Outlook Deutsche Post FY EBIT little changed; sales growth offset by margin fall
Deutsche Post World Net AG will this month report full year EBIT little changed from 2005, with higher sales offset by margin erosion in its mail activities and restucturing costs at its DHL Express business, analysts said.
DPWN has officially scheduled its earnings release for March 20, but market watchers expect the German logistics giant to release the figures either next Tuesday or Wednesday.
Analysts polled by AFX News expect EBIT to range between 3.680-3.934 mln eur compared to last year’s 3.755 bln, with sales rising sharply to 59.8-63.8 bln from 44.6 bln.
The net profit consensus lies at 1.978 bln eur, up 13.6 pct, with the bottom line declining to 730 mln from 1.02 bln in the fourth quarter.
The latter reflects shrinking margins at DPWN’s mail segment due to increased competition in Germany and Europe as a whole, analysts said.
One-off costs occurring from its ongoing revamp at DHL Express are also set to weigh, one analyst added.
While the company is targeting a complete turnaround of DHL Express unit by 2009, many market watchers expect a more speedy recovery.
Nicholas Ward at Deutsche Bank expects restructuring to be completed in 2008, assuming 100 mln eur of extraordinary costs in 2007.
BHF Banks’s Nils Machemehl added that anything later than that would not be ‘acceptable at an internal level’.
But not only the DHL unit will need to step up in 2007, analysts said, citing the company’s ability to fight off competition as one of its main risk exposures.
Goldman Sachs said a tough liberalisation in the mail segment by the German government will be a key risk to the company’s future success, with no offsetting drivers currently in place.
A more moderate liberalisation in line with European norms would, however, trigger an upward revision of forecasts at the US brokerage.
In addition, market watchers expect implementation costs arising from the 2005 acquisition of Exel to level off next year, with DPWN’s logistics division able to start pocketing synergy benefits.
Analysts are also looking to a potential further reduction in the stake owned by state development bank Kreditanstalt fuer Wiederaufbau (KfW), which currently holds 30.6 pct but has signalled it could sell up to 25.9 pct.
Deutsche Bank said an entry into DPWN by private equity firms should be seen in a positive light with the business offering ‘good quality brand, assets and networks’.
BHF Bank expects DPWN to raise its dividend to 0.80 eur per share from 0.70 eur in the year-earlier period.
BHF added that Deutsche Post could also pay a special dividend of 0.85 eur per share if a dispute with the EU over state aid payments made between 1994-1998 is settled in its favour.
