Deutsche Post DHL increased operating profits by nearly 23% in the first quarter of 2011 afterDHL Express profits doubled, freight profits improved and parcels grew strongly.
The group’s EBIT went up 22.9% to €629 million in the January-March quarter while revenuesincreased by 6.9% to €12,842 million. Net profits slumped 81.4% to €325 million from the previousyear’s €1,747 profit but this was a 27% improvement when excluding last year’s one-off contributionof €1.4 billion from the Postbank sale and one-off costs of €56 million in Q1 this year.
Operating profit growth was driven by higher margins in the three DHL divisions (Express,Forwarding/Freight and Supply Chain) which increased their combined operating profits by 66% to€363 million. DHL revenue growth was driven by the continued worldwide economic recovery and risingtransport volumes, especially in Asia.
In contrast, the Mail division’s profit dropped 4.1% to €373 million while its revenues rosefractionally (+0.2%) to €3,514 million, leaving its Q1 operating margin at 10.6%. DP DHL increasedcapital spending by nearly 30% to €252 million in the first quarter, with investments includingaircraft, warehouses and equipment.
“We have gotten off to a dynamic and very successful start in 2011,” said CEO Frank Appel. “Thefirst quarter clearly demonstrated that our growth is based on a broad and very strongfoundation.”
DHL Express improved its results significantly in the first quarter, with EBIT up 96% to €216million and revenues 5.5% higher at €2,765 million. The operating margin rose to 7.8% from theprevious year’s 4.2%. The profits improvement was based on revenue and volume growth, especially inAsia Pacific, along with continued strict cost management as well as the lack of restructuringmeasures, which had generated costs of €44 million in the first quarter of last year.
The express operator’s time-definite international volumes rose 7.8% on an average daily basiswith a 6.6% rise in average weight while time-definite domestic volumes were up 10%, more thanoffsetting the 35% drop in day-definite domestic volumes following the sale of the domestic expressbusinesses in the UK and France.
In Europe, DHL Express revenue declined by 5.1% to €1,212 million, largely due to the saleof the British and French domestic businesses. Revenue would have been 6.2% lower without a €14million positive currency gain from operations in Switzerland, the UK and Scandinavia. But DHLExpress increased its European time-definite international volumes by 7.1% on a daily shipmentbasis.
The Asia Pacific region continued to drive growth for DHL Express in the first quarter. Revenueincreased 15.2% to €841 million, which would have been an 11.8% rise without currency gains of€25 million. International express volumes went up by 9.7% to reach pre-crisis levels and theJapan earthquake did not impact business significantly, the company stressed.
In the Americas region, the operator’s revenue grew by 10.8% to €453 million. Dailytime-definite international volumes rose by 5%, including an 8% volume rise in the USA. Thestronger revenue increased was due to a changed product mix with a higher proportion of expressparcels compared to documents.
In the EEMEA region (Eastern Europe, the Middle East and Africa), Q1 revenue increased by7.9% to €301 million, which was an underlying rise of 9.7% excluding negative currency effectsof €5 million. Daily shipment volumes increased in all product lines.
In the Mail division, DHL Parcel Germany increased revenues by 8.6% to €706 million in thefirst quarter and its volumes grew 9% to 206 million. B2B/B2C parcel volumes rose 11.2% to 179million while consumer parcel volumes dropped 3.6% to 27 million. Growth was driven by e-commercebusiness and a gradual return to growth for traditional mail-order customers. The parcel businessnow generates 20% of the Mail division’s revenues.
The letters business had a 5.6% revenue drop to €1,386 million despite a 0.5% volume rise. Thiswas due to higher discounts for business customers which more than outweighed the addition of VATsince July 2010. “Even though we retained and won back quality-conscious customers, some of ourmore price-sensitive customers turned to competitors,” the company noted in its Q1 report.Advertising mail revenues went up 1.8% to €679 million due to higher addressed direct marketingvolumes. DHL Global Mail increased Q1 revenue by 0.7% to €426 million with higherinternational revenues but its volumes dropped 31% due to the sale of the Dutch bulk mailbusiness.
The Global Forwarding/Freight division improved its Q1 operating profit by 30% to €69 millionwhile revenues rose 14.9% to €3,581 million. DHL Global Forwarding revenues rose 15.6% to €2,632million with air freight volumes up 4.8% and ocean freight volumes 1.7% higher. DHL Freight, theEuropean trucking business, increased revenues by 13% to €981 million. The division profited fromlower freight rates and improved buying conditions.
DHL Supply Chain increased revenues by 7.5% to €3,273 million and improved EBIT by 39% to €78million. The Retail and Life Sciences & Healthcare sectors, which produce nearly half of thedivision’s revenue, performed particularly well, while Asia Pacific was the main growth region.
Looking ahead, Deutsche Post DHL confirmed its 2011 full year earnings guidance for EBIT of €2.2– 2.4 billion. The MAIL division is still expected to contribute €1 – 1.1 billion in operatingprofits this year while DHL combined EBIT is forecast to grow double-digit to €1.6 – 1.7 billion.Consolidated net profit, adjusted for effects from the valuation of the Postbank transaction,should continue to improve during 2011 in line with the operating business.
“We are in an extremely good position from which we can benefit from the continued recovery ofthe global economy to generate profitable growth and achieve our short- and mid-range targets. Inparticular, our excellent position in the world’s growth markets will pay off even more in thefuture and be a key contributor to sustainable revenue and earnings growth in all DHL divisions,”Appel said. “At the same time, with our dynamic parcel business and the continued expansion of ourdigital business, we have also created ideal conditions to stabilise the contribution from our MAILdivision.”
