Deutsche Post says US DHL Express unit improving
Deutsche Post World Net (DPW.XE) said its DHL express business in the U.S. was improving as a result of better management, while growth in Asia and emerging markets remained strong.
John Mullen, a joint chief executive of the company’s express division DHL, told an analyst conference that the Bonn-based mail and logistics company expected its U.S. DHL business to break even in the fourth quarter of next year. For 2005, the company reiterated that DHL expects a loss of EUR300 million in the U.S.
Despite difficulties and strong competition from United Parcel Service (UPS) and FedEx (FDX), DHL said the U.S. business was seeing improvements in service and quality. DHL said it would work to streamline operations by focusing on cost control, productivity and revenue improvements.
“The second-half financial targets for the U.S. are ambitious but achievable,” Mullen said in the business update.
In late July, Deutsche Post World Net said second-quarter net profit for the group rose 76% to EUR484 million. Sales rose 4.4% to EUR10.95 billion.
At the time, it said that the overall express business, which makes up 40% of the company’s sales, posted a 1.8% rise in first-half revenue to EUR8.8 billion, while earnings before interest and taxes came to EUR163 million.
The company regards its express business as “everything that’s smaller than 70 kilograms and not on a pallet.” Also, express products are often delivered faster than many of the company’s other delivery methods.
“Deutsche Post is clearly making significant progress in the highly competitive U.S. market,” Landesbank Rheinland-Pfalz analyst Per-Ola Hellgren said.
“They’re focusing their efforts on improving service quality while moving away from the previous discount-pricing strategy, which in itself suggested inferior service quality,” he added.
At the same time, the express division is rationalizing its cost structure. “With these efforts, Deutsche Post is, in my view, striking the right note in a developed marketplace. Of course, they’ve still got some way to go, but they’re on the right track,” Hellgren said.
At 1530 GMT Deutsche Post shares were up EUR0.35, or 1.7%, to EUR21.13.
The company said it expects the express division’s strong growth in Asia, especially china, to continue.
“There is no evidence of any slowdown,” the company said of the Chinese market.
Mullen said the Asian business was expected to increase and “maintain the highest levels of growth as well as margin. The China, Taiwan, Korea, Hong Kong and Japan corridors will continue to be a dominant revenue contributor to the company for the next 10 years, he said.
The Asian subcontinent will also be a strong contributor to DHL’s business in the future, and DHL will continue to invest in Asia’s air networks, hubs and infrastructure, Mullen said.
“By 2015, the Asia-Pacific market is likely to be four times the size it is today,” the company said. “DHL holds strong market leadership position in both of these key regional markets.”
Company Web site: http://www.dpwn.de
-By George Frey; Dow Jones Newswires; +49 69 29 725 505; [email protected]
(END) Dow Jones Newswires
