both effects totaled EUR 143 million during the second quarter. Adjusted for these items and the sale of a subsidiary in the SUPPLY CHAIN division carried out during the second quarter of 2011, Group EBIT would have risen by 8 percent between April and June. With an 11 percent year-over-year improvement, the DHL divisions underscored once again their role as the company's growth driver. At the same time, the MAIL division also helped boost the Group's operating profitability thanks to its dynamic parcel business and its ongoing strict cost management.

The subsequent VAT payment had a negative impact of EUR 115 million on the Group's financial result, which, as a consequence, declined to minus EUR 242 million in the second quarter of this year (2011: minus EUR 158 million). Overall, this one-time effect had a negative impact of EUR 260 million on the Group's consolidated net profit in the quarter. During this period, consolidated net profit fell by EUR 77 million to EUR 201 million (2011: EUR 278 million). As a result, earnings per share decreased to EUR 0.17 (2011: EUR 0.23). Adjusted for the non-operational one-time effects in both years, consolidated net profit and earnings per share would have increased in the second quarter.

Capital expenditures and cash flow: foundation of growth strengthened

In the second quarter of 2012, the Group's capital expenditures totaled EUR 374 million, a slight increase from the EUR 371 million invested in the second quarter of 2011. During the first half of the year, a total of EUR 679 million was invested, an increase of more than EUR 50 million compared with the EUR 623 million invested in the same period of the previous year. The DHL divisions were the focal point of these investments. Here, the foundation for future growth and the company's long-term business success were bolstered further by investments in a more efficient aircraft fleet, the continued expansion of the network, state-of-the-art warehouses as well as a new IT infrastructure in the Global Forwarding business. As is usually the case during the first half of the year, the Group's operating cash flow and liquidity position in 2012 were again affected by the pension contribution that the company makes each January to the pension fund for the company's civil servants, Bundes-Pensions-Service für Post und Telekommunikation, (EUR 530 million) and the dividend payment made in May (EUR 846 million). In addition, the Group's liquidity was also negatively impacted by the repayment of state aid (EUR 298 million). As a result, the company had net debt of EUR 978 million at the end of the quarter. The company's free cash flow decreased from minus EUR 339 million in the first six months of 2011 to minus EUR 767 million in 2012.

First six months: revenues and earnings growth continues

In the first half of the current fiscal year, the company boosted revenues by EUR 1.5 billion, or 5.8 percent, from EUR 25.6 billion in the previous year to EUR 27.1 billion in 2012. Compared with the first half of 2011, the Group's operating result rose by 3.6 percent to EUR 1.2 billion (2011: EUR 1.2 billion). The one-time effects arising from the subsequent VAT payment, the reversal of provisions and the income from disposals reflected in the quarterly results had a similar impact on the half-year figures. In the first half of the year, consolidated net profit climbed from EUR 603 million in 2011 to EUR 734 million in the ongoing fiscal year. Earnings per share rose from EUR 0.50 last year to EUR 0.61 in 2012.

Outlook: earnings guidance adjusted

For the second half of the year, the Group continues to expect that the world economy will grow moderately and that the company – driven by the DHL divisions – will continue to boost revenues and earnings compared with the previous year. On the basis of these assumptions and the company's positive development in the second quarter, the Group has made an upward adjustment to its earnings guidance for the ongoing fiscal year. It now expects to generate EBIT of EUR 2.6 billion to EUR 2.7 billion. Previously the company had anticipated the Group's operating result to be between EUR 2.5 billion and EUR 2.6 billion. Despite the subsequent VAT payment, earnings in the MAIL division are still estimated to be between EUR 1.0 billion and EUR 1.1 billion. At the same time, due to the positive one-time effects recorded in the EXPRESS division in the second quarter, the Group now expects that the operating result at DHL will climb to about EUR 2 billion, EUR 100 million more than previously assumed. Corporate Center/Other expenditures are still forecast to total about EUR 400 million. The Group also continues to assume that net profit adjusted for non-operational effects will increase in line with the operating business in 2012. Looking beyond this year, the company remains optimistic and expects that its positive earnings trends will continue: the Group forecasts earnings at DHL to rise by an average of 13 percent to 15 percent annually between 2010 and 2015. In the MAIL division, cost-cutting measures and growth programs are designed to stabilize profitability at a level of at least EUR 1 billion. Combined with the planned lowering of costs in Corporate Center/Other, the Group's operating result should rise to between EUR 3.35 billion and EUR 3.55 billion by 2015.

