Higher losses at DHL Express USA, the international financial markets crisis and one-off effectscombined to leave Deutsche Post World Net profits down sharply in the first quarter of 2008, it was
announced today. The future of the US express business will be decided by the supervisory board onMay 28.The group’s operating profits fell 14.7% to €851 million and net income after minoritiesdropped 18.4% to €407 million. But the underlying EBIT, excluding non-recurring effects, was up by6.4% to €1,025 million. Group revenue rose by 1.8% to €15,748 million.
DPWN described its Q1 performance as “solid” with underlying EBIT in line with targets anddespite two fewer working days than one year earlier. Excluding negative currency effects,underlying revenue was up by about 6%. The reported EBIT drop of 14.7% was due to non-recurringexpenses at Deutsche Postbank tied to the crisis on the financial markets, it said.
“Given the working day effect and the faltering U.S. economy, business was very satisfactoryin the first quarter,” said CFO John Allan. “Both the Express and the Logistics businesses greworganically and we made good progress in our Roadmap to Value capital markets program.” The Groupreiterated its full-year earnings forecast.
DHL Express ended Q1 with a 32.3% drop to EBIT of €21 million on revenues up 1% at €3,367million. The EBIT decline was due to two fewer working days in Europe due to the early Easter, andthe impact of the weak US economy, DPWN said. “This slowdown fuelled the shift from high-margintime-definite to day-definite business in the United States, which prompted higher losses in theAmericas region,” the group noted in its Q1 report.
The Express division posted healthy growth in all regions except for the United States, thegroup pointed out. Revenues included a negative currency effect of €225 million, DPWN said. Organicgrowth in local currencies amounted to 6.5%, with demand for the Time Definite International andDay Definite Domestic products increasing, in particular. Volumes of those products increased 2.5%and 7.4% respectively.
DHL Express revenue in Europe rose by 4.4% to €1,669 million, driven largely by the CentralEuropean region including Poland, Hungary and Romania, the Benelux countries as well as asignificant turnaround in France. DHL had halted its market share decline in Central and EasternEurope due to day definite and domestic growth, DPWN noted.
Exchange-rate effects caused revenue in the Americas region to decline by 10% to €942million. In local currency terms, the region recorded organic revenue growth of 2.2%. In additionto growing volumes in Latin America, growth in the Day Definite area as well as the internationalbusiness in the United States contributed to this result. But the US economic slowdown is creatingcheaper product substitution and increased price competition, DPWN noted.
Revenue in the Asia Pacific region rose 6.3% to €628 million. A modal shift away from airexpress products was evident but being compensated for by productivity gains, DPWN said. The EEMEAregion (Eastern Europe, Middle East and Africa) recorded even stronger revenue growth of 13.4% to€263 million, with the highest growth in Russia and the Middle East. Excluding currency effects,growth in both regions would have been even faster.
The Mail division remained the group’s “cash cow” in Q1, although EBIT declined 9.2% to €599million on revenues down by 1.4% at €3,900 million, mainly due to the working day effect. Theimpact of the full liberalisation of the German postal market at the start of the year had beenlimited so far, and more customers had been gained than lost, DPWN said.
DHL Parcel Germany, the German domestic parcels business, increased Q1 revenues by 1.3% to€636 million thanks to the growing online retail market, and rising sales volumes among private andbusiness customers.
Looking ahead, DPWN said it was “aware” of the uncertainties in world economic developmentbut “at this point in time” had no reason to change its full-year earnings forecast of around €4.2billion EBIT before non-recurring effects and around €3.2 billion in pre-tax profit. DHL Express isexpected to generate EBIT of around €500 million this year, the Mail division should generate EBITof around €1.95 billion and the Logistics division is scheduled to increase EBIT to around €1.05billion.
