Deutsche Post plans to buy back shares

Deutsche Post, the German postal and logistics group, said yesterday it planned to buy back shares in an attempt to shore up its share price.

Institutional investors have long called on Deutsche Post to take such a step, given that its mono-poly mail business generates healthy cashflow and it has comparatively little debt.

The postal carrier has also lost a quarter of its value since its initial public offering in late 2000, which has angered small investors.

The move is supported by the German government, which still owns 69 per cent of Deutsche Post and wants to boost the value of its holding.

"The German government is behind us, we really plan to do (a share buy-back)," Edgar Ernst, Deutsche Post chief financial officer, told the FT.

Given its current budget deficit, the German government is widely believed to want to take the first opportunity to capitalise on an improved stock price and sell down its shares. The government said in February it would consider placing a second tranche this year.

Mr Ernst said the group would ask its shareholders to approve a buy-back at its annual meeting in June.

Usually, permission is granted for up to 10 per cent of a company's stock.

Separately, Klaus Zumwinkel, the chief executive, said Deutsche Post would lift its 2001 dividend by 37 per cent to Euros 0.37 per share.

Mr Zumwinkel said the difficulty in gauging the economic climate only allowed him to give a careful outlook. "For the ongoing year we see a mixed scenario and only expect a serious improvement for 2003."

In February, Deutsche Post had said that it would be hard to match last year's Euros 2.6bn (Dollars 2.3bn) operating profit, which was up 7.3 per cent from 2000. Group sales were up 2.1 per cent at Euros 33.4bn.

Deutsche Post said it was looking to strengthen its logistics activities, particularly value-added services, through large acquisitions.

"Our search is definitely geared at larger acquisitions with a value of Euros 1bn and above," said Peter Kruse, board member in charge of express and logistics.

Mr Zumwinkel said the recent decision by the European Union to gradually open up European mail markets by 2006 provided Deutsche Post with the legal framework to set up its own mail distribution operations outside Germany. "Now we can become active in foreign domestic mail services, particularly in the area of business mail," he said.

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Deutsche Post, the German postal and logistics group, said on Monday it planned to buy back up to ten per cent of its shares in a move supported by the German government, which owns 69 per cent of its stock and wants to boost the value of its holding.

Institutional investors have long called on Deutsche Post to take such a step given that its monopoly mail business generated a lot of cashflow and it had comparatively little debt.

The postal carrier has also lost a quarter of its value since its initial public offering in late 2000, which has angered small investors lured by its appeal as "people's share."

"The German government is behind us, we really plan to do it" [a share buyback], said Edgar Ernst, the chief financial officer, on the sidelines of Deutsche Post's annual results presentation.

Given its current budget deficit, the German government is widely believed to take up the first opportunity to capitalise on an improved stock price and sell down its shares. The government said in February it would consider placing a second tranche this year.

In late afternoon trading, the share traded down 2.1 per cent at E16.49.

Mr Ernst said the group would ask its shareholders to approve such a buyback at its annual meeting in June.

Separately, Klaus Zumwinkel, chief executive, said Deutsche Post would increase its 2001 dividend by 37 per cent to E0.37 per share. He said the difficulty to gauge the economic climate only allowed him to give a careful outlook. "For the ongoing year we see a mixed scenario and only expect a serious improvement for 2003."

In February, Deutsche Post said it would be hard to match last year's E2.6bn operating profit, which was up 7.3 per cent from 2000. Group sales were up 2.1 per cent at E33.4bn.

Deutsche Post sent clear signals that it was looking to strengthen its logistics activities, particularly more value-added services, through large-scale acquisitions. "Our search is definitely geared at larger acquisitions with a value of E1bn and above," said Peter Kruse, board member in charge of express and logistics.

Although Deutsche Post likes to portray itself as a logistics and express company following a global shopping spree in the past years, logistics and express only contribute 12 per cent to its income and still have low margins compared with competitors.

Meanwhile, monopoly mail distribution still accounts for 70 per cent of Deutsche Post's earnings.

Mr Zumwinkel said the recent decision by the EU to gradually open up European mail markets by 2006 provided the legal framework to set up its own mail distribution operations outside of Germany. "Now we can become active in foreign domestic mail services, particularly in the area of business mail," said Mr Zumwinkel.

Competitors such as TPG, the Dutch logistics group, have already attacked neighbouring markets to the degree that they were opened.