MAIL division: parcel business remains very dynamic

Although the past quarter had one fewer workday than last year, revenues generated by the MAIL division in the second quarter of 2012 grew 0.9 percent to EUR 3.3 billion (2011: EUR 3.3 billion). The missing workday was primarily reflected in the volume and revenues of the traditional letter mail business, which fell by about 3 percent between April and June 2012. But the parcel business' continued strong performance more than offset this decrease. As a result of rapidly growing online retailing, a trend that the division is doing much to shape by offering innovative products and delivery services, parcel revenues jumped by more than 12 percent to EUR 797 million from April through June 2012. The parcel business now generates one-fourth of total revenues in the MAIL division. The successful development of the company's parcel unit, in combination with strict cost management, has contributed to the desired stabilization of profitability in the division. The sole reason that the MAIL division's EBIT decreased to EUR 38 million during the past quarter (2011: EUR 186 million) was the subsequent VAT payment. Excluding this negative one-time effect of EUR 151 million, the operating result in the MAIL division would have risen by 2 percent.

EXPRESS division: international express business still strong

In the second quarter of 2012, the EXPRESS division – in-line with the company's expectation – continued to grow revenues and earnings and further expanded its worldwide market share. Revenues rose by 10.7 percent between April and June 2012 to EUR 3.2 billion over the previous year's level of EUR 2.9 billion. In the process, double-digit revenue improvements were produced in all regions – except Europe. This positive performance reflects the exceptional market position achieved by DHL in the world's dynamic growth markets. Revenues and volume rose particularly fast in Asia and the Americas region, where the continuing strong business in the United States played a major role in the good performance. In addition to the operating improvements, one-time effects related to the reversal of restructuring provisions and the sale of the domestic express business in Australia and New Zealand totaling EUR 143 million provided significant momentum to the rise in profitability. By contrast, the subsequent VAT payment had a one-time negative effect of EUR 30 million on the profitability of the EXPRESS division in the second quarter. Overall, the division's EBIT in the second quarter jumped by more than 50 percent to EUR 367 million (2011: EUR 242 million). Adjusted for all one-time effects, the division's EBIT would have risen by 5 percent in the past quarter.

GLOBAL FORWARDING, FREIGHT division: gross margin further improved

In the GLOBAL FORWARDING, FREIGHT division, revenues climbed by 5.7 percent to EUR 4 billion in the second quarter of 2012 amid challenging business conditions. In the same quarter last year, the division had produced revenues of EUR 3.8 billion. This performance was primarily driven by currency effects. At the same time, the division benefited from improved purchasing conditions in the air freight sector. Combined with its own efficiency gains and its selective growth strategy, the division's gross margin continued to rise. As a result, its operating result jumped by 19.1 percent, from EUR 115 million in the second quarter of 2011 to EUR 137 million between April and June of the current fiscal year.

SUPPLY CHAIN division: successful new-customer business

Revenues in the SUPPLY CHAIN division rose strongly in the second quarter. At EUR 3.5 billion, revenues were 12.5 percent above the previous year's total of EUR 3.1 billion. This growth was fueled in particular by strong gains in the Asia Pacific region as well as in the 'Automotive' and 'Life Sciences & Healthcare' sectors. The division's strong performance was also highlighted by newly concluded contracts with new and existing customers totaling EUR 330 million and the improved profit margins of these agreements. Despite gains in profitability, which were primarily the result of optimized contract management, continuing strict cost controls and increased operational efficiency, second-quarter EBIT fell by EUR 10 million to EUR 101 million (2011: EUR 111 million). However, the quarter-on-quarter comparison is distorted by a EUR 23 million net gain on the disposal of a U.S. subsidiary that was not part of the core business and was included in last year's operating result. Adjusted for this gain, the division's second-quarter EBIT would have actually risen by 15 percent.

– End –

Note to newsrooms: At www.dp-dhl.com, you will find an interview with the Group's CFO Larry Rosen. The investor telephone conference of Deutsche Post DHL will be broadcast live online beginning at 2 p.m.

