Deutsche Post Q1 Financials Expected Tuesday

German postal giant Deutsche Post AG is expected to post an eight percent fall in first quarter core profit on Tuesday, figures which may shed more light on the scale of margin erosion at its mail division. The postal, logistics, express and banking group disappointed investors three weeks ago when it predicted its cash cow would see margins of 'at least' 14 percent in 2002, lower than analysts were expecting. 'I think all eyes will be on the scale of the margin erosion in mail for the first quarter,' one London-based analyst said. Analysts said the mail business usually had a strong first quarter but the figures would still provide clues to the prospects for the division. In a Reuters poll of 10 analysts, group earnings before interest, tax and amortisation (EBITA) was seen at 770 million euros ($696 million), in a range of 716-825 million and down from 840 million in the first quarter of 2001. Sales were seen at 10.14 billion euros, compared to 8.58 billion in 2001. The figures will also be scoured for evidence that express company DHL, which Deutsche Post is consolidating for the first time, is making progress in reviving its loss-making U.S. unit. The group has a 51 percent stake in DHL, which it plans to increase to more than 70 percent this year. 'We'll get a bit more detail in terms of exactly what's going on with DHL and whether it is really good or not,' an analyst at HSBC said. Deutsche Post said earlier in April it expected group sales to jump more than 20 percent to 41 billion euros this year as a result of the DHL consolidation, and reiterated that it would be 'a challenge' to improve on 2001's EBITA of 2.6 billion. Analysts said they would be looking for more details on the group's plan to buy back shares, announced at its annual news conference on April 8.

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Deutsche Post still cautious on FY earnings as Q1 disappoints – UPDATE
AFX Europe; Apr 30, 2002

(updates with further details throughout)

BONN (AFX) – Deutsche Post World Net AG remained cautious in its outlook for full year earnings as its first quarter results came in below consensus.

"As before, we are assuming that the difficult global economic situation will continue throughout 2002.

"Against this backdrop, we consider it a major challenge to achieve consolidated EBITA in 2002 as a whole which will surpass the previous level.

"In view of the composite tax rate in 2002 it will be very difficult to maintain the high level of the 2001 net profit for the period," the company said in a statement.

In the first quarter the company posted EBITA of 785 mln eur, versus 840 mln in the year-earlier period. On average analysts forecast 808 mln eur.

Net profit fell to 417 mln eur from 539 mln, lower than the average forecast of 432 mln. Sales rose to 9.703 bln eur from 8.580 bln. Analysts forecast an average 10.258 bln.

The fall in net profit was due to lower operating income and the composite tax rate, which is now around 40 pct, it said.

"In both Germany and Europe, we are in the grip of an ongoing economic downturn, a trend that we were unable to escape in Q1/2002," the company said.

The company's Logistics and Financial Services divisions posted a slight increase in earnings, while in the Mail unit profits were hit by an increase in operating expenses. The Express unit's earnings fell due to the losses made by its US unit DHL, it said.

The sales growth was mostly generated by the the first-time consolidation of DHL in the Express corporate division, it said. The other divisions recorded flat or falling sales, it said.

In the company's Mail division, first quarter EBITA fell 9.2 pct year-on-year to 675 mln eur due to a drop in demand from private customers in particular, a one-time cost of 15 mln eur as a result of the conversion to the euro, the rise in material expenses in other operating expenses.

Sales fell 2.1 pct to 3.005 bln, it said.

The company said it expects its Mail division to post an EBITA margin of "at least 14 pct" in the full year given the current wage negotiations and the continued economic downturn, it said. In the first quarter the EBITA margin was 22.5 pct.

The company is continuing to streamline its operations in this area, it said.

The Express division is expected to post a full year EBITA margin of 2.7 pct. In the first quarter the margin was 1.1 pct.

EBITA fell 62.5 pct to 33 mln eur, due to unspecified losses at DHL, while sales rose 95.4 pct to 3.046 bln due to the first time consolidation of business conducted under the DHL brand, it said.

The Logistics unit is forecast by the company to post a full year EBITA margin of 2.1 pct — in the first quarter it was 1.5 pct — on improved sales, it said.

EBITA rose 3.2 pct in the first quarter to 32 mln eur due to "strict cost management" in the Intercontinental Business unit and the expansion of its high-margin Solitions unit, it said.

Sales in the unit fell 7.0 pct to 2.170 bln eur, mainly due to falling sales at Intercontinental Business, where sales slumped 15 pct, it said.

The Financial Services unit's sales are expected to fall in 2002 as a whole, but earnings will rise, it said. It expects a return on equity of at least 9 pct in 2002, it said.

In the first quarter the unit's sales fell 4.7 pct to 1.891 bln eur, while EBITA rose 5.6 pct to 131 mln, it said.