Deutsche Post DHL reported a smaller-than-forecast 71.4% drop in net profit for the second quarterof 2009 declining to €66 million from €231 million last year due to dramatically falling sales and
shipping volumes and the bankruptcy of the department store and mail-order company Arcandor.However, the company was able to cushion the effects of the global financial crisis due to itscomprehensive cost-cutting programme and expects to post a profit for the full year.In the first half-year, Deutsche Post DHL revenues declined 15.3% to €22.58 billion butoperating profits (Ebit) dropped dramatically 85% to €136 million. However, net profits increased64.5% to €1.01 billion due to a higher valuation of Postbank put options in the first three monthsof the year. Underlying Ebit was down 40.2% at €569 million.
In Q2, reported revenues decreased by 17.7% to €11.1 billion. Reported Ebit on the Grouplevel also decreased from €366 million in the previous year to €109 million. Underlying Ebit fell37.8% to €257 million as a result of the global economic crisis.
Looking ahead, the Group has based its planning for 2009 on a scenario that does not foreseea significant improvement in global trade in the coming months. Taking that into account, DeutschePost DHL expects underlying EBIT to reach € 1.2 billion for the full year 2009.
Overall, the savings generated in the first half of the year by the cost-cutting programmeIndEx totalled €413 million. Since the start of the programme, total annualised savings haveamounted to €552 million. As a result, the Group is confident that it will reach its goal of saving€1 billion in indirect costs already in the second quarter of 2010.
“Our first-half figures prove that our vigorous cost-cutting efforts are having a tangibleimpact throughout the Group and we cannot let up now,” said CEO Frank Appel, at the Group’shalf-year press conference in Bonn.
DHL Express ended the second quarter of 2009 with revenues declining 28.6% to €2.51 billiondue to the overall economic environment. Adjusted for the US domestic exit, organic revenue declinewas at -15.6%. Underlying Ebit almost matched the level of the previous year with €65 milliondropping only 2%. The performance was supported by significant loss reduction in the US.
In terms of cost cutting, further progress was made mainly in the United States. Despite thefinancial crisis, the Express unit was able to reduce costs faster than planned, with the resultthat lower volumes were largely offset. In the US, 50% more international shipments have beenhandled per day than planned with preparations on track to move its US air gateway from Wilmington,Ohio, back to its former location of Cincinnati. In product terms, the continuous decline inair-based time-definite international volumes was slowing down in the second quarter amounting to-9.8% compared to 10.6% in the first quarter, Appel noted. The group is confident that it will beable to reduce losses on an annual basis to below $400 million in the fourth quarter of 2009 in theregion.
The mail division saw revenues further declining in the second quarter by 6.7% to €3.21billion. The decline is mainly due to electronic substitution, revival of competition and theeconomic downturn. Underlying Ebit fell 38% to €171 million because of significant wage increasesand €15 million debt following the insolvency of Arcandor.
As part of its Strategy 2015, the mail division has introduced a comprehensive programme tocut costs in a sustainable way while also broadening its service portfolio to include products suchas the “Letter on the Internet”, which meet customers’ needs in the future. In the first half-yearalone, the mail division reduced costs by €180 million, with the total EBIT effect expected toamount to around €300 million this year.
“Existing cost reduction instruments cannot alone compensate for structural problems,”commented Jürgen Gerden, responsible for mail and parcel business in Germany. He said that mailvolumes were decreasing irreversibly due to e-substitution.
“Digital substitution is accelerated by the economic crisis,“ Gerdes further explained sayingthat it might have a potential impact on parcel revenues if mail-order companies begin to sufferseverely from the crisis. However, parcel revenues in Germany were up despite mail order crisisthanks to the increase in online trade, he added.
Gerdes said that the mail division continues to invest in innovation and needs to expand itsonline products and services in order to profit from digitisation in a changing market environment.“Long-term transformation of core business is necessary to shape and secure our future,” heconcluded.
The company’s forwarding/freight division was able to benefit from the economic crisis andwin significant new business, particularly in the life science, fashion, industrial projectbusiness, high tech and automotive sectors. Still, an overall declining demand, particularly in thetechnology and engineering sectors, as well as lower freight rates and fuel surcharges prompted arevenue decline of 27% equalling €2.57 billion. Underlying Ebit amounted to €79 million comparedwith €103 million a year earlier.
The supply chain/corporate information solutions division reported a Q2 revenue drop of 8.8%to €3.06 billion and underlying Ebit shrank from €64 million last year to 16 million this year as aresult of the unexpected impact of the Arcandor insolvency. It led to bad debt losses of €12million. In contract logistics, however, Deutsche Post DHL continued to add contracts with a totalvolume of around €250 million in the second quarter, despite the weak business climate.
“We’re successfully navigating through the crisis,” Appel said. “What’s crucial is that wehave not only taken short-term steps but are also sustainably strengthening both pillars of theGroup – mail and logistics – as part of our Strategy 2015. This is all the more important as westill don’t have a clear view of the further economic development. Though economic conditionshaven’t worsened – with new business bustling and our strong market position in Asia – we are notyet seeing any substantial improvement.”
“Business development in the second quarter confirms our view that in percentage terms volumedeclines may have seen the bottom. Still, the Group doesn’t expect a substantial recovery in worldtrade in coming months. This scenario includes continued risks to individual customers andindustries, be it insolvencies or extended factory closures,” Appel added.
