Deutsche Post raises earnings guidance
Deutsche Post, the German postal group on Wednesday upped earnings guidance after closing its GBP3.8bn ($4.5bn) deal with UK logistics group, Exel.
The company now expects operating profit to reach EUR3.7bn compared to earlier guidance of EUR3.6bn. The company is set to benefit from reduced costs for health care as a result of new legislation relating to health insurance which will reduce its costs by about EUR70m a year.
"As a one-time effect in 2005 the reduction in our annual obligation to fund future shortfalls led to a reversal of health care provision with a positive earnings before interest and tax impact of of about EUR1bn."
But Deutsche Post added that the impact would be offset by EUR0.7bn of new provisions for new "optimisation measures", such as the creation of a new global corporate services division, creating a net benefit of about EUR0.3bn.
Operating profit guidance for its mail division remained unchanged at EUR2bn, while in its Express division operating earnings are expected to improve by about EUR130m to EUR500m. However, losses in the Americas arm of the Express division, are expected widen to EUR400m, compared with previous guidance of losses of EUR300m as it absorbs the negative impact of combining two hubs.
In its logistics division, excluding Exel, operating profits are expected to improve by about 10 per cent, at the upper end of earlier guidance, while the financial service division is expected to show an increase of 10 per cent.
The group is scheduled to report on the full year on March 14.
Deutsche Post added it had completed its purchase of Exel on Tuesday as part of its strategy of diversification.
Deutsche Post will see the end of its exclusive licence in its domestic market – its biggest source of profit – on December 31, 2007. In preparation for increased competition, Deutsche Post has trimmed its workforce and cut costs at home.
The postal operator has also realised the need to diversify and has been quick to internationalise since its flotation on the stock market 10 years ago. However at least one of its acquisitions has been problematic: the purchase of Airborne Express in 2000, led to far deeper than expected losses and a management shake-up in the US.
Investors have raised concerns over the acquisition of Exel, finalised on Tuesday, flagging up comparatively slender pre-tax margins and the price it paid – a 48 per cent premium to the share price before speculation about the deal emerged.
Shares in Deutsche Post were flat at EUR19.54 in early trade.
DHL loss to widen in U.S.
JOURNAL OF COMMERCE, Web, Sec. ECOMM, p WP 12-14-2005
Deutsche Post ups earnings forecast LONDON — Deutsche Post today said losses at its DHL express unit in the U.S. will widen from earlier forecasts, but raised expectations for 2005 earnings as it completed the $6.8 billion acquisition of Exel. The German mail, express and logistics group now expects operating profit to hit 3.7 billion euros $4.4 billion , excluding contributions from Britain's Exel, compared with a previous forecast of at least $4.3 billion. But it also expects losses at its U.S. DHL express unit to widen to around $480 million from an earlier forecast of $360 million due to the extra cost of combining two hubs. Overall operating earnings at its express unit are seen improving by around $156 million to $600 million. The improved earnings outlook stems mainly from changes in German laws covering employees' health care contributions which will trim costs by some $84 million a year. The acquisition of Exel will deliver annual pre-tax savings of about $264 million by 2008, largely through reduced overhead and increased productivity, Deutsche Post said. The integration of Exel, which take place over three years, will cost $480 million. The completion of the Exel acquisition has created a company with annual sales of around $ billion and a 500,000-strong workforce.
