Deutsche Post DHL confident in outlook after Q2 profit soars
Deutsche Post DHL said today (Tuesday) that its net profit had more than tripled during Q2, and as a result tweaked its outlook for 2011. Between April and June, the German firm recorded a net profit figure of EUR 278m, almost EUR 200m more than Q2 2010’s figure of EUR 81m, citing operational improvements, strong performance, and the continuing economic recovery as key reasons behind the growth.
As a result, the Board of Management believes that the company’s operating earnings will finish the year at the upper end of its projected EBIT guideline of EUR 2.2 to EUR 2.4bn.
Frank Appel, CEO of Deutsche Post DHL, said: “We are continuing to grow and have kept the positive momentum of the last quarters.
“The second quarter once more proves the quality and sustainable nature of the efficiency gains we have achieved over recent years.”
Group revenues rose by 0.3% to EUR 12.8bn.Adjusted for exchange-rate effects and the deconsolidation of various divested company units, the result reflects organic growth of more than EUR 700m compared with the same period last year.
In producing this result, the company continued on the growth course chartered at the beginning of the year. At the same time, the Group was able to even accelerate the pace of its earnings increases: At EUR 562m, EBIT finished the second quarter more than EUR 300m above the previous year’s level of EUR 253m.
The DHL divisions produced EUR 471m of the Group’s operating earnings in the second quarter, nearly four times more than in the same period last year (2010: EUR 122m).
In addition to operational improvements achieved by the company, the absence of any restructuring expenses, which totaled EUR 250m last year, also had a positive impact on the development of Deutsche Post DHL’s operating earnings.
This amounts to an increase in quarterly earnings per share from EUR 0.07 in 2010 to EUR 0.23 in the second quarter of 2011.
Half year results
After the company generated revenues of EUR 24.8bn in the first half of 2010, the Group increased its turnover to EUR 25.7bn during the first six months of the ongoing fiscal year. Thanks to marked volume and revenue increases as well as the Group’s improved efficiency, operating earnings jumped by 55.7% to EUR 1.2bn. With an earnings contribution of EUR 834m, reflecting an increase of nearly EUR 500m over the same period last year, the DHL divisions generated the lion’s share of the Group’s EBIT and its growth.
In addition to improved revenues and increased earnings strength, the planned absence of any restructuring expenses, which totaled EUR 304m during the prior year period, contributed to the significant improvement of the Group’s operating earnings. The company’s net financial income fell during the first half of 2011, dropping from EUR 1.2bn in the same period last year to minus EUR 319m. This was, however, almost solely a result of the valuation of financial instruments from the sale of Postbank. While last year’s financial result included positive effects of EUR 1.4bn related to the Postbank transaction, expenses totaling EUR 133m were incurred in the first six months of 2011.
This extraordinary accounting effect also had a major impact on the Group’s consolidated net profit: During the first half year, consolidated net profit fell from EUR 1.8bn in the previous year to EUR 603m. This represents a decrease in earnings per share from EUR 1.51 in 2010 to EUR 0.50 in the current fiscal year. However, adjusted for the Postbank valuation effects for both years, consolidated net profit and earnings per share would have increased by more than 80% during the first six months of the year.
Following its strong performance in the first six months of the year, the company improved its earnings guidance for full year 2011. The Board of Management continues to project an EBIT of EUR 2.2bn to EUR 2.4bn, but now – based on the positive results achieved in the first half of the year – believes that the company’s operating earnings will finish the year at the upper end of this range.
Earnings in the MAIL division are still expected to total between EUR 1bn and EUR 1.1bn. The company also continues to project double-digit growth in DHL’s operating earnings, which should reach EUR 1.6bn to EUR 1.7bn.
Expenses in Corporate Center/Other should total about EUR 400m. Consolidated net profit, adjusted for the valuation effects related to the Postbank transaction, should continue to improve during 2011 in line with the operating business.
“We remain confident concerning our future business development, also against the backdrop of a more normalized level of global economic activity,” Appel said referring to the Group’s improved earnings guidance. “We have the necessary skills and the required flexibility to remain firmly on our successful growth course – both during the second half of the year and beyond.”
Second quarter revenues in the MAIL division remained stable compared to the prior year at a level of EUR 3.3bn. Even though volumes stabilised, revenue in the traditional mail business continued to decline as a result of discounts that the Group is providing its customers following the imposition of the value-added tax in July 2010. However, the continuing momentum being generated by the parcel business almost completely offset this reduction.
In light of the rise in Internet retailing, revenues in this business segment climbed nearly 8% to EUR 667m between April and June. At 10%, the increase in the number of transported parcels recorded in the second quarter even exceeded the growth rate generated in the first three months of the year. During the second quarter, EBIT in the MAIL division totaled EUR 183m, about 25% below the previous year’s level of EUR 243m. This was largely the result of the value-added-tax effect and expenditures related to the setup of the digital business. This drop could, however, be partially offset by increased earnings in the parcel business and the division’s strict, ongoing cost management.
The EXPRESS division continued its successful revenue and earnings performance in the second quarter of 2011 and further increased the pace of its growth. Revenues rose by 2.9% to EUR 3.0bn (2010: EUR 2.9bn). Adjusted for exchange-rate and consolidation effects, organic revenue growth totaled 11.3% between April and June. This result was a reflection of the double-digit growth rates in volumes and revenues in international shipments. The Asia-Pacific region once again underscored its role as the growth driver within the Group as a whole and at EXPRESS in particular.
The division’s operating earnings also improved markedly in the reporting period. While a loss of EUR 30m was incurred in the second quarter of 2010, EBIT climbed to EUR 244m in 2011. In addition to revenue and volume growth as well as systematic cost management, the successfully completed restructuring measures played a major role in this increase. During the same period last year, these measures resulted in non-recurring expenses in an amount of EUR 228m.
GLOBAL FORWARDING, FREIGHT division
In the GLOBAL FORWARDING, FREIGHT division, revenues rose to EUR 3.7bn in the second quarter of 2011. The result represents an increase of 3.6% over the previous year’s level of EUR 3.6bn. However, this figure only partially reflects the division’s actual operating performance. Adjusted for negative exchange-rate effects, the division’s organic revenue growth totaled 7.1%. This gain was a result of solid growth in air and ocean freight as well as double-digit growth in the European overland transport business.
In spite of rising fuel costs, the division profited from lower freight rates and improved purchasing conditions, developments that resulted in margin improvements. As a result, EBIT climbed by 13.1%, from EUR 99m in the second quarter of 2010 to EUR 112m in the same period of 2011. Last year’s operating earnings contained restructuring costs totaling EUR 3m.
SUPPLY CHAIN division
At EUR 3.2bn, revenue in the SUPPLY CHAIN division fell 3.4% during the second quarter of 2011 from the previous year’s level of EUR 3.3bn. This decrease, however, was solely attributable to negative exchange-rate effects and the sale of a US subsidiary that was not part of the division’s core business. Excluding these effects, revenue would have climbed by 6.1%.
The division’s strong performance is also reflected in the continued high volume of contracts concluded with new and existing customers totaling EUR 220m in the second quarter as well as in the marked improvement in the profit margins of these new agreements. This was also a driver of the significant rise of operating earnings, which more than doubled from EUR 53m in the second quarter of 2010 to EUR 115m in the current year. The significant improvement was also supported by the division’s strict, ongoing cost management and the gain on the disposal of the U.S. subsidiary. Furthermore, the previous year’s result contained restructuring expenses of EUR 17m.