Postbank sale takes edge off Deutsche Post DHL growth in 2011

Deutsche Post DHL reported its latest results today, with its recent Postbank share sale heavily denting its growth figures, taking some of the shine off the “good progress” seen in its operations during 2011. The year saw growth driven primarily by the company’s DHL divisions, with its mail operations showing a stable performance compared to 2010.

The German logistics giant said its net profit for the last quarter of 2011 dropped 64% to EUR 175m, while for the whole of 2011 net profits were halved from EUR 2.5bn in 2010 to EUR 1.2bn in 2011.

However, revenues increased 2.1% during the last quarter (to EUR 14.1bn) and 2.8% in the full year, to EUR 52bn.

The valuation from 2010’s sale of Postbank stock, to Deutsche Bank, took a EUR 1.6bn impact on Deutsche Post’s results compared to the previous year. Net profits would have been up 50% for the year without these affects, the company said.

Operationally, Deutsche Post executives said they had had a strong last quarter for a successful 2011. Mail revenues stabilised, with a slight decline in letter volumes countered by increasing parcel volumes, but much of the growth in the group overall was driven by DHL, with express and freight income showing good growth, particularly from Asia, despite generally weak demand for forwarding.

“For us, this has been a strong end to a successful 2011,” said CFO Larry Rosen today.

“Our revenue growth is almost 3%, but we achieved 5.3% organic growth when adjusting for currency and consolidation affects, while DHL saw growth of over 7%. Our decline in net profit reflects Postbank and 2010 non-recurring charges – our financial result was heavily affected by the valuation affect from the Postbank transaction.”

Executives predicted that earnings would bounce back in 2012 to around EUR 2.5bn to 2.6bn for the group, with mail earnings stable at just over EUR 1bn and DHL’s earnings pushing up towards EUR 1.9bn.

Mail division

Deutsche Post said revenues in its mail business stabilised in the full year, up around EUR 100m to EUR 14bn, thanks to relatively stable volumes, with earnings about the same EUR 1.1bn level as in 2010.

The company said it had been granting discounts to customers to counter the introduction of VAT on services back in July 2010, stabilising traditional mail revenues. Most of the growth came from the parcel business thanks to the growing e-commerce demand.

Parcel volumes grew 11% in the fourth quarter, and up 10% for the full 2011 compared to the same period in 2010. Parcel revenues were up 9% for the year to EUR 3.2bn.

Parcels now account for about 25% of revenues in Deutsche Post’s mail division. The company is planning some new ways to attract further e-commerce business, but could not reveal details today.

For 2012, executives predicted that mail volumes would deteriorate around 2-3%, and said they were so confident of an impending appeal against European Union demands to hand back state aid, that they had not included the money in balances for 2011.

DHL

Within the strong performance of the DHL side of the business, Deutsche Post noted that revenues in its express services climbed 5.9% during 2011, to EUR 11.8bn.

Revenue growth would have been around 10.9% without the affects of restructuring that included selling off domestic operations in China, Canada and Australia.

Earnings before tax soared by 86.5% to EUR 927m, even as the company invested in expanding its air network, upping its global advertising reach and training staff.

The Asia-Pacific was very much the driver for growth, for both DHL as a whole as well as for express business, although speaking to analysts, executives also noted the strong opportunities in Latin America.

Revenues in global forwarding and freight at DHL rose 4.9% in 2011, to EUR 15bn, but profitability rose sharply, with earnings before tax up 12% on 2010, to EUR 429m, as the company pursued “selective growth” by avoiding unprofitable contracts.

The supply chain division saw DHL increasing revenue 1.2% to EUR 13.2bn, with operational earnings up 5.7% to EUR 362m for the year thanks to cost management efforts and strong growth in Asia, as well as in the life sciences and automotive industry sectors.

The growth in earnings driven by DHL in 2011 came despite relatively flat or even slightly shrinking volumes in freight, the company said, because of efforts to cut back on less profitable contracts.

The move nevertheless saw around EUR 420m of new supply chain business in the last quarter of the year, the biggest increase in new business for a few years

“We have had a much better approach to selling, with more training for our staff and because we didn’t compromise on margins,” explained CEO Frank Appel. “We are not looking for cheap contracts, we are looking to provide quality solutions. Even so – we have achieved some big new business.”