Deutsche Post World Net announced today that it completed the first nine months of the yearaccording to plan. Once again, all divisions contributed to the 5.3 percent increase in revenue to
46.5 billion euros. At 2.5 billion euros, EBIT was slightly below last year’s level, which includednon-recurring gains totaling 375 million euros. Excluding these non-recurring gains, the underlyingEBIT rose about 10 percent. The strongest earnings growth was achieved by the LOGISTICS and EXPRESSdivisions.“The first nine months of the year were right on target,” Chairman and Chief ExecutiveOfficer Klaus Zumwinkel said at a press conference in Frankfurt. “We succeeded in our efforts tofurther increase the profitability of the EXPRESS business; and the LOGISTICS division has alsomade positive strides in terms of growth and new customers.” In addition to that, FINANCIALSERVICES with Deutsche Postbank had a strong quarter and recorded a substantial increase in profitdespite the turbulences in the financial markets. All in all, Deutsche Post World Net now expectsEBIT excluding non-recurring effects of around 3.7 billion euros for the full year of 2007,slightly more than the at least 3.6 billion euros forecast earlier. Therefore, the management boardwill propose to raise the dividend for 2007 by 20 percent to 90 cents per share from 75 cents pershare.
As part of its capital markets program also presented today, Deutsche Post World Net plans tochange the way it will report its business prospects in the future. Deutsche Post World Net willcommunicate specific earnings targets for the following year. “This change will allow us to give amore precise and reliable earnings outlook,” Chief Financial Officer John Allan said. “It’s animportant step to help improve transparency.” For 2008, the Group expects EBIT to rise 14 percentto around 4.2 billion euros.
The consolidated net profit after minorities fell by 10.5 percent to 1.1 billion euros in thefirst nine months. In the third quarter, consolidated net profit was 350 million euros, a drop of35 percent. Last year’s figure included a 276 million euro gain from the sale of bonds exchangeableinto shares of Deutsche Postbank. Operating cash flow after changes in working capital rose 15percent to 1.3 billion euros from 1.1 billion euros. Free cash flow almost tripled to 570 millioneuros from 198 million euro in the first nine months.
Revenue at the MAIL division rose slightly by 1 percent to 11.2 billion euros in the firstnine months, proving yet again that the strategy of outweighing anticipated revenue declines in theGerman mail market with growth at other segments is paying off. Revenue at the Mail Communicationbusiness in Germany declined 4.6 percent to 4.5 billion euros in the first nine months. In theDirect Marketing business, the trend toward higher-quality services is continuing. Like in thesecond quarter, volumes in the unaddressed advertising mail business continued to rise in themonths July through September, resulting in a 2.7 percent revenue increase at the Direct Marketingbusiness unit. In the business units Global Mail and Corporate Information Solutions (WilliamsLea), revenue climbed by 15.7 percent to 2.4 billion euros in the first nine months.
EBIT in the MAIL division was 10.3 percent below last year’s level at 1.3 billion euros inthe first nine months. The loss of 0.7 work days and the rate cut in the German parcel business in2006 had a negative impact here.
Revenue in the EXPRESS division increased by 1.9 percent to 10.1 billion euros in the firstnine months. Shipping volume continued to grow both in the international and the national business.Because more than half of the revenue was generated in countries outside Europe, the result wasburdened by negative currency effects of almost 325 million euros. In local currencies, the EXPRESSdivision achieved organic growth of 6.3 percent.
In Europe, both revenue and shipping volume rose, with significant improvements beingrecorded particularly in the third quarter. Revenue decreases in France were stopped and improvedresults achieved. In the Americas region, organic revenue rose 2.5 percent in local currency terms,driven by strong business in Latin America. The U.S. business also posted a modest increase inrevenue in local currencies as rising revenue at the Ground and International product businessoutweighed lower shipping volumes and a reduced product yield in the Domestic Air business.However, the recovery in revenue in the Americas business slowed down in the third quarter, withthe Domestic Air business being particularly affected by weaker demand in the U.S. market.
EBIT in the EXPRESS division increased by 60 percent to 246 million euros in the first ninemonths.
The LOGISTICS division developed favorably in the first nine months. Revenue rose 7.3 percentto 19 billion euros. Organic revenue growth was at 9.7 percent in the first nine months, propelledby the 10-year contract with the British health service NHS. In the business unit DHL GlobalForwarding, volume increased significantly, a fact that did not have a proportionate effect onrevenue growth due to lower freight rates in the air freight business and negative currencyeffects. Revenue at DHL Global Forwarding matched last year’s level of 6.9 billion euros.
DHL Exel Supply Chain once again generated double-digit revenue growth. Year on year, revenuerose 13.3 percent to 9.7 billion euros, boosted among others by the NHS contract. The business unitDHL Freight generated stable revenue of 2.7 billion euros, with most countries developingfavorably. Especially in Germany, the overall economic situation and increased contracts from theautomotive industry had a positive impact.
The LOGISTICS EBIT grew by 25 percent to 618 million euros, with the sale of VfW AGcontributing 59 million euros.
The FINANCIAL SERVICES division, which consists primarily of Deutsche Postbank, boostedrevenue by 8.8 percent to 7.7 billion euros in the first nine months. Earnings grew as well, withan EBIT increase of 24 percent to 864 million euros.
Despite intensive competition in the retail banking business and turbulences in the financialmarkets, Deutsche Postbank was able to raise pretax earnings 25 percent to 806 million euros in thefirst nine months. Excluding the positive effects from the disposal of its insurance holdings aswell as one-time charges tied among others to the integration of mortgage lender BHW Holding aswell as the retail outlets of Deutsche Post, pretax profit rose 8.4 percent to 752 million euros.Pretax return on equity for the first time exceeded the 20 percent mark. The rate rose to 20.9percent on Sept. 30, 2007, from 17.5 percent a year earlier. The cost-income ratio dropped to 65.5percent in the first nine months from 69.6 percent in the year-earlier period. In the classicbanking business, excluding transaction banking, the cost-income ratio was at 63.2 percent in thefirst nine months compared with 68.0 percent in the year-earlier period.
The SERVICES division, which includes Global Business Services, the Corporate Center and theretail outlets of Deutsche Post as well as non-operating income and expenses of Deutsche Post AG,reported a 7.7 percent increase in revenue to 1.7 billion euros in the first nine months. Thedivision recorded an EBIT loss of 450 million euros compared with 131 million euros in theyear-earlier period. The main cause for the change was the exercise of exchangeable bonds intoPostbank shares in the third quarter of 2006. In addition, non-recurring effects stemming from thearbitration proceedings with Deutsche Telekom and the divestment of McPaper were booked in thefirst nine months of 2006. Excluding those non-recurring effects, the EBIT loss narrowed by 11percent.
For the full year of 2007, Deutsche Post World Net expects EBIT before non-recurring effectsto total around 3.7 billion euros. The MAIL division continues to expect stable to slightly higherrevenue. Expected revenue declines in the national mail business are likely to be more than offsetby the other segments in the MAIL division. EBIT should remain stable at 2 billion euros. In theEXPRESS division, EBIT is forecast to total at least 400 million euros for the entire year of 2007.This figure contains costs related to the new air hub Leipzig/Halle. For the LOGISTICS division,the Group expects EBIT to rise by around 15 percent, a figure that does not include income from thesale of VfW AG. The FINANCIAL SERVICES division expects an increase in EBIT of at least 5 percent.
