Deutsche Post DHL today targeted higher express and logistics margins to help drive higherprofits this year after doubling Q2 profits and also ruled out any TNT-style split of its mail and
express/logistics businesses.In addition, the German group raised its financial guidance for the full year and rejectedreports of start-up problems with its new electronic mail service.
In the April-June second quarter of 2010, Deutsche Post DHL more than doubled reported EBIT to€253 million, while underlying EBIT soared 95.7% to €503 million. Despite significant non-recurringexpenses of €250 million, which were mainly related to the sale of the domestic Express business inFrance, the group’s consolidated net profit still increased 22.7% to €81 million in the secondquarter of 2010.
Group revenue grew 15.6% to €12,795 million, including 10.3% organic growth, in the secondquarter with the three DHL divisions as the driving forces. They profited from higher transportvolumes and new customers as well as better financial results following restructuring andefficiency measures.
“As an enabler of global trade, we benefited significantly from the recovery of the worldeconomy in the second quarter. This was particularly true at the DHL divisions, which have becomethe sustainable driver of the group’s profit growth,” said CEO Frank Appel. “We are now reaping thefruits of our successfully implemented strategic initiatives and efficiency-enhancing measures aswell as the portfolio restructuring that we have largely completed.”
As a result, DP DHL raised its full-year 2010 guidance for underlying EBIT to the €1.9 – 2.1billion range from €1.6 – 1.9 billion. The bulk of the profits, about €1.3 billion, are expected tobe delivered by the DHL businesses as they profit from recovering global transport volumes, whileMail is seen earning €1 – 1.2 billion. All the DHL divisions are currently winning market share,according to Appel.
Questioned at today’s Q2 results press conference about TNT’s planned creation of separate mailand express companies, Appel stressed: “There are no plans to split off mail. Our focus is clearlyon improvement of margins and organic growth and our two-pillar strategy will be continued. We haveno plans to separate off one part.”
DHL Express performed strongly in the second quarter with a 19.2% revenue increase to €2,868million, despite the sale of the UK domestic business. This was organic growth of 13.3%. Thereported EBIT loss, which included the French restructuring charges, was reduced by 41.2% to €30million, while the underlying operating profit soared 205% to €198 million. The underlying profitmargin improved to 6.9%.
Express volumes increased rapidly in Q2, with time-definite international volumes up 5.5% andrevenues showing a 14.3% rise. This international growth more than compensated for a sharp drop indomestic volumes and revenues, which was mostly due to the UK domestic sale. Over the firsthalf-year, DHL Express had stable organic revenues and higher international volumes in Europe, a21% revenue rise in the Americas in local currency terms, and 22% organic revenue growth in AsiaPacific.
The improved Q2 profits also reflected the successful restructuring in the USA, the withdrawalfrom the UK domestic market and worldwide cost savings, the company stated. This would be the lastquarter with high restructuring charges, CFO Larry Rosen told the press conference.
“We see more opportunities to improve (express) profits,” he commented. DHL’s peers had lowdouble-digit express profit margins, he noted. Declining to disclose DHL Express USA’sprofitability status, Rosen described the latest US Express results was “very good”, adding: “Weare very satisfied with the express business there. We have successfully defended our internationalbusiness and are expanding it.”
The mail division had a good second quarter, with higher profits driven by parcel growth andcost savings. Reported EBIT was up 61% at €241 million while underlying EBIT increased 42% to €243million. Divisional revenues were flat at €3.2 billion. Letter volumes dropped 0.8% in Q2 anddirect marketing volumes were 3.7% lower.
DHL Parcel Germany, however, generated profitable growth for the division, despite the loss ofmajor customer Quelle which ceased trading last autumn. It increased Q2 volumes by 2.8%, includinga 4% rise in business customer volumes, largely driven by e-commerce. Over the half-year, the unitincreased revenues by 4.8% to €1,269 million.
Appel played down reports of diverse start-up problems with the ‘E-Postbrief’, the high-profilenew electronic letter service, which so far has 250,000 registered customers. “We are verysatisfied with customer acceptance,” he said. Deutsche Post DHL would take account of customerfeedback to further improve the product, he added.
The DHL Global Forwarding/Freight division also grew strongly in the second quarter. Itsrevenues rose 36% to €3.6 billion thanks to double-digit increases in air freight and ocean freightvolumes and higher freight rates. The division reported EBIT of €99 million, up 46%, whileunderlying EBIT improved by 29% to €102 million.
DHL Supply Chain increased Q2 revenues by 10.7% to €3.4 billion thanks to new business andincreased volumes from existing customers and despite the loss of the Arcandor/Quelle business.Reported EBIT more than tripled to €55 million and underlying EBIT more than quadrupled to €72million.
The group’s Q2 capital expenditures increased by 20.7% to €286 million, including investments inmail technologies such as state-of-the-art letter-sorting equipment as well as the company’s newE-Postbrief product.
“As the second quarter’s results and the increased guidance for the entire year demonstrate onceagain, Deutsche Post DHL is strategically well positioned and is well prepared for the future,”Appel said. “By pressing forward with the implementation of our Strategy 2015, we will be able tounlock the Group’s full potential step by step over the coming years.”
