Influential financial market analysts have called on Deutsche Post World Net to downsize DHLExpress in the USA to reduce long-running heavy losses there. The comments come amid an ongoing
DPWN review of the US operation following its new Roadmap to Value capital markets strategyunveiled last November.In a January 7 research note, Morgan Stanley raised its recommendation for Deutsche Postshares to “overweight” and named a new price target of EUR 30. In response, the DPWN share rosejust over 3% yesterday to close at EUR 24.15.
In their report, Morgan Stanley researchers commented that following the appointment of JohnAllan as CFO, they “sensed” that management were paying more attention to investors’ long-standingsore point, which was the DHL Express US business with estimated losses of $900 million.
The financial institute highlighted “potential parallels” between DPWN and DaimlerChryslershortly before the German automotive group responded to long-standing calls by disposing of itsloss-making US business which generated “very positive investor response”.
“A rapid and radical solution at DHL Express USA” was the key to achieving the targetedExpress Ebit of EUR 0.9 billion – 1.1 billion in 2009, Morgan Stanley wrote. “A substantial cut innetwork size, combined with subcontracting and a focus on international services is the mostlogical outcome, we think.”
Investment company Bear Stearns had earlier stated in a report published in December that theUS losses were eating into DPWN’s overall shareholder value and urged the group to take action.
DPWN chairman Klaus Zumwinkel admitted in an interview with German business magazine Capitalpublished last week that DPWN expects DHL to suffer a single-digit percentage drop in its USrevenues in 2008 as the financial crisis hits the country’s economy, and it would adjust itscapacity in response.
But he reiterated that the company had no plans to withdraw from the US market. “We haveinvested in a stable, good quality network for the whole USA that is linked to the global network.If we were not present in North America, then we would not do such good business in Europe andAsia. Even when it’s not going ideally for us there at the moment, this market is essential for aglobal network,” he stressed.
At the November presentation of the Roadmap to Value strategy, Zumwinkel and new CFO JohnAllan said that the group was reviewing the DHL Express USA business in view of the slowing USeconomy and they withdrew plans for the business to break even in 2009.
