Deutsche Post DHL plan more cost cutting
Deutsche Post DHL aims to cut its cost base further and focus on organic growth to win market share from rivals such as United Parcel Service and FedEx, its chief executive said.
Deutsche Post DHL aims to cut its cost base further and focus on organic growth to win market share from rivals such as United Parcel Service and FedEx, its chief executive said.
“There is no interest in new adventures just because we have cash,” Frank Appel said at its annual Capital Markets Day on 6 May after quarterly operating profit at Europe’s biggest mail and express delivery group beat expectations.
Deutsche Post has pocketed more than €4bn in cash from a deal to sell its unit Deutsche Postbank to Deutsche Bank, eradicating its net debt.
But Appel said Deutsche Post had not submitted a bid for Britain’s Royal Mail, for which the government there is seeking an investor, and brushed off speculation Post may be interested in Austria’s Oesterreichische Post.
“Our international foreign domestic business is not very successful. Cross-border is successful, and in foreign domestic we are much more cautious than we were before,” he said.
Post said it would focus on cutting costs in its Mail and Express divisions and may reach its target of cutting costs by €1bn euros ($1.34bn) sooner than planned.
“Deutsche Post DHL still managed to surprise positively with very good progress in cost savings and a further upgrade in restructuring measures,” Commerzbank analyst Frank Skodzik said.
Deutsche Post said it aimed to negotiate longer working hours at the Mail division, try to postpone wage increases and shift some air mail to ground transportation to add around €300m to annual earnings before tax and interest (EBIT).
“The further cost initiatives in the Mail business are positive in general, but from our point of view the outcome of the discussions (between the company and the union) are unclear due to the strong position of the unions in Germany,” said DZ Bank analyst Robert Czerwensky.
In the first quarter, underlying EBIT fell 42% to €312m, better than the €290m average analyst estimate in a Reuters poll.
Sluggish consumer spending and shrinking business investing have been hurting shippers around the world. The World Trade Organisation has forecast global trade volumes would fall 9% this year, the sharpest decline since World War Two.
Deutsche Post said volume declines may have bottomed out in the first quarter, but still shied away from giving a 2009 operating profit outlook. It will make a 2009 net profit thanks to gains related to the Deutsche Postbank sale.
Post’s stock trades at around 11.3 times 12-month forward earnings, a discount to UPS’s 22.1, but ahead of Dutch peer TNT at 10.8 times, according to Thomson Reuters StarMine, which weighs analyst estimates according to their track record.
TNT on 5 May reported a 44% drop in first-quarter operating profit, less severe than expected, and said it expected trading conditions in the first quarter to persist through the rest of the year.
Investors have said they worry that Deutsche Post is losing ground to its U.S. express-mail rivals and has limited growth potential and a bloated staff cost base in the mail market.