Deutsche Post Raises Goal – Postbank IPO Helps Profit
Deutsche Post AG, Europe's largest postal service, raised its earnings forecast for the year after a gain from last month's sale of stock in the consumer-banking business helped boost second-quarter profit 87 percent. Deutsche Post shares rose as much as 3.4 percent.
Earnings before interest, taxes and amortization in 2004 will probably rise by 7.5 percent to 12.5 percent and will reach “at least'' 3.6 billion euros ($4.3 billion) in 2005, Chief Executive Klaus Zumwinkel told journalists in Bonn. The previous forecast had been for growth of 5 percent to 10 percent in 2004.
Deutsche Post is preparing to spend 3.6 billion euros expanding over the next two years, with an aim of becoming the biggest logistics company in the world, Zumwinkel said. Competitors FedEx Corp. and United Parcel Service Inc. have increased profit targets in the past six weeks as global economic growth helped sales.
“The figures and increased forecast exceeded my estimates, although the guidance was raised just because of the Postbank gain, so it was actually unchanged,'' said Robert Heberger, an analyst with Merck Finck in Munich, who is now reviewing his “hold'' rating on the stock. “Second-quarter numbers were very positive, so they should be able to easily reach that guidance.''
Second-Quarter Profit
Second-quarter net income rose to 280 million euros, or 25 cents a share, from 150 million euros, or 14 euros, Bonn-based Deutsche Post said. Profit beat the 254 million-euro median estimate of 11 analysts surveyed by Bloomberg News.
Earnings before interest, taxes and amortization rose 45 percent to 752 million euros from 518 million euros. Sales rose 12 percent to 10.5 billion euros from 9.42 billion euros, mainly because of acquisitions.
Deutsche Post shares rose as much as 57 cents to 17.24 euros and were up 1.8 percent at 16.97 euros as of 11:33 a.m. in Frankfurt. The stock is up 3.7 percent this year, counter to the 1.8 percent decline in Germany's benchmark DAX index.
Proceeds from June's initial public offering of Deutsche Postbank AG, Germany's biggest consumer bank by customer numbers, brought in 75 million euros of profit and reduced net debt by 85 percent to 304 million euros as of June 30, the company said. Deutsche Post had 2.04 billion euros in debt as of Dec. 31.
Debt-Elimination Goal
The company aims to be debt free by the end of the year, as “the good operating results and the Postbank IPO helped us further strengthen our financial situation sustainably,'' Zumwinkel told journalists.
Money from the IPO and the sale of a bond exchangeable for Postbank stock, which raised a total of about 2.6 billion euros, will be used “to reduce pension obligations in particular,'' Chief Financial Officer Edgar Ernst told journalists. The company is spending 1 billion of the IPO money to reduce debt as it works toward “a solid, single-A debt rating,'' Ernst said.
The share of revenue generated outside of Germany rose to nearly 47 percent of total sales from 41 percent a year earlier, and the company expects international sales to make up 50 percent of the total by next year, Zumwinkel said.
“Our internationalization strategy is beginning to contribute handsomely to our overall results and we are competing vigorously throughout the world,'' Zumwinkel said.
Deutsche Post's so-called Star cost-cutting program contributed 178 million euros to profit in the first half, adding 601 million euros to earnings since its inception in November 2002, the postal service said. Star focuses on reducing duplication of services and scaling back unprofitable businesses.
Sorting Machines
Under the program this year, the company increased its capacity for sorting mail to 9.4 billion letters a year from 1.25 billion by adding sorting machines to mail centers in Germany. It also saved money by lowering information technology costs. Star is targeting a cumulative 1.4 billion euros in savings through next year.
The mail business's earnings last quarter rose 15 percent from a year earlier to 419 million euros as mail-order companies sent out more advertising and the company delivered more election documents for German and European votes.
The DHL express division posted a 44 percent Ebita increase to 98 million euros in the second quarter, as acquisitions boosted sales by 27 percent.
DHL is integrating Seattle-based Airborne Inc. to expand in the U.S., the world's largest delivery market, which cost the company 89 million euros in the first half of the year and led to a first-half 229 million-euro Ebita loss in the region.
Deutsche Post said it expects a 20 percent increase in Ebita for the full express division this year. Zumwinkel reiterated plans to break even in the Americas on that basis next year.
