Deutsche Post DHL confirms 2012 earnings guidance in a volatile environment

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1 Press release Deutsche Post DHL confirms earnings guidance in a volatile environment Group revenues increase to EUR 13.8 billion in the third ; improvements in all DHL divisions and the parcel business Group EBIT declines while DHL earnings continue to improve earnings guidance confirmed: EBIT of EUR 2.6 billion to EUR 2.7 billion expected CEO Frank Appel: The strength of our business model keeps us on track Bonn/Frankfurt am Main, November 8, : Deutsche Post DHL, the world s leading postal and logistics group, continued to increase its revenues during the third : at EUR 13.8 billion, revenues generated between July and September climbed 5.7 percent above the previous year s level. In addition to favorable exchange-rate effects, this increase also reflects the ongoing organic revenue growth produced by all three DHL divisions. These businesses continue to benefit from their strong market position in the world s growth markets particularly in Asia. As a result, the profit of the logistics division as a whole continued to increase. The company s parcel business, an area that is generating a growing share of revenue in the MAIL division, remained dynamic. During the third, it once again generated strong gains in both volume and revenues. However, this third contained one less business day than the prior year. In combination with the impact of additional staff costs resulting from the new wage agreement this caused MAIL s operating earnings to decline compared with the previous year s total as did Group EBIT. Nevertheless, based on its positive expectations for the final of the year, the Group foresees higher earnings in all divisions and the company has therefore confirmed its earnings guidance for the ongoing fiscal year. The strength of our business model keeps us on track in a difficult economic environment: With our strong market position in the international express and the German parcel business still paying off, we have delivered a solid set of results in the third, said Frank Appel, CEO of Deutsche Post DHL. At the same time it is clear that we cannot afford to rest on our laurels given the volatile economic environment. Deutsche Post DHL The Mail & Logistics Group Charles-de-Gaulle-Str Bonn Germany Telephone +49 (0) Facsimile +49 (0) pressestelle@deutschepost.de 1/8

2 of : profitable growth at DHL After generating revenues of 13.1 billion in the third of, the Group supported by positive exchange-rate effects increased its turnover by more than EUR 700 million to EUR 13.8 billion between July and September. Thanks to further efficiency improvements operating earnings at DHL also climbed further. At EUR 462 million, they rose 5 percent above the previous year s level. In the MAIL division, expenditures related to the bankruptcy of the Neckermann mail-order company, increased staff costs as a result of the new wage agreement and the loss of one workday had a negative impact on the earnings position. These effects were partially offset by the continued dynamic growth of the parcel business. Due to the overall decrease in MAIL earnings, the Group s EBIT also declined by 6.5 percent to EUR 604 million (: EUR 646 million). Nonetheless, consolidated net profit (EUR 382 million) and earnings per share (EUR 0.31) in the third of remained at the previous year s level due to lower tax expenses (: EUR 385 million and EUR 0.32). Capital expenditures and cash flow: foundation of growth reinforced During the third of, the Group further bolstered its foundations for growth by boosting capital expenditures as planned. At EUR 456 million, investments made in the third of this year were 9.1 percent above the previous year s level of EUR 418 million. During the first nine months of the year, a total of EUR 1.1 billion was invested, nearly EUR 100 million above the amount. The driving forces behind this increase were the DHL divisions, which increased their expenditures in order to reinforce the basis for continued profitable growth by investing in such areas as a more efficient aircraft fleet, the ongoing expansion of the divisions network, state-of-the-art warehouses and a new IT infrastructure for Global Forwarding. The Group s cash flow and liquidity continued to be impacted by the annual contribution made each January to the Bundes-Pensions-Service (EUR 530 million) and by the dividend payment issued in May (EUR 846 million). The Group s liquidity was also affected by the repayment of state aid (EUR 298 million) and the subsequent VAT payment (EUR 482 million). As a result, the company had net debt of EUR 977 million at the end of the third. The company s free cash flow, also significantly impacted by one-time effects, fell from EUR 141 million during the first nine months of to minus EUR 772 million this year. 2/8

