Deutsche Post World Net business on target

Consolidated revenue up to 29.3 billion euros in the first half of 2006
Operating profit down slightly to approx. 1.6 billion euros
Exel integration moving ahead fast
Group confirms 2006 EBIT forecast of at least 3.9 billion euros

"Deutsche Post World Net completed the first half of 2006 according to plan, working intensively on integration and achieving revenue growth in all of its corporate divisions." This was announced by the Group's Chairman and Chief Executive Officer, Klaus Zumwinkel, at the company's press conference on first-half earnings in Bonn. "We are already seeing disproportionately high revenue increases from our acquisitions, and all our integration projects, especially Exel, are moving ahead fast. After a temporary downturn, they will have a significant positive effect on earnings. That is why I am able to confirm our EBIT forecast of at least 3.9 billion euros for 2006," he continued. With its new opportunities, the company was concentrating all its efforts on expanding and improving its portfolio for customers worldwide. As performance was as planned, the CEO again confirmed the medium-term EBIT forecast of at least 5.2 billion euros for 2009. "We are continuing in our commitment to implement ur long-term Group strategy, and facing up to our immediate challenges with determination. Whatever we now invest in terms of money and effort will ultimately benefit our global customers and shareholders and safeguard our leading position in the market," said Zumwinkel.

Key financial figures

Consolidated revenue grew, both organically and through acquisitions, by 36.4 percent year on year, to 29.3 billion euros. Excluding revenue from Exel, acquired at the end of 2005, the figure was 23.6 billion. In the first half of 2006, 59.2 percent of total revenue was generated outside Germany. As expected, the recent acquisitions of Exel, BHW and Williams Lea are still to be reflected in improved profit figures because of the high costs of integration. Results were also impacted by high one-time gains recorded in the previous year and, as expected, by the express business in the United States. Hence, profit from operating activities (EBIT) fell slightly in the first half-year by 6.8 percent to 1.558 billion euros; the previous year's figure was 1.672 billion euros. Now, however, the US express business is gaining momentum, and this positive trend will intensify in the second half of the year.

Consolidated net income for the first six months reached 736 million euros, against 947 million euros the previous year. This corresponds to a decrease of 22.3 percent. Diluted earnings per share fell to 61 euro cents from 85 euro cents the previous year, mainly because of increased financial expenditure. The initial consolidation of Exel was a major factor in this. In the second quarter, consolidated net income fell by 48 percent year on year, from 488 million to 254 million euros. The second quarter of the previous year still included income from the sale of Trans-o-flex.

MAIL Corporate Division

The MAIL Division increased its revenues by 1.7 percent in the first half of 2006, to about 6.5 billion euros. The mail and document service provider Williams Lea has been included in the Group's Mail International and Value-added Services business since April 1. This increased the revenue generated outside Germany to a fifth of total mail revenue. The expected revenue decreases in the national market were thus offset by the international mail business. International mail revenues rose by a quarter to around 1.3 billion euros.

Increasing competition and a lack of stimuli from the domestic economy affected the Mail Communication business. The revenue figure of 3.1 billion euros was below the previous year's level. The MAIL Division's total EBIT for the first half of 2006 came to 1.024 billion euros, 7.1 percent below the previous year's figure of 1.102 billion.

EXPRESS Corporate Division

In the first six months of the year, revenue from the EXPRESS Division rose by 4.7 percent to 9.2 billion euros. With the exception of the Americas, all regions made a positive contribution to this. EBIT for the first half of 2006 totaled 5 million euros. In the first quarter of 2006, the division posted a loss of 37 million euros. In the Americas region, the revenue level stabilized in the second quarter compared to the first and the high service levels at DHL Express were once again met. Overall, the EXPRESS Division achieved an increase in profits of around 80 million euros in the second quarter compared to the first, coming mainly from the Americas region.

LOGISTICS Corporate Division

Since the beginning of the year, the LOGISTICS Division (air freight, ocean freight and supply chain management) includes the activities of Exel, taken over in 2005. Business continued to develop well in terms of integration, profitability and growth. According to CEO Klaus Zumwinkel: "The new management structures are in place, and we're very pleased with the integration of Exel. All business units showed sustained organic growth, and returns are developing better than planned." Revenue from LOGISTICS came to 9.9 billion euros in the first half, up from 3.6 billion the previous year. Acquisition effects amounted to around 5.7 billion euros. EBIT for the LOGISTICS Division in the first half of 2006 reached 324 million euros, against 133 million the previous year. This increase is based on organic growth as well as the inclusion of Exel.

FINANCIAL SERVICES Corporate Division

The FINANCIAL SERVICES Division consists mainly of Postbank, which reported its results separately on July 28. In the first six months of 2006, the division generated revenue and income from banking transactions of around 4.6 billion euros, an increase of 33 percent. The previous year's revenue totaled around 3.4 billion euros. EBIT rose by 7.4 percent against the previous year, to 464 million euros.

Brand and First Choice

An ongoing priority is to further strengthen the independent profile of the DHL brand in the various regions of the world. After the exceptionally successful campaign to increase brand awareness over the last three years, it is now a matter of positioning the global DHL brand and its identity, characterized as it is by the personal commitment of its staff, its proactive offer of innovative solutions to customers, and its local strengths within a worldwide network. Work on and with the brand is of course closely linked to the First Choice program, which made good progress in the first half of 2006. With the aid of this Group-wide initiative, Deutsche Post World Net aims to be the first choice for customers world-wide, and to bring all 500,000 employees to world-class levels in terms of quality and productivity, thus making a decisive contribution to further growth and the mid-term EBIT-target of at least 5.2 billion euros.

Up to the end of 2006, the Group will be concentrating initially on eight pilot projects to test and refine the processes and methods defined for First Choice in day-to-day operations in all divisions and regions. The core process, encompassing over 5 000 individual projects, will be rolled out worldwide from the beginning of 2007.

Outlook

For the current year, the Group is expecting revenue of a good 60 billion euros and EBIT of at least 3.9 billion euros. This includes substantial one-time expenses for the integration of Exel and BHW. 2006 revenue for the MAIL Corporate Division is expected to remain stable or rise slightly, while EBIT is forecast at about 2 billion euros. In the EXPRESS Corporate Division, the Group is anticipating single-digit revenue growth in 2006. The operating profit for 2006 should be on a level with the previous year excluding goodwill impairment, i.e. at around 450 million euros. In the LOGISTICS Corporate Division, enlarged by the acquisition of Exel, revenue is expected to exceed 18 billion euros by some margin, with EBIT of at least 700 million euros. In the FINANCIAL SERVICES Division, revenue is forecast to rise, driven in part by the inclusion of BHW Holding AG. This will be accompanied by double-digit growth in operating profit to at least 900 million euros.