Surging express profits, strong parcels growth and better forwarding and supply chain resultscombined to double Deutsche Post DHL operating profits in the second quarter of 2011, the group
announced today along with a slightly more optimistic full-year outlook.Highlighting the express and parcel results in an analysts’ call, CFO Larry Rosen said thatalthough there was more economic uncertainty than three months ago and the forwarding business hadsoftened, he remained “optimistic” there would be no recession and that world GDP would grow by theexpected 3-4 per cent this year.
DP DHL group revenues rose 0.3 per cent to €12.8 billion from April to June 2011. Adjustedfor inorganic and exchange-rate effects, including disposals, however, group revenues rose by 5.8per cent, driven by the strong growth at DHL and the German parcel business. DP DHL improved itsoverall operating profit to €562 million from €253 million last year thanks to higher margins atall the DHL divisions, while the net profit more than tripled to €278 million.
The DHL divisions produced €471 million of the group’s Q2 operating earnings, nearly fourtimes more than in the same period last year, and well ahead of Mail’s operating profit of €183million, which was down nearly 25 per cent. The DHL divisions continued to benefit from the ongoingglobal economic growth as well as its exceptional market position in the world’s fast growingregions, particularly in Asia. The group’s parcel operations in Germany drew further strength fromthe dynamic Internet retailing business.
“We are continuing to grow and have kept the positive momentum of the last quarters,” saidFrank Appel, CEO of Deutsche Post DHL. “The second quarter once more proves the quality andsustainable nature of the efficiency gains we have achieved over recent years.”
Over the first half-year, group revenues were 3.5 per cent higher at €25.7 billion. EBIT wasup 56 per cent at €1.2 billion but net profits dropped 67 per cent to €603 million due to one-offeffects last year from the Postbank sale.
Following its strong performance, the company improved its full-year earnings guidance,saying it now expects EBIT at the upper end of the €2.2 billion to €2.4 billion range. DHLoperating profits are expected to grow double-digit to €1.6 – 1.7 billion while Mail’s operatingprofits will be largely stable at €1-€1.1 billion.
DHL Express continued its successful turnaround in Q2, generating profits of €244 millioncompared to last year’s loss of €30 million. This was an 8.3 per cent profit margin. The absence ofrestructuring expenses, which totaled €228 million last year, was a key factor together withorganic growth. Revenues were 2.9 per cent higher at €2.95 billion but underlying organic growthwas 11.3 per cent. Its main product line, Time Definite International, increased daily revenues by12.4 per cent and volumes by 10.7 per cent.
Rosen told analysts that DHL Express yields had been stable in the first and second quarters,excluding surcharges, and the company was benefiting from its strong position in emerging marketsthat enabled it to outgrow the market. Asia Pacific remained the main growth driver for DHL Expressin the quarter, and about 50 per cent of its volumes now ‘touch’ the region as export, imports orintra-regional shipments, he pointed out. “DHL Express has clear market leadership in Asia,” hestressed. The company was investing in the region with the opening of the new North Asia hub atShanghai next spring to cut transit times for the Yangtze river delta region, he added.
In China, DHL Express was following growth westward and remained committed to theinternational business, Rosen said. Asked about the recent sale of the China domestic expressactivities, he stressed that this was “a very small business” that had only been launched in 2009.DHL had decided to exit the domestic express market, which was characterised by “low prices, lowquality, low margins and many competitors”, since it did not believe the business would becomeattractive in the future, he said. “Our relationship with (joint venture partner) Sinotrans isexcellent and I do not think our exit from the small foray will have any impact,” he added.
The Mail division’s Q2 revenues dropped fractionally by 0.3 per cent to €3.25 billion whileEBIT was 24.7 per cent lower at €183 million due to the impact of higher VAT and ongoing investmentin the E-Postbrief digital letter, where a total of €500 million will be invested up to 2015. Theletters business had a slight 1.3 per cent volume increase due to the good German economy.
DHL Parcel Germany increased Q2 volumes by 9.9 per cent to 199 million items while itsrevenues rose 7.8 per cent to €667 million. Highlighting the business’ medium-term growthpotential, Rosen said the German parcel market is likely to grow about 5 per cent a year up to 2020driven by e-commerce and more B2C deliveries.
DHL Global Forwarding/Freight increased Q2 revenue by 3.6 per cent to €3.7 billion with airfreight volumes up by 1.2 per cent, ocean volumes 1.2 per cent lower and double-digit growth inEuropean overland transport. EBIT improved 13 per cent to €112 million thanks to lower buyingrates. Rosen said the unit was focusing on profitable business in a volatile market and wouldre-focus on “ defending and extending” its market share at a later stage.
DHL Supply Chain more than doubled its operating profit to €115 million in the second quarterdespite a 3.4 per cent revenue drop to €3.2 billion. This was due to negative currency effects andthe sale of “low-margin” US business ETS, however. Adjusted revenue would have been 6.1 per centhigher.
The group did not plan any more disposals of large businesses following the domestic expressand ETS transactions, Rosen added. “ There are no similar businesses that we are considering forsale,” he stated.
