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Press Release

Bonn, Germany 05/14/2013

Deutsche Post DHL boosts operating profit in the first quarter of 2013

  • Consolidated revenues slightly up to EUR 13.4 billion
  • EBIT increased to EUR 711 million in the first quarter
  • Focus on cash generation paying off
  • Full year guidance for 2013 confirmed: EBIT expected to increase to between EUR 2.7 billion and EUR 2.95 billion
  • CEO Frank Appel: "Solid start into the new year"
During the first quarter of 2013, Deutsche Post DHL built on its successful performance of last year. In a business environment characterized by persistent economic challenges, the world’s leading postal and logistics group increased revenues by 0.6 percent to EUR 13.4 billion in the first three months of the year compared with the same period last year. Adjusted for exchange-rate effects and inorganic factors, revenues climbed by 1.5 percent. The driving forces of this growth were primarily volume and revenue gains generated by the international express business as well as the parcel segment in Germany. This growth reflects the company’s exceptional market position in the world’s highly dynamic markets. The Group improved its operating earnings once again: At EUR 711 million, EBIT produced during the first quarter rose EUR 20 million above the level generated in the same period last year. The development of the consolidated net profit was even more pronounced: Net income adjusted for last year’s one-time effects related to the final Postbank transaction jumped by 45 percent to nearly EUR 500 million.

“Even though we have yet to feel any sort of economic tailwind, we were able to get off to a solid start in the new year. In doing so, we demonstrated once again just how robust our business model is and lived up to our position as market leader,” said Frank Appel, CEO of Deutsche Post DHL. “Thanks to our commitment to customers, the gains in efficiency we have made in recent years and our determination to continuously simplify processes, we can reliably deliver profitable growth.”

First quarter of 2013
During the first quarter of 2013, the Group boosted revenues by EUR 80 million to EUR 13.4 billion. Adjusted for exchange-rate effects and inorganic factors, revenues were about EUR 200 million above the level generated in the previous year’s period – and the Group was able to produce this result even though the loss of around 2.5 working days in Germany negatively impacted the year-on-year comparison. This factor also affected operating earnings, which the company was nonetheless able to increase by 2.9 percent to EUR 711 million in the first quarter of 2013 (2012: EUR 691 million). By improving earnings by 4 percent to EUR 427 million, the DHL divisions once again were the driving force behind EBIT generation and growth. During the first quarter, the Group’s financial result fell from EUR 69 million in 2012 to minus EUR 44 million in 2013. This decrease was attributed mainly to the non-recurrence of last year’s positive one-time effects related to the completion of the Postbank transaction totaling EUR 186 million. During the first three months of 2013, consolidated net profit thus fell from EUR 529 million in the previous year to EUR 498 million in 2013. This corresponds to a drop in basic earnings per share to EUR 0.41 (2012: EUR 0.44). Excluding the Postbank effects from last year, consolidated net profit and earnings per share would have risen by more than 45 percent due to operational improvements and lower taxes.

Cash flow
During the first three months of 2013, the Group made significant progress in its intensified efforts to improve cash flow. While the company’s operating activities had resulted in a cash outflow of EUR 357 million last year, a positive operating cash flow of EUR 120 million was generated in the first quarter of 2013. This rise of nearly EUR 500 million primarily reflects the EBIT increase and working capital improvements. As a result, free cash flow improved considerably in a year-on-year comparison and totaled minus EUR 140 million in the first quarter of 2013 (2012: minus EUR 656 million) despite the payment made to the Bundes-Pensions-Service für Post und Telekommunikation, a special pension fund for the company’s civil servants, which occurs at the beginning of each year (2013: EUR 540 million). The Group’s net debt totaled EUR 2.3 billion at the end of the quarter. This represented a seasonal rise of EUR 298 million compared with the end of 2012.

Capital expenditures
In the first quarter of 2013, the Group’s capital expenditures totaled EUR 218 million (2012: EUR 305 million). The focus of these investments continued to be the DHL divisions. These expenditures flowed into such areas as the continued expansion of the network, a more efficient air fleet, state-of-the-art warehouses and a new Global Forwarding IT infrastructure. As a result, the Group has further bolstered its foundation for continued expansion and long-range company success. In the MAIL division, capital expenditures were increased particularly with the aim of expanding the parcel infrastructure.

Outlook
The Group expects the world’s economy to generate moderate growth in 2013. Against this background the Group continues to expect its EBIT to increase to between EUR 2.7 billion and EUR 2.95 billion. While the MAIL division is anticipated to contribute between EUR 1.1 billion and EUR 1.2 billion to this figure, DHL should generate operating earnings of between EUR 2.0 billion and EUR 2.15 billion. Corporate Center/Other expenditures are forecast to again total about EUR 400 million. The Group’s consolidated net profit is projected to grow in line with the operating business in 2013. The company also expects that its focus on cash flow will enable this year’s free cash flow to at least cover the proposed dividend for fiscal year 2012.

