Strong growth in DHL Express profits together with better freight forwarding and supply chainresults more than compensated for falling mail profits and drove up overall Q3, 2010 results,
Deutsche Post DHL announced today. It also raised its full-year outlook.The mail and logistics group increased revenue by 13.9% to €12,799 million between July andSeptember 2010. Reported EBIT rose more than 100% to €545 million, while underlying EBIT improved43.7% to €543 million. Net profit moved from last year’s €83 million loss to a €226 millionprofit.
“The company’s very good performance in the third quarter demonstrates once again that we havean exceptionally good position that allows us to profit tremendously from positive economictrends,” said Deutsche Post DHL CEO Frank Appel. “Our strategy is robust, our efficiency programsare paying off, and our customers are rewarding our efforts.” Key growth drivers were highertransport volumes, higher freight rates, new customers and positive currency effects, while profitmargins improved in the DHL businesses.
The group’s Q3 capital expenditure was 8% lower at €282 million, including in new mailtechnologies and products. Q4 capital expenditure will rise, leaving full-year investments atabout €1.3 billion, which will be slightly below the original target of €1.4 billion. “During thethird quarter, we remained true to our strategy and carefully invested in the organic expansion ofour business,” CFO Larry Rosen said. “Deutsche Post DHL continues to be solidly financed and has –also thanks to the very positive performance of its operating business – the necessary financialflexibility to reach its growth targets and systematically exploit opportunities that presentthemselves.”
The mail business remained the most profitable division but fell back significantly. Mailrevenues dropped 2.7% to €3,241 million in the third quarter and EBIT was down 20.6% at €259million. The revenue drop primarily resulted from the effects of the value-added tax on revenuewith business customers that began on July 1 and the price discounts that were offered in response.The ongoing substitution of physical letters by electronic media and the loss of the Quellebusiness in Germany negatively impacted revenues as well. In contrast, DHL Parcel Germany continuedto perform very dynamically and increased revenues by 5% thanks to the fast growth of internetretailing. “This business unit’s very positive earnings performance and the continued strict costdiscipline were able to limit the impact of the value-added tax effect and higher wages on thedivision’s overall profitability,” DP DHL noted.
DHL Express increased revenues by 11.7% to €2,719 million. Its reported operating profit soaredfrom just €11 million last year to €199 million, while the underlying EBIT rose 48.1% to €194million. The express division benefited from rising international volumes which more than offsetdecreases in the day-definite domestic business, mostly resulting from the sale of the domesticexpress businesses in the United Kingdom and France. Higher income from fuel surcharges alsocontributed to the rise in revenue. The profit improvement was largely driven by completion of therestructuring in the United States, the withdrawal from the domestic express business in the UnitedKingdom and France as well as efficiency programmes successfully implemented around the world.
DHL Global Forwarding/DHL Freight also improved significantly in the third quarter with a strongrevenue rise of 35.8% to €3,715 million, making it into the largest division in revenue terms. Thereported EBIT improved 81.8% to €100 million and the underlying EBIT was up 34.2% at €102 million.Transport volumes, particularly in air freight, continued to rise considerably in the third quarterof 2010. In combination with higher prices, high double-digit revenue gains were generated mainlyin the air but also in the ocean freight category. The division improved profits by passing onhigher freight rates to its customers.
DHL Supply Chain increased revenues by 12.9% to €3,385 million and returned to profit withreported EBIT of €81 million. Revenues increased despite the loss of the Quelle business in Germanyand the systematic withdrawal from underperforming contracts thanks to new business wins, theincrease in existing business activity in all regions and positive currency effects. In Q3 alone,additional contracts worth around €200 million were concluded with new and existing customers.
As a result of the continuation of the economic recovery and the good earnings performanceduring the first nine months of the year, Deutsche Post DHL said it has been able to improve itsearnings guidance for the full year 2010 and raise the lower end of the planned range for theGroup’s underlying EBIT. The Board of Management now projects the group’s underlying EBIT to totalbetween €2.0 billion and €2.1 billion. It had previously predicted a range between €1.9 billion and€2.1 billion. Mail profits are now expected to be between €1.1 billion and €1.2 billion, which is a€100 million increase in the lower end of the range. The DHL divisions are still expected tocontribute more than €1.3 billion to overall earnings, meaning that combined DHL earnings will behigher than mail for the first time.
From today’s perspective, the positive earnings trend is likely to continue in 2011, even thoughglobal economic performance remains somewhat unpredictable, the company stated. “In recent years,we have systematically created the conditions that enable the group to sustainably improve itsprofitability. With underlying EBIT that will likely total more than €2 billion, we will takeanother big step forward this year. But we are still a long way from reaching our full potential,”CEO Frank Appel said.
