Deutsche Post shares slump amid DHL concerns
Deutsche Post on Wednesday abandoned its break-even target for its struggling DHL package delivery arm in the US and said it would stop reporting separate results for the unit. The news led to a substantial sell-off of the stock.
The German postal group, the world’s largest logistics company, has been plagued by problems, particularly over service levels, following its acquisitions of DHL and Airborne, a Seattle-based delivery company bought for $1bn in 2002.
It had promised to break even in the US by the last quarter of this year but on Wednesday it merely said that “[DHL] will continue its path towards break-even in the coming years”. It also said it would no longer break results down geographically because none of its rivals, such as FedEx and UPS, did.
Shares in the German group, which loses its domestic postal monopoly next year and has been seeking to expand abroad to compensate, plunged 3.6 per cent, making them the biggest losers among Frankfurt’s blue-chip stocks.
“If people were being mean, they could argue that Deutsche Post wants to hide the progress of the US operations,” said one German-based analyst. “It is definitely not an encouraging sign.”
Analysts were further worried by the quality of earnings at its wider DHL express division, where a ?434m goodwill charge related to a US acquisition thought to be Airborne led operating profit to be just ?11m. Adding back goodwill, this was ?55m shy of its target, leading analysts to suspect DHL’s performance had also been below par in Europe.
DHL’s attempt to break into the US which has been dominated by FedEx and UPS has lurched from crisis to crisis, with Klaus Zumwinkel, Deutsche Post’s chief executive, forced to replace the unit’s head last year.
Both John Mullen, the new boss of DHL express, and Mr Zumwinkel have scaled back the previously bullish language of DHL and have said they are happy with its US market share of just 7 per cent.
Deutsche Post’s continuing problems in the US came as it laid out its earnings forecast for 2009, saying operating profit should hit ?5bn, up from last year’s ?3.76bn.
But analysts were unimpressed, variously describing the target as “not very ambitious” and “unexciting”.
