The week that was: 6 August 2010
USPS in trouble, DP DHL looking stronger, and TNT to split business… Hello, and a warm welcome to ‘the week that was’. Due to technical problems we were unable to bring you your weekly round-up last week. However, now we are back bigger and stronger. So settle in and enjoy!
It hasn’t been a very good week for USPS. The future of organisation is uncertain after the company ended Q3 of its fiscal year 2010 with a net loss of $3.5bn. This compares to a net loss of $2.4bn for the same period of last year (1 April to 30 June). Liquidity remains a major concern as the end of the fiscal year approaches. Although cash flow appears to be sufficient for 2010 operations, it is uncertain whether cash flow, together with maximum available borrowing of $3bn, will be enough to fund the Congressionally-mandated $5.5bn payment to the Retiree Health Benefit Fund on September 30 and retain sufficient liquidity into 2011, according to Joseph R. Corbett, the Postal Service’s CFO. “Given current trends, we will not be able to pay all 2011 obligations,” said Corbett. “Despite ongoing aggressive cost reductions totaling over $10bn in the last three years, it is clear that a liquidity problem is looming and must be addressed through fundamental changes requiring legislation and changes to contracts.” Mail volumes slumped even further, with statistics showing that 40.9bn pieces being delivered during the period – down approximately 700m pieces, or 1.7%, compared to a year ago. Complete USPS third-quarter results include operating revenue of $16bn, some $294m less than the same period last year, and operating expenses of $19.5bn, an increase of $789m, or 4.2%, over the third quarter last year.
There was better news in Germany this week, where Deutsche Post DHL generated double-digit revenue growth in the second quarter of this fiscal year. At the same time, the Group nearly doubled its underlying operating profit versus the same period last year. This development “reflects both the company’s success in acquiring business with new customers and the marked rise in transport volume being fueled by the continuing economic recovery as well as favorable currency effects in all DHL divisions”, said a statement. In addition, the efficiency measures implemented in 2008 and 2009 have resulted in higher margins and increased profitability of all divisions. Underlying EBIT at the Group totaled EUR 503m, 95.7% above the previous year’s level. Despite significant non-recurring expenses of EUR 250m, which were mainly related to the sale of the domestic Express business in France, the Group’s consolidated net profit still increased 22.7% to EUR 81m in the second quarter of 2010. “As an enabler of global trade, we benefited significantly from the recovery of the world economy in the second quarter. This was particularly true at the DHL divisions, which have become the sustainable driver of the Group’s profit growth,” said Deutsche Post DHL CEO Frank Appel. “We are now reaping the fruits of our successfully implemented strategic initiatives and efficiency-enhancing measures as well as the portfolio restructuring that we have largely completed.”
Also in Europe this week, TNT confirmed that it will split its Mail and Express units into two separate companies.TNT cited that the strategic challenges for the two businesses are increasingly different and that Mail and Express can be successful as standalone companies. CEO Peter Bakker said: “As announced earlier this year, we have explored the best structure to secure the continued success of our Express and Mail divisions. Based on this review, we have concluded that a full separation will best serve both units.” By separating the business, TNT hopes to create two “independent companies with best-in-class management, focused organisations and solid capital structures. This will allow both entities to achieve their strategic objectives to the benefit of their respective shareholders and all other stakeholders.” The announcement came on the same day that TNT revealed a slump in profit for Q2.
And finally…
Post&Parcel editor Chris Dolan will be on (a well deserved) holiday until 18 August. Therefore, please be sure to send any news items to Flor Mansilla ([email protected])
