“Dynamic start” for Deutsche Post DHL, despite Q1 profit drop

Deutsche Post DHL’s CEO Frank Appel said his company had “gotten off to a dynamic start” in 2011, despite seeing a drop in profit during Q1. Compared to a figure of EUR 1.7bn for Q1 2010, consolidated net profit fell for the quarter to EUR 325m, leading to a decrease in earnings per share to EUR 0.27 (2010: EUR 1.44).

However, the company was quick to state that this was “almost exclusively the result of the valuation of financial instruments related to the sale of Postbank”.

In the same bracket, Group net financial income dropped to minus EUR 161m, compared to 2010’s figure of EUR 1.3bn.

A statement said: “While last year’s financial result included positive effects of EUR 1.4bn related to the Postbank transaction, expenses amounting to EUR 56m were incurred in the first quarter of 2011.

“Adjusted for the Postbank valuation effects for both years, consolidated net profit and earnings per share would have risen by over 27% in the first quarter of 2011, driven by the operational improvements achieved.”

Deutsche Post DHL saw growth across all divisions during the quarter, with Group revenue climbing by 6.9%.

Revenue grew to EUR 12.8bn, as the company “remained firmly on its growth course in the first quarter of 2011”. The results were boosted by the continuing economic recovery, which in turn has led to a rise in transport volumes. The company also highlighted the high growth rate in its Asian markets.

The company’s EBIT increased by 22.9% to EUR 629m, as a result of margin improvements across DHL divisions.

“We have gotten off to a dynamic and very successful start in 2011,” said Appel. “The first quarter clearly demonstrated that our growth is based on a broad and very strong foundation.

“As a result, we are in an ideal position to benefit significantly from the continuing momentum in global markets and to reveal step by step our Group’s full potential – for the good of our customers, employees and investors.”

The company confirmed that its DHL divisions contributed a figure of EUR 363m towards the overall Group result. This represented a significant improvement compared to 2010 levels – up by almost two-thirds (2010: EUR 219m).

For the period, capital expenditure reached EUR 252m – an increase of almost 30% against last year’s figure of EUR 195m. The rise was attributed to ongoing investment across all DHL divisions, including aircraft, warehouses and other property, plant and equipment.

Concerning its outlook for the future, Deutsche Post DHL expects continued economic recovery across the world, “triggering a measureable rise in global trade volume”.

The business stated that its 2011 full-year earnings guidance “continues to project an EBIT of between EUR 2.2bn and EUR 2.4bn”. It forecasted a double-digit increase of DHL’s operating profit to EUR 1.6bn – EUR 1.7bn, whilst the MAIL division is still on course to contribute between EUR 1bn and EUR 1.1bn.

A company statement said: “Consolidated net profit, adjusted for effects stemming from the valuation of the Postbank transaction, should continue to improve during 2011 in line with the operating business. The medium-term growth targets as set at the end of 2010 were also confirmed: provided the world economy continues to recover, the overall positive earnings trend should continue in future years. Earnings at the MAIL division should stabilise at around EUR 1bn, and EBIT at DHL should climb by an average of 13% to 15% annually through 2015.”

Appel added: “We are in an extremely good position from which we can benefit from the continued recovery of the global economy to generate profitable growth and achieve our short- and mid-range targets. In particular, our excellent position in the world’s growth markets will pay off even more in the future and be a key contributor to sustainable revenue and earnings growth in all DHL divisions.

“At the same time, with our dynamic parcel business and the continued expansion of our digital business, we have also created ideal conditions to stabilise the contribution from our MAIL division.”

MAIL division

For the quarter, the company’s MAIL division produced revenue of EUR 3.5bn. This result was the same as the previous year. Revenue for traditional mail fell as a result of the company offering discounted products following the imposition of the value-added tax last July. However, this was offset by a growth in the parcels business, which saw a growth of nearly 9% to more than EUR 700m.

“EBIT in the MAIL division totaled EUR 373m in the first quarter, slightly below the previous year’s level of EUR 389m. This decrease resulted largely from the effect of the value-added tax and expenses associated with the expansion of the division’s digital business. The impact of these developments on the division’s profitability, however, could be limited through the higher earnings generated by the parcel business and strict cost management,” the company said.

EXPRESS division

Revenues for the EXPRESS division grew by 5.5% in Q1 to EUR 2.8bn, with the increase being attributed to a growth in international shipments. The company added this “trend more than offset the sale of the domestic express business in the United Kingdom and France”. Operating profit rose to EUR 216m. Double-digit revenue growth was achieved in the Americas and Asia-Pacific regions.

The company said: “In addition to the revenue and volume growth as well as continued strict cost management, a major reason for this strong increase was the successfully completed restructuring measures, which in the same quarter last year had caused expenses of EUR 44m.”

GLOBAL FORWARDING, FREIGHT division

Revenues also grew in the GLOBAL FORWARDING, FREIGHT division. During Q1 the figure rose to EUR 3.6bn – a 14.9% increase. Double-digit growth in revenue was achieved across air and ocean freight, as well as the European overland transport segment.

“In spite of rising fuel costs, the division profited at the beginning of the year from lower freight rates and improved buying conditions. This resulted in a stabilisation of margins. Accordingly, the divisional EBIT increased strongly by 30.2%, from EUR 53m in the first quarter of 2010 to EUR 69m in the first three months of this year. Last year’s operating result included restructuring charges totaling EUR 1m,” a statement said.

SUPPLY CHAIN division

Finally, the SUPPLY CHAIN division also benefited from “significant” growth in revenues. Revenue figures for the division stood at EUR 3.3bn for Q1 – a 7.5% increase on last year’s result. The ‘Retail’ and ‘Life Sciences & Healthcare’ sectors produced almost half of the division’s revenue. Asia-Pacific achieved highest regional revenue gains. New business gains across the division stood at EUR 320m – one third higher than Q1 last year. “At the same time, the profit margins of the new contracts reflect a significant improvement compared to the previous year,” the company confirmed.

“As a result of the profitability gains, which in the first quarter were largely the result of an improved contract mix, strict cost management and higher business volume, EBIT rose by 39.3%, from EUR 56m in the first three months of 2010 to EUR 78m in 2011. The previous year’s figure included restructuring charges of EUR 7m,” the company concluded.

What are your thoughts on the results? Are Deutsche Post DHL’s results a good indicator of the industry’s position as a whole? Please comment below…