Deutsche Post World Net has good start in fiscal 2006
- First-quarter group sales up 40.7 percent
- Operating earnings rise to 917 million euros
- International revenue reach 57.4 percent of total revenue
- LOGISTICS biggest corporate division for the first time
Deutsche Post World Net posted 4.2 percent higher profit from operating activities (EBIT) of 917 million euros in the first quarter of 2006 compared with the same quarter last year. Organic growth and acquisitions increased sales by 40.7 percent to 14.8 billion euros. Excluding Exel, which was included in Deutsche Post's accounts for the first time in the reporting period, group revenues totaled 11.9 billion euros. That corresponds to an increase of 13.4 percent. Consolidated net profit was 482 million euros for the first three months compared with 459 million euros a year earlier, a 5 percent increase. Due to a higher number of shares, earnings per share fell from 41 euro cents to 40 euro cents.
"Just a few days ago, we were able to present our shareholders with a record result for the past fiscal year, and we have entered the new year on a positive note as well. The additional impulse from the acquisition of Exel had a particularly positive impact," Chief Financial Officer Edgar Ernst said. In terms of revenue and employees, LOGISTICS is now the Group's biggest Corporate Division, ahead of EXPRESS and MAIL. In the first quarter, 57.4 percent of consolidated revenue was generated outside Germany.
Deutsche Post AG on the weekend successfully completed the wage talks for its about 130,000 employees after just two rounds of negotiations. The parties reached a two-year agreement starting May 1, 2006, which foresees an increase in compensation of 2.3 percent in the first year and 2 percent in the second year. "The agreement is within our expectations and so we can confirm our forecasts for 2006," said Ernst.
Accounting changes during the first quarter
The consolidation of Exel entailed a number of accounting changes. The method that Exel used to report pension obligations has been adapted to the standard method used by Deutsche Post World Net. This resulted in a positive annualized earnings contribution of about 200 million euros in the LOGISTICS division. The Group therefore now projects EBIT of at least 3.9 billion euros for 2006, an adjustment of its previous forecast of at least 3.7 billion euros.
The Group established a new segment effective January 1, 2006. The SERVICES Corporate Division bundles group-wide internal services with the goal of enhancing service quality and cutting costs. The new division includes Global Business Services, the Corporate Center, Hubs, Aviation and the retail outlets that remain part of Deutsche Post after the sale of 850 branches to Deutsche Postbank AG. The first-quarter 2005 figures for the EXPRESS, LOGISTICS and FINANCIAL SERVICES divisions were adjusted accordingly. First-quarter revenue in the SERVICES division totaled about 1.5 billion euros, with a loss from operating activities of 95 million euros.
MAIL Corporate Division
The MAIL Corporate Division posted a slight revenue increase to about 3.3 billion euros during the first quarter. As expected, the international mail business, which is being expanded aggressively under the DHL Global Mail brand, more than offset lower domestic sales, contributing 17 percent to first-quarter sales in the MAIL division. The sluggish domestic economy and heightened competition left their mark on the Mail Communication business. At 1.6 billion euros, revenue remained at the year-earlier level. After cutting the price of some products, the company managed to stabilize sales in the Direct Marketing business at the previous year's level. At 674 million euros, EBIT in the entire MAIL division exceeded the year-earlier figure of 643 million euros by 4.8 percent.
EXPRESS Corporate Division
First-quarter revenue in the EXPRESS Corporate Division rose 10 percent to about 4.6 billion euros. All regions contributed to this increase. Asia Pacific and Emerging Markets even posted double-digit growth rates. The loss from operating activities was 37 million euros, after an operating profit of 77 million euros in the first quarter of 2005. The deterioration was due solely to the situation in the Americas region, which continued to suffer from quality-related customer and sales losses during the fourth quarter. Although these difficulties have since been eliminated, the financial impact is still being felt. The company managed to improve its results in all other regions. Improvements on the European market were particularly positive. Sales in the Europe region rose by 3.7 percent to about 2.9 billion euros.
LOGISTICS Corporate Division
Since the start of the year, the LOGISTICS Corporate Division (air freight, sea freight and contract logistics) includes the activities of Exel, which Deutsche Post World Net acquired in 2005. Its business units are now called DHL Global Forwarding (previously DHL Danzas Air & Ocean) and DHL Exel Supply Chain (previously DHL Solutions). The joint business got off to a good start and outgrew its market. First-quarter revenue totaled about 5.0 billion euros compared with about 1.7 billion euros a year earlier. Excluding acquisitions, LOGISTICS still posted strong organic growth with sales of about 2.2 billion euros, an increase of 31.1 percent. EBIT in the LOGISTICS division reached 154 million euros in the first quarter compared with 66 million euros a year earlier. The increase reflects both organic growth and the inclusion of Exel.
FINANCIAL SERVICES Corporate Division
The FINANCIAL SERVICES Corporate Division comprises Postbank, the "Renten Service" and the 850 retail outlets that Postbank took over from Deutsche Post on January 1, 2006. Postbank published first-quarter results on May 15. The FINANCIAL SERVICES division generated revenue and income from banking transactions of about 2.4 billion euros in the first quarter. Of that total, 472 million euros is due to the acquisition of BHW. Revenue in the first quarter of 2005 totaled about 1.7 billion euros. Compared with the same quarter last year, EBIT rose by 1.4 percent to EUR 221 million.
The group projects EBIT of at least 3.9 billion euros for 2006, including substantial one-time expenses for the integration of Exel and BHW and the positive earnings effect from the adapted reporting of pension obligations. Revenue is expected to reach a good 60 billion euros this year.
The Group expects revenue in the the MAIL Corporate Division to remain stable or increase slightly and an EBIT of around 2 billion euros for 2006. The EXPRESS division is expected to post single digit percentage revenue growth in 2006. The 2006 operating profit should be on level with the previous year excluding goodwill impairment, at around 450 million euros. The expanded LOGISTICS Division, including Exel, is projecting revenue of well over 18 billion euros and EBIT of around 700 million euros under the adapted pension reporting methods. Due partly to the consolidation of BHW Holding, the FINANCIAL SERVICES Division should post increased revenue and double-digit growth of operating profit to at least 900 million euros. The Group has also adjusted its targets for fiscal 2009 accordingly and now expects EBIT of at least 5.2 billion euros in that year.