Deutsche Post has 2 percent gain in first quarter earnings; on track for full-year target
German mail and package delivery group Deutsche Post AG announced Monday that its first-quarter profit rose by 2 percent, helped by increased air and sea freight revenue, and said it was on track to meet its full-year earnings target.
The Bonn-based company earned €455 million (US$589 million), or 41 euro cents (52 U.S. cents) a share, in the January-March quarter _ up from €446 million, or 40 euro cents a share, in the same period a year ago.
Revenue for the quarter was down, however, falling to €10.52 billion ($13.62 billion) from €10.57 billion a year ago.
"The first quarter went as planned and confirms our confidence for the year overall," Chief Financial Officer Edgar Ernst said, adding that increased revenue from air and ocean freight at its logistics unit helped boost net profit.
He said the company expects to earn €3.6 billion (US$4.6 billion) this year "and we have every expectation we will achieve that result."
The outlook was attributed to better revenue in the company's mail business and because of operating improvements in the U.S.
The company said it was still working to improve its DHL unit, which is in bitter competition with FedEx Corp. and United Parcel Service Inc.
"This year, measures taken to ensure the continuing positive development of DHL's U.S. express activities are being implemented," the company said.
The unit lost €133 million (US$172.2 million) in the first quarter, but that was an improvement from the €147 million loss in the same period last year.
For the whole of 2005, Deutsche Post said the unit could lose as much as €300 million (US$388.41 million).
Shares of Deutsche Post were down 1.25 percent to €18.20 (US$23.56) in morning trading in Frankfurt.
Deutsche Post Press Release 9/5/05
Deutsche Post has positive start in 2005 business year
§ Group revenue in the first quarter stable
§ Profit from operating activities increased to 871 million euros
§ STAR contributes 101 million euros in the first quarter
§ Full-year earnings forecast confirmed
Deutsche Post World Net increased its profit from operating activities (EBIT) by 2.8 percent to 871 million euros in the first quarter. Revenue remained stable compared to the same period last year at 10.5 billion euros. First quarter net income was 455 million euros compared with 446 million euros for the same period in 2004. Earnings per share rose correspondingly from 40 euro cents to 41 euro cents.
"The first quarter went as planned and confirms our confidence for the year overall," said Chief Financial Officer Edgar Ernst. "We've forecast annual earnings of at least 3.6 billion euros, and we have every expectation we will achieve that result. Helping us reach this goal will be the high and stable revenue level in the Mail business and the impact of operating improvements in the U.S."
The prior-year figures were adjusted to reflect the new International Financial Reporting Standards IRFS. Under IFRS, goodwill is no longer amortized. From now on Deutsche Post World Net will therefore report the EBIT earnings figure instead of EBITA (Earnings before interest, tax and amortization). The previous year's EBIT included goodwill amortization of 90 million euros.
Measures under the STAR value creation program contributed 101 million euros to earnings in the first quarter compared with 81 million euros in the same period last year. Since its launch in November 2002, the program has contributed a cumulative 963 million euros to earnings. The STAR contribution will be at least 1.4 billion euros by year-end.
MAIL Corporate Division
Revenue remained stable in the MAIL Division in the first quarter at around 3.3 billion euros. Double-digit growth outside Germany compensated for the decline in revenue in the "Mail Communication" business, which was caused by two lost working days. The effect of this alone is estimated at around 100 million euros. Operating profit (EBIT) in the MAIL Division declined correspondingly from 746 million to 643 million euros. Revenue in the "Mail International/Value-added-Services" Business Division rose by 32.1 percent to 514 million euros in the first three months of the year. The international mail business thus contributed 16 percent to total revenue in MAIL.
Under the DHL Global Mail brand, the company continues to grow its international mail activities. For example, the first British mail distribution center outside of London was opened in Manchester in April, marking the start of nationwide service.
EXPRESS Corporate Division
Revenue in the EXPRESS Division declined by 1 percent to about 4.3 billion euros in the first three months of the year. This is attributable to negative currency effects. Excluding the currency effects, revenue rose slightly. EBIT amounted to 37 million euros, compared to a loss of 14 million euros in the prior-year period. This year, measures taken to ensure the continuing positive development of DHL's U.S. express activities are being implemented. The expenses incurred from these measures contributed to a loss in the Americas region of 133 million euros in the first quarter. Compared to the prior-year period, this is an improvement of 14 million euros. As already communicated, the Group expects the Americas region to incur a loss of as much as 300 million euros for the year overall. Business in Southeast Asia continues to show strong growth, in particular in China und Japan. The Asia Pacific region closed the first quarter of 2005 with revenue growth of 12.5 percent to 494 million euros.
LOGISTICS Corporate Division
The LOGISTICS Division (air freight, ocean freight and contract logistics) continued its positive trend in the first quarter. Revenue rose by 8.3 percent to about 1.7 billion euros. Both Business Divisions DHL Solutions and DHL Danzas Air & Ocean contributed to this revenue growth. EBIT nearly doubled from 34 million euros in the prior-year period to 60 million euros. DHL Solutions took over major logistics activities for KarstadtQuelle AG on April 01, 2005. The LOGISTICS Division expects additional revenue of around 500 million euros annually from this cooperation.
FINANCIAL SERVICES Corporate Division
The FINANCIAL SERVICES Division comprises Postbank, the Pension Service and the retail outlets. Postbank presented its results separately on May 4th. Revenue declined by 5.0 percent in the first quarter to 1.732 billion euros. This was due to the continuing low interest rate level. EBIT increased by 16 percent to 185 million euros. Postbank's key ratios continued their good performance with the Cost Income Ratio improving from 70.6 percent to 69.1 percent and the pretax return on equity from 11.7 percent to 13.8 percent.
Outlook
The company confirmed its expectation of reaching an operating profit of at least 3.6 billion euros for 2005 overall. For MAIL, the Group expects EBIT for the year to stabilize at around 2 billion euros, the level of the previous year. Operating earnings for EXPRESS, including the Americas region, are expected to double compared to the prior-year level of 367 million euros. The company is confident that LOGISTICS will continue its positive trend and exceed the comparable prior-year earnings of 281 million euros by 5 to 10 percent. In FINANCIAL SERVICES, the Group expects earnings growth of 5 to 10 percent for the year as a whole, compared to the 2004 level of 692 million euros.
As announced in March, the Group tax rate under international accounting standards (IFRS) will be about 20 percent in the coming years. Combined with the change regarding goodwill amortization, this will have the effect of significantly increasing consolidated net profit and earnings per share.
First-quarter 2005 financial highlights
Further Information:
The complete quarterly report is available here.
An interview with CFO Edgar Ernst (text and audio) is available at www.deutschepost.de/presse.