“We are making good progress toward meeting our mid-range targets,” a confident CEO Frank Appel said in discussing his outlook for the year and beyond. The company also expects the positive earnings trend to continue over the next few years. At DHL, the Group forecasts earnings to rise by an annual average of between 13 percent and 15 percent between 2010 and 2015. The operating profit of the MAIL division should stabilize at a level of at least EUR 1 billion thanks to cost-cutting measures and growth programs that have been introduced. In combination with the planned reduction of expenditures for Corporate Center/Other, the Group expects operating earnings to increase to between EUR 3.35 billion and EUR 3.55 billion by 2015.

MAIL division
Even though the first quarter of 2013 had 2.5 fewer working days than the same period last year and volume in the Group’s traditional mail business continues to decline as expected, revenues in the MAIL division increased 1.5 percent to EUR 3.6 billion in the first three months of 2013. In addition to the postal-rate increase that took effect at the beginning of the year, another key reason for this rise was the continued strong performance of the company’s parcel business in Germany. The ongoing growth in volume and revenues – 11 percent per workday in the first quarter of 2013 – was primarily due to booming online retailing, a trend the company is also fueling with its own comprehensive range of products and services for shippers and parcel recipients. The parcel business is also acting as a key support in the effort to stabilize the division’s profitability. In combination with strict cost management, the MAIL division was able to partially offset the impact of the reduced number of working days and higher labor costs resulting from wage increases that took effect in the second quarter of 2012 as part of a collective bargaining agreement. Altogether, EBIT in the MAIL division fell by 2.6 percent in the first quarter of 2013 to EUR 382 million (2012: EUR 392 million).

EXPRESS division
At the beginning of 2013, the EXPRESS division profited once again from its strong market position in the world’s dynamic growth regions and increased its profitability. Reported revenues totaled EUR 3.0 billion in the first quarter of the current year, slightly above the previous year’s level. Adjusted for exchange-rate effects and the sale of the domestic express businesses in Australia and New Zealand, revenues rose by 2.4 percent – despite the loss of two working days. Again, the main contributor to the increase in revenues was the strong growth in the Time Definite International product line – daily shipment volumes grew by 10 percent in the first quarter. This positive trend is the direct result of significant volume and revenue gains achieved in all regions. After the EXPRESS division has made significant investments into the expansion of its international network, the training of its employees and its range of services in recent years, the operational improvements are now producing the expected gains in profitability: In the first quarter of 2013, operating earnings in the division totaled EUR 254 million, nearly 10 percent above the previous year’s level of EUR 232 million. This result also includes income of EUR 12 million generated by the sale of the domestic express business in Romania.

GLOBAL FORWARDING, FREIGHT division
In the GLOBAL FORWARDING, FREIGHT division, first-quarter revenues in 2013 decreased by nearly 2 percent to EUR 3.6 billion in a difficult business environment. In the first quarter of 2012, revenues had totaled EUR 3.7 billion. This year, the air- and ocean-freight units moved in different directions: Volume and revenues in the air-freight business decreased primarily because of a strong drop in demand in the ‘Technology’ and ‘Engineering & Manufacturing’ sectors. On the other hand, volume and revenues rose in ocean freight, largely due to increased demand on north-south routes and within Asia. Thanks to the division’s selective market strategy and strict, ongoing cost management, operating earnings rose slightly to EUR 88 million (2012: EUR 87 million) despite the dip in revenues.

SUPPLY CHAIN division
Revenues in the SUPPLY CHAIN division rose during the first quarter of 2013. They totaled EUR 3.5 billion between January and March 2013, more than 2 percent above the previous year’s level of EUR 3.4 billion. Adjusted for negative exchange-rate effects, revenues rose by nearly 4 percent. This growth was fueled in particular by double-digit revenue increases in the Asia-Pacific region and gains in the key sectors of ‘Automotive’, ‘Retail’ and ‘Airline Business Solutions’. During the first quarter, the volume of new contracts concluded with existing and new customers totaled EUR 430 million, more than double the level generated in the same period last year. The division’s EBIT fell from EUR 92 million in the first quarter of 2012 to EUR 84 million this year due to insolvency proceedings involving a customer in the United States. Adjusted for this effect, the division’s operating earnings would have been slightly above the previous year’s level thanks to optimized contract management and successful business performance in the Americas and Asia-Pacific regions.
 

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