Lower mail profits drove Deutsche Post DHL’s operating profits down by 6.5 per cent in the thirdquarter of 2012 despite strong parcels and express growth but top executives today remained
confident about full-year profits although they were tight-lipped about the 2013 outlook.In the third quarter, the German group saw operating profits (Ebit) fall by 6.5 per cent to€604 million, with Mail profits down 18.2 per cent to €247 million but DHL profits up 5 per cent at€462 million. Group revenues increased by 5.7 per cent to €13.8 billion during the July-September2012 quarter. Over the first nine months of the year, operating profits were flat ( 0.1 per cent )at €1.8 billion on revenues of €40.9 billion ( 5.8 per cent ). Mail profits were 21.3 per centlower at €678 million while DHL profits rose by 16.1 per cent to €1.5 billion.
CEO Frank Appel said: “The strength of our business model keeps us on track in a difficulteconomic environment: With our strong market position in the international express and the Germanparcel business still paying off, we have delivered a solid set of results in the third quarter. Atthe same time it is clear that we cannot afford to rest on our laurels given the volatile economicenvironment.”
Appel said the economic environment is getting worse but he remained “convinced” that thegroup would reach its full-year targets. DHL was “outgrowing” the market while the downturn in mailprofits was due to one-off factors such as the insolvency of German mail-order company Neckermannthis summer. He also said the group could respond quickly to an economic downturn, such as byflexibly adjusting capacity with the “virtual” DHL Express airline.
The company confirmed its full-year guidance for group Ebit of €2.6 to €2.7 billion, withMail earnings of €1 – 1.1 billion and DHL operating profits of about €2 billion. Appel said: “Webelieve we will have strong Christmas business in Germany while worldwide we expect solid Christmasbusiness.”
But executives declined to make any forecasts for 2013 before the annual press conferencenext March given the “volatile” economic environment. CFO Larry Rosen said only: “There is likelyto be an Ebit increase in 2013.” He noted that global GDP growth is likely to be only about 2.4 percent this year compared to original expectations of 3-3.5 per cent growth but should be higher than2.5 per cent next year.
In the Mail division, expenditures related to the bankruptcy of the Neckermann mail-ordercompany, increased staff costs as a result of the new wage agreement and the loss of one workdayresulted in the 6.5 per cent drop to operating profits of €604 million, with revenues down 1.9 percent at €3.28 billion. The division’s operating margin declined to 7.5 per cent.
The addressed letters business suffered a 3.8 per cent fall in volumes and a 4.5 per centdecline in revenues to €1.25 billion. Appel said Deutsche Post expects mail volumes to declineabout 2-3 per cent this year, although this is much lower than the declines seen by other postaloperators. He claimed that the digital letters service, the E-PostBrief, is “developing positivelyat a low level” and stressed: “We still believe that an interesting market is developing here”.
DHL Parcel Germany continued to grow strongly in Q3, with volumes up by 6.8 per cent andrevenues 6.7 per cent higher at €798 million. E-commerce and B2C parcels remained the key growthdriver. CEO Frank Appel highlighted the ongoing €750 million investment in expanding the Germanparcel network capacity and predicted the German parcels market would grow in the 5-7 per centrange up to 2015. He also questioned whether traditional B2B operators would be able to enter theB2C market successfully.
DHL Express again performed strongly in the third quarter with revenues rising 9 per cent to€3.2 billion. Its operating profit rose by 6.9 per cent to €231 million, leaving the operatingmargin at 7.3 per cent. In its core time-definite international (TDI) express business, DHL Expressvolumes increased by 8.7 per cent per working day, with revenues up 6.4 per cent per day.
In Europe, revenues grew 2.9 per cent to €1.35 billion in third quarter and by 4.7 per centto €4.1 billion in the first nine months, with daily TDI volumes up 9 per cent between January andSeptember. Appel said that DHL had won market share in Europe but could not say if business hadbeen won from specific competitors. “We are growing more strongly in international than the otherthree players,” he commented.
In Asia Pacific, revenues increased by 13.9 per cent to just over €1 billion in the thirdquarter. Over the first nine months, revenues rose by 16.8 per cent to €3.2 billion and TDI volumeswere 9.7 per cent higher on a daily basis. DHL Express also grew strongly in the Middle East andAfrica despite the region’s turbulence, and Q3 revenues increased by 13.7 per cent to €240 million.
In the Americas, Q3 revenues soared by 28.7 per cent to €588 million. Over the first ninemonths, revenues rose by nearly 20 per cent to €1.7 billion, driven by the US, Mexico and SouthAmerica. Daily volumes grew by 8.6 per cent in the region over the nine months, including a 12.7per cent rise in US shipments.
Looking ahead, Appel said that DHL Express had been focusing on increasing its market sharewhich was now 32 per cent worldwide but would focus more on margin improvement in the next fewyears. It has already announced a worldwide average price increase of 5 per cent for January 2013.He also reiterated that the company would only remain in domestic markets where it could besustainably profitable.
DHL Global Forwarding/Freight saw its Q3 operating profit drop back slightly to €122 millionon revenues to €4 billion ( 5.6 per cent), leaving its profit margin down slightly at 3 per cent.Air freight volumes dropped but revenues remained stable as DHL focused on profitable business.Ocean freight volumes grew 6.1 per cent and revenues increased by a strong 14.9 per cent figure.
DHL Supply Chain improved its Q3 operating profit by 9 per cent to €109 million on revenuesof €3.7 billion ( 10.4 per cent) and maintained a 3 per cent profit margin. The business grew inthe ‘Automotive’ and ‘Life Sciences & Healthcare’ sectors and gained €290 million worth of newcontracts.
