Deutsche Post sales and earnings damaged by sluggish economy
Mail and package delivery company Deutsche Post announced Wednesday a sharp rise in second quarter earnings over 2002 when the company was hit with a massive fine from the European Union.
The company announced a net profit of 150 million (US$172 million) between April and June, compared to net loss last year of 257 million for that period. But in 2002, the company was hit with a 906 million fine from the European Union for misusing German government subsidies that skewed comparison.
Deutsche Post said its earnings were actually lower than expected, damaged by the sluggish global economy. It reported that second quarter sales for this year fell to 9.422 billion (US$10.8 billion) from 9.648 billion last year.
At the earnings press conference, chief executive Klaus Zumwinkel said the company’s DHL Worldwide Express parcel delivery service expected to move ahead with expansion in the United States by completing the takeover of the ground operations of Airborne Express in the current quarter. Airborne’s board is to vote on the sale Aug. 14.
The expansion strategy will continue, he said, despite U.S. Department of Transportation proceedings regarding Astar Air Cargo, formerly DHL Airways. Competitors Federal Express and United Parcel Service say Astar violates rules that bar foreign control of U.S. airlines.
DHL no longer holds a stake in the airline, but competitors argue that it’s still effectively controlled because Astar still gets most of its revenue from DHL parcel operations. DHL vigorously denies that argument.
“We’re taking this case very seriously,” Zumwinkel told Dow Jones Newswires. “Many people are working on it and it’s costing us a lot money in legal costs.”
Overall, first half earnings more than quadrupled over the same period a year ago when they were impacted by the fine.
Net profit was 650 million (US$741 million) in the first half of 2003, up from 155 million a year ago.
The company raised its operating earnings outlook for the full year from 2.8 billion (US$3.2 billion) to 2.9 billion (US$3.3 billion), saying it doesn’t believe the “somewhat weaker first half of 2003 is an indicator of earnings developments in the second half.”
Operating earnings omit items such as interest and taxes and so give an incomplete view of a company’s finances, but many companies argue they give a clearer look at their core business activities.
Revenues fell in the half by 0.8 percent to 19.2 billion (US$21.9 billion).
The German government, which holds a majority in the company, sold 29 percent of Deutsche Post in 2000 but has put off selling more.