Contact for media queries:

Deutsche Post DHL

Media Relations

Sebastian Steffen

Tel.: +49 (0)228 182-9944

Online: www.dp-dhl.com/press

Follow us at www.delivering-tomorrow.com

Deutsche Post DHL is the world's leading mail and logistics services group.

The Deutsche Post and DHL corporate brands represent a one-of-a-kind portfolio of logistics (DHL) and communications (Deutsche Post) services. The Group provides its customers with both easy to use standardized products as well as innovative and tailored solutions ranging from dialog marketing to industrial supply chains. About 470,000 employees in more than 220 countries and territories form a global network focused on service, quality and sustainability. With programs in the areas of climate protection, disaster relief and education, the Group is committed to social responsibility. In 2011, Deutsche Post DHL revenues exceeded EUR 53 billion.

The postal service for Germany. The logistics company for the world.

For more information at www.dp-dhl.com

Group financial highlights in the second quarter of 2012

in million euros	2nd quarter 2011	2nd quarter 2012	Change in %
Revenues 1)	12,803	13,732	7.3%
– of which international revenues	8,842	9,731	10.1%
Profit from operating activities (EBIT)	562	543	-3.4%
Consolidated net profit 2)	278	201	-27.7%
Basic earnings per share (in euros)	0.23	0.17	-26.1%
Diluted earnings per share (in euros)	0.23	0.17	-26.1%

Divisional revenue in the second quarter of 2012 1)

in million euros	2nd quarter 2011	Share of total revenues	2nd quarter 2012	Share of total revenues	Change in %
MAIL	3,259	25.5%	3,288	23.9%	0.9%
EXPRESS	2,931	22.9%	3,244	23.6%	10.7%
GLOBAL FORWARDING, FREIGHT	3,758	29.4%	3,973	28.9%	5.7%
SUPPLY CHAIN	3,136	24.5%	3,528	25.7%	12.5%
Corporate Center / Other and Consolidation	-281	n/a	-301	n/a	-7.1%
Group revenue	12,803	100%	13,732	100%	7.3%

Divisional EBIT in the second quarter of 2012 1)

in million euros	2nd quarter 2011	2nd quarter 2012	Change in %
MAIL	186	38	-79.6%
DHL	468	605	29.3%
– EXPRESS	242	367	51.7%
– GLOBAL FORWARDING, FREIGHT	115	137	19.1%
– SUPPLY CHAIN	111	101	-9.0%
Corporate Center / Other and Consolidation	-92	-100	-8.7%
Group EBIT	562	543	-3.4%

1) Prior-year amounts adjusted.

2) After non-controlling interests.

Group financial highlights in the first half of 2012

in million euros	1st half of 2011	1st half of 2012	Change in %
Revenues 1)	25,610	27,096	5.8%
– of which international revenues	17,447	18,834	7.9%
Profit from operating activities (EBIT)	1,191	1,234	3.6%
Consolidated net profit 2)	603	734	21.7%
Basic earnings per share (in euros)	0.50	0.61	22.0%
Diluted earnings per share (in euros)	0.50	0.61	22.0%

Divisional revenues in the first half of 2012 1)

in million euros	1st half of 2011	Share of total revenues	1st half of 2012	Share of total revenues	Change in %
MAIL	6,779	26.5%	6,845	25.3%	1.0%
EXPRESS	5,681	22.2%	6,264	23.1%	10.3%
GLOBAL FORWARDING, FREIGHT	7,357	28.7%	7,659	28.3%	4.1%
SUPPLY CHAIN	6,352	24.8%	6,937	25.6%	9.2%
Corporate Center / Other and Consolidation	-559	n/a	-609	n/a	-8.9%
Group revenue	25,610	100%	27,096	100%	5.8%

Divisional EBIT in the first half of 2012 1)

in million euros	1st half of 2011	1st half of 2012	Change in %
MAIL	559	431	-22.9%
DHL	831	1,014	22.0%
– EXPRESS	456	598	31.1%
– GLOBAL FORWARDING, FREIGHT	186	224	20.4%
– SUPPLY CHAIN	189	192	1,6%
Corporate Center / Other and Consolidation	-199	-211	-6.0%
Group EBIT	1,191	1,234	3.6%

1) Prior-year amounts adjusted.

2) After non-controlling interests.

End of Corporate News

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

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