"We are confident about the future"
Larry Rosen, the Chief Financial Officer of Deutsche Post DHL, is meeting with investors today at the Commerzbank German Investment Seminar in New York updating them on the company's current business situation. In an interview with Deutsche Post DHL News for this newsletter edition, Rosen talks about the Group's recent performance and its near-term prospects.
"I am looking forward to another interesting year." (Larry Rosen)
DPDHL News: Mr. Rosen, the beginning of a new year is a time to look back: How did the Group perform in 2013? Did Deutsche Post DHL hit its ambitious targets?
Larry Rosen: At the beginning of the year, I like to look ahead first: I am looking forward to another interesting year in which we will once again set out to accomplish a number of new things. But it is also correct to say one other thing: Before we can turn our attention to these tasks, we must first successfully close out the year of 2013. We will find out just how well we succeeded in doing this on March 12, when we release our figures for the past year. You will have to be patient until then. Nothing has changed in the guidance we issued for 2013: Our goal is to generate operating profit of between EUR 2.75 billion and EUR 3.0 billion. The MAIL division is forecast to contribute EBIT of between EUR 1.15 billion and EUR 1.25 billion to this figure. EBIT at DHL should amount to between EUR 2.0 billion and EUR 2.15 billion.
DPDHL News: The pre-Christmas season is historically an important time of the year for your business. How was 2013?
Larry Rosen: As a result of strucutual changes in the marketplace, across our divisions on aggregate, we have - for some years now - not been experiencing as pronounced a peak in demand in the fall as we might have seen before. Today's business is mainly driven by fashion trends, which evolve and change during the entire 12-months period. And trade flows follow this pattern developing more steadily throughout the year. The peak seasons as we had experienced them in the past are gone for good. Nevertheless, specific areas of our business have still been performing very well during the Holiday Season over the last couple of years - particularly the parcel segment in Germany. And the past year was no exception. In fact, quite the opposite is the case: parcel volumes continued to grow strongly, not least because of the ongoing boom in e-commerce. Volumes during the last weeks of the year were again significantly above last year. And this growth is not just good news for our bottom line. Thanks to it, we are also able to lay the foundation for new jobs. About 5,000 new permanent jobs have recently been created as a result.
DPDHL News: Do you think this business will continue to expand at this pace?
Larry Rosen: We are confident that it will. After all, the upward trend in e-commerce is continuing. Year after year, people are buying more and more products online. Right now, we think that one-fifth of consumption in Germany will be generated online in 2020. By comparison: it was less than 10 percent in 2012. Products that are ordered online must also be delivered. For this reason, the parcel market in Germany may grow by 5 percent to 7 percent annually over the next few years.
DPDHL News: And you would like to get a large share of it...
Larry Rosen: Of course: As the market leader, this has to be our goal. The key will be our smart, innovative and, above all, customer friendly services as well as our high-performance infrastructure that we plan to continue expanding.
DPDHL News: The e-commerce boom is not the only megatrend that is playing into your hands.
Larry Rosen: That's right. We are also really profiting from continued globalization, which is generating rising trade flows among global economic centers. In these terms, we are benefiting from our decisions to gradually and systematically expand our presence in emerging markets in recent years. Today, we are the market leader in many places - this is the result of hard work and targeted strategic investments.
DPDHL News: Speaking of strategy: How far are you along in the introduction of Strategy 2015?
Larry Rosen: Today, we are profiting from the fact that we formulated a clear strategy in 2009 and effectively carried it out in subsequent years. As a result, we are making very good progress toward reaching our goals. In the MAIL division, we made a commitment to stabilizing operating earnings at a level of at least EUR 1 billion. And we have succeeded in doing this so far. But it is becoming increasingly difficult to reach this goal through productivity gains. After all, the fundamental trend of falling mail volume will not go away and our revenues in the traditional core business will continue to decline. We will of course continue to drive our strategic projects in order to compensate for this general trend and generate additional revenues. But this won't be enough. We will have to focus even more closely than before on strict cost discipline to improve the conversion of revenues into earnings. At DHL, we intend to generate sustainable profitable growth by increasing our operating earnings by an average of 13 percent to 15 percent each year. And we have also been successful in doing this from 2010 through 2012. So right now, there is nothing preventing us from reaching our EBIT target for 2015 of between EUR 2.7 billion and EUR 2.9 billion for the DHL divisions and of between EUR 3.35 billion and EUR 3.55 billion for the Group as a whole.
DPDHL News: Let's look at the upcoming year: What do you expect in 2014?
Larry Rosen: It is still too soon to make any specific forecast. As we usually do, we will issue our guidance along with our business results in March. We think that the economic situation in 2014 will not change significantly. Enormous improvements cannot be expected to occur - but we also do not see any major risks. We correctly positioned ourselves in recent years for this volatile market: We have become more flexible and robust. At the same time, we have an exceptional position in those areas that hold the growth opportunities of the future: in emerging markets and the expanding online business. Not least for these reasons, we are confident about the future. In 2014, we will also have every opportunity to further expand our position as the world's leading postal and logistics group.