Deutsche Post World Net: Start in 2004 Better Than Expected
First-quarter revenues rise to 10.5 billion euros from 9.8 billion euros / Double-digit growth in EXPRESS and LOGISTICS Divisions / STAR program contributes 81 million euros to earning in the first quarter / Deutsche Post confirms 5-10 percent full-year EBITA growth targetBonn , 05/14/2004, 11:30 AM CEST
Deutsche Post World Net, a leading global provider of mail, logistics, express delivery and financial services, said first-quarter revenues rose 7.8 percent to 10.5 billion euros in the quarter ending March 31 from 9.8 billion euros in the same period a year ago, driven by growth in the EXPRESS and LOGISTICS Corporate Divisions.
Earnings before interest, tax and goodwill-amortization (EBITA) declined 2.2 percent to 930 million euros in the first quarter from 951 million euros in the first quarter a year ago. This was mainly due to a decline in revenues from business clients in the MAIL Corporate Division and integration costs in the EXPRESS Corporate Division. Excluding these one-time factors, corporate operating results developed positively.
First-quarter net income fell 11,8 percent to 441 million euros from 500 million euros. Earnings per share were 40 cents in the first quarter compared to 45 cents per share a year ago. Revenues generated outside of Germany rose 20 percent to 4.8 billion euros in the first quarter, accounting for 45.7 percent of total sales.
STAR, Deutsche Post World Net's value creation and integration program contributed 81 million euros to earnings in the first quarter through improved procurement practices, more customer focus at DHL, and a more efficient night airmail network in Germany. STAR has contributed cumulative 504 million euros to earnings since it was first introduced in November 2002 and the company expects to achieve the projected goal of at least 700 million euros by the end of the year.
Edgar Ernst, Chief Financial Officer, said he was satisfied with business development in the first quarter: "The company continued its very dynamic development in the past few months. STAR is developing according to plan and delivers lasting results.''
Corporate Division Mail
Revenues in the MAIL Corporate Division were little changed at 3.3 billion euros in the first quarter. MAIL revenues in the first quarter of 2004 normalized compared to the first quarter last year, when business mailers took advantage of a price cut that became effective on Jan. 1, 2003. Operating earnings (EBITA) in the MAIL Corporate Division declined 6.1 percent to 749 million euros in the first quarter from 798 million euros in the year-ago period.
Deutsche Post World Net in the first quarter succeeded in further expanding its mail business outside of Germany. In January, the company acquired Speedmail International Ltd. of the U.K., and in March, it obtained a long-term license for the mail business in the U.K., and agreed on access conditions to the Royal Mail transport network. In the Netherlands, the Group purchased the 30 percent of Interlanden BV it didn't already own, further expanding the business with unaddressed advertising mail.
Deutsche Post World Net is also expanding its mail business in the U.S., the world's largest mail market. Earlier this week, the company announced the acquisition of two leading mail service providers in the U.S., SmartMail Services and QuikPak Inc. The Group's Global Mail subsidiary will become the first full-service provider for direct mail senders and mail order houses in the U.S.
Corporate Division EXPRESS
Revenues rose at the EXPRESS Corporate Division by 25.6 percent to 4.3 billion euros in the first quarter. Operating profit (EBITA) increased 17.1 percent to 41 million euros. Revenue growth was helped by last year's acquisition of Airborne Inc. In the Americas region, sales more than doubled to 1.06 billion euros in the first quarter compared with 430 million euros in the year-ago period. Just six months after the takeover, Deutsche Post World Net has already made good progress in the U.S. with integrating Airborne.
In the Americas region, the EBITA loss as expected amounted to 147 million euros; this number includes costs of 49 million euros for the integration of the DHL and Airborne networks. Thus, the Americas region is fully on track to reach break-even in 2005. Excluding the Americas region, return on sales in the EXPRESS Corporate Division was 5.9 percent.
Corporate Division LOGISTICS
The LOGISTICS Corporate Division grew strongly in the first quarter. Revenues increased 10.8 percent to 1.5 billion euros whereas EBITA rose 43.9 percent to 59 million euros. Revenue growth in the DHL Danzas Air & Ocean unit was substantial and helped compensate for negative currency effects, which amounted to 44 million euros for the entire Corporate Division LOGISTICS.
FINANCIAL SERVICES Corporate Division
The FINANCIAL SERVICES Corporate Division, which includes Deutsche Postbank AG, the retail outlet network as well as the Pension Service, generated first-quarter revenues of 1.8 billion euros, a 9.7 percent decline compared with the first quarter a year ago. The overall low interest-rate level reduced Postbank's interest income in the quarter. This was also the reason behind the drop in Postbank's interest expenses.
Operating profit in the division rose by 37.9 percent to 160 million euros in the first quarter from 116 million euros a year ago. Postbank reported an after-tax return on equity of 7.4 percent in the first quarter, from 4.9 percent a year ago. The cost-to-income ratio fell by 6.3 percentage points to 70.6 percent as personnel costs declined.
In the course of the year, Deutsche Post World Net expects the pace of global economic recovery to quicken. In the U.S., the outlook for sustainable economic recovery is particularly good. Early economic indicators for the eurozone also point to continued recovery, albeit in a somewhat less dynamic fashion. The largest expansion of the European Union to date on May 1, 2004 will not result in any significant economic changes in the short term. In Germany, economic experts are expecting a rather slow economic recovery for the rest of the year.
"Deutsche Post World Net expects operating earnings (EBITA) to increase by 5 to 10 percent this year and to reach at least 3.6 billion euros in 2005. That means we're sticking to the forecast we gave when first communicating the STAR program, which is a positive message to our shareholders,'' Ernst said.
In the MAIL Corporate Division, the company is forecasting full-year 2004 EBITA to remain at the prior-year level. Deutsche Post World Net expects the EXPRESS Corporate Division to continue to develop positively in the course of the year and to record an EBITA increase of at least 20 percent compared with reported 2003 figures. The company continues its positive assessment for the LOGISTICS Corporate Division, where it expects EBITA to increase by at least 10 percent this year. In the FINANCIAL SERVICES Corporate Division, Deutsche Post World Net is forecasting an EBITA increase of at least 15 percent for 2004. These forecasts relate to the result presented in the annual report for 2003.
The entire quarterly report (PDF)