3 First nine months: one-time effects in Q2 impacted earnings In the first nine months of, the company increased revenues by EUR 2.2 billion, or 5.8 percent, to EUR 40.9 billion (: EUR 38.7 billion). At EUR 1.8 billion, the Group s operating earnings remained unchanged from the previous year s level. But this result includes a number of one-time effects that impacted earnings and the comparison with the previous year s performance particularly in the second. The effect from the subsequent VAT payment (EUR 181 million) was offset in part by positive one-time effects related to the reversal of a restructuring provision (EUR 99 million) and the income produced by disposals of companies that were not part of the Group s core business (EUR 44 million). Adjusted for these factors and the sale of a subsidiary in the second of, the Group s operating earnings would have increased slightly in the first nine months of compared with the previous year s level. In the same period, the reported consolidated net profit improved by 13.0 percent to EUR 1.1 billion (: EUR 988 million). Likewise, earnings per share rose from EUR 0.82 last year to EUR 0.92 in. Guidance: earnings guidance confirmed In spite of the current economic uncertainties the company expects to increase its fourth earnings both in the MAIL and the DHL divisions above the previous year s level. Against this background and as a result of the company s performance in the first nine months of the year, the Group has confirmed the earnings guidance for the full year. The company continues to expect to generate a Group EBIT of EUR 2.6 billion to EUR 2.7 billion in. In the MAIL division, earnings should total EUR 1.0 billion to EUR 1.1 billion despite the VAT payment. For the DHL divisions, the Group continues to expect operating profit to rise to about EUR 2 billion. Corporate Center/Other expenditures are forecast to total about EUR 400 million. The Group also expects that consolidated net profit adjusted for one-time non-operating effects will increase in line with operating results. Looking beyond the current year, the company remains optimistic and expects the positive earnings trend to continue: at DHL, the Group expects that earnings will rise each year by an average of 13 percent to 15 percent between 2010 and The profitability of the MAIL division should stabilize at a level of at least EUR 1 billion thanks to costcutting measures and growth programs that have been introduced. In combination with the planned reduction of expenditures for Corporate Center/Other, the Group s operating earnings should climb to between EUR 3.35 billion to EUR 3.55 billion by We will reach our target for the year, Appel said in explaining the Group s guidance. In order to achieve both this short-term goal and our mid-term goals it will be critical to 3/8

4 intensively focus on efforts to meet the needs of our customers and to further improve efficiency. MAIL division: parcel business remains dynamic Revenues in the MAIL division totaled EUR 3.3 billion between July and September, 1.9 percent below the previous year s level (: EUR 3.3 billion). This decrease resulted primarily from the continuing drop in volume being experienced by the traditional mail business as well as a loss of one workday compared with the previous year. Because the strong performance in the parcel business eased slightly in the past this reduction could not be completely offset. Nevertheless, due to the dynamic online retail business, a trend being fueled in part by the innovative products and delivery services offered by the company s parcel unit, parcel volumes and revenues continued to climb significantly in the third. During the entire nine-month period, the parcel business, which already generates a of total revenues in the MAIL division, even reported double-digit growth in both revenues and volumes. Between July and September, the division s EBIT fell from EUR 302 million in to EUR 247 million this year. In addition to the lost workday, the decrease resulted primarily from expenditures related to the Neckermann bankruptcy and increased staff costs resulting from the new wage agreement. EXPRESS division: international express business continues to grow During the third of, the company s EXPRESS division profited further from its strong market position in the world s dynamic growth regions, continued to improve revenues and earnings, and expanded its global market share once again. Between July and September, revenues climbed by 9.0 percent to EUR 3.2 billion (: EUR 2.9 billion). In addition to favorable exchange-rate effects, the strong growth produced in the volumes and revenues of international time-definite (TDI) shipments was once again the primary reason for the strong increase in revenues. During the period, double-digit growth in revenues was generated in all regions with the exception of Europe. Revenues and volumes rose particularly in Asia and the Americas region, where good business in the United States played a major role in the division s performance. In terms of EBIT, the division produced a strong gain in the third of : at EUR 231 million, earnings rose 6.9 percent above the previous year s level of EUR 216 million. 4/8

