Deutsche Post earnings up in first quarter despite “sluggish” economy
Deutsche Post DHL has said it had a “good start” to the year, but although revenues and earnings were up in the first quarter, currency movements hit growth. The German postal and logistics giant said today that revenues edged upwards by 1% to EUR 13.6bn, but would have climbed 5% taking the currency impact out of the equation.
Pre-tax earnings grew by more than 2% to EUR 726m, with net profits up slightly compared to last year’s first quarter, to EUR 502m, mostly driven by double-digital earning growth in the DHL Express division.
Frank Appel, the Deutsche Post CEO said the “sluggish” global economy and negative exchange rate impacts had not helped, but despite this he said the company had delivered profitable growth.
He said: “We got off to a good start in 2014, in line with our expectations and market circumstances. Because we strive for and achieve continuous improvement, we have been able to consistently deliver what we have promised to our customers and investors even when facing sub-optimal business conditions.”
The first quarter performance was not quite up to some analyst expectations, but despite anticipating only “slight improvement” in the global economy in the rest of this year, Deutsche Post said it was expecting positive earnings trend for 2014 as a whole.
Divisions
The transformation of the old Mail division into the Post – eCommerce – Parcel (PeP) division has tied the high-growth online shopping sector into the declining traditional mail business, which should help stabilise the performance of the division in the long-term, although much of the company’s growth is still expected to be in the DHL divisions.
In the first quarter, the PeP division saw its revenues grow 3.6% year-on-year to EUR 4bn, thanks to the restructuring of the division. The new division not only includes the old Mail division’s domestic German mail activities, but also any domestic (in-country) parcel activities outside of Germany.
Higher postal rates in Germany also helped with revenue growth, but the key driver of growth in the division was strong German parcel business thanks to e-commerce at home.
Operating earnings in the PeP division totaled EUR 398m, a slight improvement on last year’s first quarter.
Most of the Group’s profit growth in the first quarter came courtesy of DHL Express, which boasted pre-tax earnings growth of 14% year-on-year to 275m, on revenue growth of 8% when currency movements were factored out, up to EUR 2.9bn.
Deutsche Post said the Express business had benefited from “significant gains” in all global regions with strong demand for international time-definite shipments, with double-digit volume growth in the Asia Pacific, Middle East and Africa regions.
DHL’s Global Forwarding and Freight division saw its revenues fall 2.2% in a “challenging” business environment, to EUR 3.5bn, although taking out currency movement would have seen growth of 2.5%. Pre-tax earnings slumped by 45% to EUR 48m, as investment went into a new IT infrastructure, and with general pressures on margins.
Volumes remained flat compared to last year, with “weak” demand from technology, engineering and manufacturing customers. Volumes grew in ocean freight on the back of new business wins.
DHL’s Supply Chain business saw revenues up slightly in the first quarter, to EUR 3.5bn, again depressed by currency movements. Adjusted for currency, growth would have been nearly 7% year-on-year. Pre-tax earnings were up slightly to EUR 84m, hit by “sluggish” market conditions in Europe and start-up costs for new business.
