Deutsche Post DHL today reported a “pleasing” second-quarter performance, with a 7.3% increasein revenues, boosted by strong growth in both parcel and international express volumes.
Supported by favourable exchange rate effects, the revenue growth, to €13.7 billion, exceededthe growth rate in the first quarter of the year, although organic revenue growth was just2.4%.
The group said the positive development was largely due to the performance of the DHL divisions,which continued to benefit from their “exceptional” market position in the rapidly growing regionsof the world – particularly in Asia.
In addition, the company’s parcel business generated double-digit growth in volume and revenues,making a significant contribution to the group’s strong performance.
“As a result of rapidly growing online retailing, a trend that the division is doing much toshape by offering innovative products and delivery services, parcel revenues jumped by more than12% percent to €797 million from April through June 2012,” Deutsche Post DHL (DP-DHL) claimed. “Theparcel business now generates one-fourth of total revenues in the Mail division.”
While the company said it also made further strides in its drive to improve profitability, aone-time retrospective VAT payment negatively impacted earnings in the Mail division in the secondquarter. On the other hand, overall positive one-time effects at DHL, including the sale of itsdomestic express businesses in Australia and New Zealand, further bolstered the operationalimprovements in the group’s logistics division.
As a result of these developments, the company has made an upward adjustment to its earningsguidance for the current fiscal year and now expects to generate group EBIT of between €2.6 billionand €2.7 billion.
Despite further profitability improvements, group EBIT fell by 3% to €543, largely as a resultof the VAT payment, which had a one-time negative impact on second-quarter earnings totalling €181million. In contrast, DHL Express recorded positive one-time effects resulting from the reversal ofprovisions that the group set up in 2008 as part of the restructuring of its business in the UnitedStates as well as from the disposal of company units that were not part of the core business.
Adjusted for these items and the sale of a subsidiary in the Supply Chain division carried outduring the second quarter of 2011, Group EBIT would have risen by 8% between April and June, thegroup claimed.
“With an 11% year-over-year improvement, the DHL divisions underscored once again their role asthe company’s growth driver,” the company said. “At the same time, the Mail division also helpedboost the group’s operating profitability thanks to its dynamic parcel business and its ongoingstrict cost management.”
Frank Appel, CEO of Deutsche Post DHL, commented: “We continue to perform well. The excellentmarket positions of our brands and divisions in the world’s growth markets are paying off. We havea strong foundation for generating long-term improvements in revenues and earnings.”
Although the past quarter had one fewer working day than last year, revenues generated by theMail division in the second quarter of 2012 grew 0.9% to €3.3 billion. The missing workday wasprimarily reflected in the volume and revenues of the traditional letter mail business, which fellby about 3% between April and June 2012. But continued strong performance from the parcel businessmore than offset this decrease. As a result of rapidly growing online retailing, a trend that thedivision is doing much to shape by offering innovative products and delivery services, parcelrevenues jumped by more than 12% to €797 million from April through June 2012.
In the second quarter of 2012, the Express division – in line with the company’s expectation –continued to grow revenues and earnings and further expanded its worldwide market share. Revenuesrose by 10.7% between April and June 2012 to €3.2 billion over the previous year’s level. In theprocess, double-digit revenue improvements were produced in all regions – except Europe.
“This positive performance reflects the exceptional market position achieved by DHL in theworld’s dynamic growth markets,” DP-DHL said. Revenues and volume rose particularly fast in Asiaand the Americas region, where the continuing strong business in the United States played a majorrole in the good performance.
In addition to the operating improvements, one-time effects related to the reversal ofrestructuring provisions and the sale of the domestic express business in Australia and New Zealandtotalling €143 million provided significant momentum to the rise in profitability. In contrast, theVAT payment had a one-time negative effect of €30 million on the profitability of the Expressdivision in the second quarter. Overall, the division’s EBIT in the second quarter jumped by morethan 50% to €367 million. Adjusted for all one-time effects, the division’s EBIT would have risenby 5% in the past quarter, the company said.
In the Global Forwarding, Freight division, revenues climbed by 5.7% to €4 billion in the secondquarter of 2012 “amid challenging business conditions”, with these increases primarily driven bycurrency effects. At the same time, the division benefited from improved purchasing conditions inthe air freight sector. Combined with its own efficiency gains and its selective growth strategy,the division’s gross margin continued to rise. As a result, its operating result jumped by 19.1% to€137 million between April and June.
Revenues in the Supply Chain division rose 12.5% in the second quarter to €3.5 billion,fuelled in particular by strong gains in the Asia Pacific region as well as in the ‘Automotive’ and‘Life Sciences & Healthcare’ sectors.
The division’s strong performance was also highlighted by newly concluded contracts with new andexisting customers totalling €330 million and the improved profit margins of these agreements,DP-DHL said. Despite gains in profitability, which were primarily the result of optimized contractmanagement, continuing strict cost controls and increased operational efficiency, second-quarterEBIT fell by €10 million to €101 million, although the quarter-on-quarter comparison is distortedby a €23 million net gain on the disposal of a US subsidiary that was not part of the core businessand was included in last year’s operating result. Adjusted for this gain, the division’ssecond-quarter EBIT would have actually risen by 15%, DP-DHL said.
In the first half of the current fiscal year, the company boosted revenues by €1.5 billion, or5.8% to €27.1 billion in 2012. Compared with the first half of 2011, the group’s operating resultrose by 3.6% to €1.2 billion.
The one-time effects arising from the VAT payment, the reversal of provisions and the incomefrom disposals reflected in the quarterly results had a similar impact on the half-year figures. Inthe first half of the year, consolidated net profit climbed from €603 million in 2011 to €734million in the ongoing fiscal year.
For the second half of the year, the group continues to expect that the world economy will growmoderately and that the company – driven by the DHL divisions – will continue to boost revenues andearnings compared with the previous year. On the basis of these assumptions and the company’spositive development in the second quarter, the group has made an upward adjustment to its earningsguidance for the ongoing fiscal year, and now expects to generate EBIT of €2.6 billion to €2.7billion. Previously the company had anticipated the Group’s operating result to be between €2.5billion and €2.6 billion.
Despite the VAT payment, earnings in the Mail division are still estimated to be between €1.0billion and €1.1 billion. At the same time, due to the positive one-time effects recorded in theExpress division in the second quarter, the group now expects that the operating result at DHL willclimb to about €2 billion, €100 million more than previously assumed.
Looking beyond this year, the company remains optimistic and expects that its positive earningstrends will continue: the group forecasts earnings at DHL to rise by an average of 13% to 15%annually between 2010 and 2015. In the Mail division, cost-cutting measures and growth programmesare designed to stabilise profitability at a level of at least €1 billion.
Combined with the planned lowering of costs in the group’s Corporate Centre/Other division, thegroup predicted that its operating result should rise to between €3.35 billion and €3.55 billion by2015.