5 GLOBAL FORWARDING, FREIGHT division: profitable growth In a business environment that remains challenging, the GLOBAL FORWARDING, FREIGHT division mainly driven by favorable exchange-rate effects boosted its third revenues by more than EUR 200 million, or 5.6 percent, to EUR 4 billion. During the same last year, revenues totaled EUR 3.8 billion. While air freight revenues remained stable, ocean freight generated double-digit growth in revenues as a result of rising volume and higher freight rates. At the same time, the division profited from improved purchasing conditions in air freight. In combination with the selective growth strategy, the division s gross margin continued to climb. While the division was able to realize further efficiency improvements, its operating earnings slipped slightly as a result of start-up costs related to the introduction of the new IT infrastructure. At EUR 122 million the divisional EBIT in the third of was 1.6 percent below the previous year s level of EUR 124 million. SUPPLY CHAIN division: gains in revenues and earnings In the third of, revenues in the SUPPLY CHAIN division improved significantly. At EUR 3.7 billion, revenues between July and September were 10 percent above the previous year s level of EUR 3.3 billion. In addition to positive exchange-rate effects, organic growth in the Automotive and Life Sciences & Healthcare sectors fueled this increase. The division s strong performance was also highlighted by newly concluded contracts with new and existing customers totaling EUR 290 million and is also reflected in a rise in operating earnings: during the third of, EBIT generated by the SUPPLY CHAIN division climbed by 9 percent, from EUR 100 in the previous year s period to EUR 109 million in. This improvement in profitability primarily resulted from optimized contract management, continued strict cost controls and the division s increased operating efficiency. End 5/8

6 Note to newsrooms: At you will find an interview with CEO Frank Appel and background information about the company s parcel business in Germany. The Group s press conference will be broadcast live online beginning at 9:30 a.m. Contact for media queries: Deutsche Post DHL Media Relations Silje Skogstad Sebastian Steffen Tel.: +49 (0) Online: Follow us at Deutsche Post DHL is the world s leading mail and logistics services group. The Deutsche Post and DHL corporate brands represent a one-of-a-kind portfolio of logistics (DHL) and communications (Deutsche Post) services. The Group provides its customers with both easy to use standardized products as well as innovative and tailored solutions ranging from dialog marketing to industrial supply chains. About 470,000 employees in more than 220 countries and territories form a global network focused on service, quality and sustainability. With programs in the areas of climate protection, disaster relief and education, the Group is committed to social responsibility. In, Deutsche Post DHL revenues exceeded 53 billion. The postal service for Germany. The Logistics company for the world. For more information, visit 6/8

7 Group financial highlights in the third of Revenues 1) 13,093 13, % - of which international revenues 9,059 9, % Profit from operating activities (EBIT) % Consolidated net profit 2) % Basic earnings per share (in euros) % Diluted earnings per share (in euros) % Divisional revenues in the third of 1) Share of total revenues Share of total revenues MAIL 3, % 3, % -1.9% EXPRESS 2, % 3, % 9.0% GLOBAL FORWARDING, FREIGHT 3, % 4, % 5.6% SUPPLY CHAIN 3, % 3, % 10.4% Corporate Center/Other and consolidation -285 n/a -297 n/a -4.2% Group revenues 13, % 13, % 5.7% Divisional EBIT in the third of 1) MAIL % DHL % - EXPRESS % - GLOBAL FORWARDING, FREIGHT % - SUPPLY CHAIN % Corporate Center/Other and Consolidation % Group EBIT % 1) Prior-year amounts adjusted. 2) After non-controlling interests. 7/8

8 Group financial highlights for the first nine months of 9M 9M Revenues 1) 38,703 40, % - of which international revenues 26,506 28, % Profit from operating activities (EBIT) 1,837 1, % Consolidated net profit 2) 988 1, % Basic earnings per share (in euros) % Diluted earnings per share (in euros) % Divisional revenues for the first nine months of 1) Share of total revenues Share of total revenues 9M 9M MAIL 10, % 10, % 0.0% EXPRESS 8, % 9, % 9.8% GLOBAL FORWARDING, FREIGHT 11, % 11, % 4.6% SUPPLY CHAIN 9, % 10, % 9.6% Corporate Center/Other and consolidation -844 n/a -906 n/a -7.3% Group revenues 38, % 40, % 5.8% Divisional EBIT for the first nine months of 1) 9M 9M MAIL % DHL 1,271 1, % - EXPRESS % - GLOBAL FORWARDING, FREIGHT % - SUPPLY CHAIN % Corporate Center/Other and Consolidation % Group EBIT 1,837 1, % 1) Prior-year amounts adjusted. 2) After non-controlling interests. 8/8