News Analysis: Post Groups Grow Profits

European postal companies are bucking the trend of poor results from
their international rivals. This week Deutsche Post, which floated last November, recorded 5.5
per cent growth in underlying earnings as it increased prices, grew
volumes in its parcel delivery business and integrated logistics
acquisitions. Dutch group TPG, the only other quoted European postal company,
presented similarly impressive results earlier this month, with
acquisition-boosted first-half sales up almost a fifth. In sharp contrast, US rivals United Parcel Service and FedEx have
both blamed the US economic downturn for slumping profits. Despite their strong performances, however, neither TPG nor Deutsche
Post have been good investments. Shares in the Dutch company have
fallen by 6 per cent this year. Deutsche Post shares are down a
quarter, trading at E17.14, an all-time low and 19 per cent below
the IPO price of E21. The poor performances are mainly because of fears that European
economies are on the same down-slope as the US. “I don’t think Deutsche Post can repeat what it has done in the
second half. It claims it can, but I have my doubts, principally for
macroeconomic reasons,” said Dan Bieler, logistics analyst at
Nomura. Investors have also fretted that the German and Dutch governments
will sell down more of their stakes in the postal groups. Deutsche
Post is 69 per cent state-owned and the Dutch government owns 57 per
cent of TPG. Potential floods of shares in both companies could
dilute their share prices. A positive move, for Deutsche Post at least, is that its
cash-generative mailing monopoly within Germany has been extended
from 2002 until 2007 as EU postal liberalisation has not moved
forward as quickly as first thought. Such monopolies are something
US delivery companies must do without. The EU is still nominally committed to a timetable for
liberalisation. Last May, the European Commission proposed that
between 2003 and 2007, 20 per cent of the national postal
monopolies’ revenues should be opened to competition. This is to be
achieved mainly by opening to competition all mail that weighs more
than 50 grams. Strides towards liberalisation had been anticipated in the first
half of this year when pro-competition Sweden held the EU
presidency. But opposition, mainly from Britain and France, meant
these moves did not materialise. And if experience of deregulating other industries, such as gas and
electricity, is anything to go by, there will probably be plenty
more heel- dragging ahead.
Copyright 2001 Investors Chronicle. Source : World Reporter (Trade
Mark) – FT McCarthy INVESTORS CHRONICLE, 24th August 2001