Deutsche Post DHL Group reports 8.8% revenue growth
Deutsche Post DHL Group has reported revenues of EUR 14.8 billion for the first quarter of 2015, up 8.8% on the same period last year, and a 1.4% drop in consolidated net profit to EUR 495 million. After adjustment for currency effects, Group revenue increased by 2.1%. The group said that the first quarter results reflected “sustained growth in revenues and volumes in the international express business as well as in the German parcel business”.
Operating profit (EBIT) decreased by 1.0% to EUR 720 million, which the group said was primarily due to the “weak performance” registered by the Global Forwarding, Freight business and planned, non-recurring restructuring costs in the Supply Chain division.
The Post – eCommerce – Parcel (PeP) division marginally increased EBIT by 0.8% to EUR 399 million, with the ongoing dynamic growth of the Parcel business offset by further declines in Post volumes and higher costs.
The Express division registered a 12.5% increase in revenue to EUR 3.2 billion for the first quarter and a 20.3% jump in operating profit to EUR 332 million, due to continued strong growth in the international time definite (TDI) business. By contrast, EBIT in the Global Forwarding, Freight division decreased to EUR 17 million, compared to EUR 49 million last year. The group said this was “mainly due to the impact of the division’s transformation program and continued margin pressure within the overall market”.
Operating profit in the Supply Chain division declined in the first quarter to EUR 53 million (2014: EUR 85 million), and this was attributed “principally to non-recurring costs for the division’s optimization program”.
“We saw a moderate start to the year, as we expected,” said Frank Appel, CEO of Deutsche Post DHL Group. “Our strategy, aimed at growth in e-commerce and the emerging markets, in particular, is progressing. At the same time, as we transition from Strategy 2015 to our new Strategy 2020, we are now consciously undertaking a number of specific measures. These measures will allow us to build a strong base to bring our strategic priorities forward. We are investing significantly to ensure that our four divisions are optimally positioned, even though this is having a temporary impact on our performance.”
Looking ahead
Deutsche Post DHL Group said that although it expects global growth to be “moderate at best” in 2015, it has reconfirmed its targets. Operating profit is projected to increase to between EUR 3.05 billion and EUR 3.2 billion in 2015. The PeP division is expected to contribute at least EUR 1.3 billion to that figure, while the DHL divisions are projected to record an EBIT increase to between EUR 2.1 billion and EUR 2.25 billion. For Corporate Center/Other, the Group anticipates stable expenses of approximately EUR 350 million in 2015. In addition, the Group continues to expect free cash flow to again be generated in an amount sufficient to cover the dividend to be paid out for financial year 2014.
Looking ahead to 2016, Deutsche Post DHL Group reconfirmed its forecast of a rise in EBIT to between EUR 3.4 billion and EUR 3.7 billion. The PeP division is expected to contribute more than EUR 1.3 billion to this figure and the DHL divisions between EUR 2.45 billion and EUR 2.75 billion.
Deutsche Post DHL Group added that it is still forecasting that operating profit will increase by an average of more than 8% annually during the period from 2013 to 2020 (CAGR). The DHL divisions are expected to contribute to the improvement with average EBIT growth of 10% per year. At PeP, operating profit is expected to increase by an average of around 3% per year. The Group additionally plans to keep expenses for Corporate Center/Other at less than 0.5% of consolidated revenue until 2020.
PeP Q1 results in more depth
Revenue in the PeP division increased by 3.6% in the first quarter to EUR 4.1 billion. The group reported that EUR 1.5 billion of that figure was attributable to the eCommerce – Parcel business, which continued to register “dynamic growth” to achieve an improvement of 13.7% over the prior year. The increase, including positive currency effects, reflects revenue growth of 25.8% in eCommerce, 12.1% in Parcel Germany and 4.8% in Parcel Europe.
“This positive trend demonstrates that Deutsche Post DHL Group continues to benefit from its successful positioning in the high-growth e-commerce, parcel market,” said the group’s statement. “Innovations such as parcel boxes for apartment buildings and the recently piloted car drop delivery service continue to advance the Group’s leading position in the market.”
The Post side of the business was less successful: revenue fell by 1.7% in the first quarter to EUR 2.6 billion, which the group said “once again illustrated the impact of structural change as the mail market shrinks”. Price increases for postal products in Germany helped to mitigate the effects of the volume decline. Operating profit in the PeP division rose by 0.8% to EUR 399 million. This reflects the higher revenues in eCommerce – Parcel, which were partially offset, however, by lower Post volumes, higher staff and purchased goods and services costs as well as expenses especially related to the international expansion of the Parcel business.
