Deutsche Post in revolutionary mood
Deutsche Post’s chief executive pledged to improve profits at the logistics company by a “cultural revolution” but offered few fresh financial targets for investors dissatisfied at the group’s performance as it confronts a steep global recession.
Deutsche Post’s chief executive pledged to improve profits at the logistics company by a “cultural revolution” but offered few fresh financial targets for investors dissatisfied at the group’s performance as it confronts a steep global recession.
During his first year in charge, Frank Appel sold a controlling stake in Deutsche Postbank, the banking unit, and shut the loss-making DHL US express arm.
Losses in financial services and in the US contributed to a net loss of €1.7bn ($2.2bn) last year.
Announcing the results of a strategic review, Appel acknowledged the company’s weaknesses and said it needed to improve customer service, partly by means of new staff incentives.
He said it was in the “right markets” and did not pledge big acquisitions or further asset sales.
“We have fantastic brands, our market positions are phenomenal,” Mr Appel said. “We do not have to reinvent the group. We just have to make more of what we have.”
The downturn is likely to affect profits at logistics companies. Deutsche Post, which employs more than 500,000 people, has said customers are looking for cheaper services. It has declined to set a profits target for this year.
The decline in volumes in the DHL express business accelerated during the first weeks of the year, according to Ken Allen, its new head.
He said there would be no more acquisitions or “fancy marketing campaigns”, while capital expenditure would be kept low.
“We need a much more aggressive sales approach,” Allen said.
Appel pledged tight short-term cost control. Deutsche Post has said it wants to cut its €7bn of annual non-operating costs by €1bn by the end of 2010.
Among the targets announced on 11 March, Appel said the group’s divisions should generate an increase of 1-2 percentage points above the market average, excluding acquisitions, while profitability and return on capital should be among the top quartile of the market.
The changes “point in the right direction”, Axel Funhoff, an analyst at ING, said. “The organisation has correctly identified its problems … operational performance is [crucial]. But it remains to be seen whether the changes, for example to the incentives structure, will be enough.”
Appel will head an executive committee to forge tighter links between DHL’s divisions, which include contract logistics and freight handling as well as express delivery services.
The group will rename itself Deutsche Post DHL, to reflect a focus on two pillars including its general mail delivery arm in Germany.
The shrinking mail business needed “transformation”, Appel acknowledged. He said it would integrate physical and digital services by developing products such as secure online letters.
