Deutsche Post World Net with solid third quarter
- Revenues rise to 14.9 billion euros in the third quarter of 2006
- Third-quarter EBIT up 40.1 percent to 1.03 billion euros
- Group forecasts 2006 EBIT of around 3.9 billion euros
Deutsche Post World Net saw a double-digit increase in revenue and earnings in the third quarter. Consolidated revenue rose by 35 percent from 11.028 billion euros to 14.887 billion euros in the period. The integration of logistics service provider Exel and financial service provider BHW as well as organic growth drove this increase. The company now generates 59 percent of total revenue outside Germany. Profit from operating activities (EBIT) rose by 40.1 percent to 1.03 billion euros, including the expected income of 276 million euros from calling the exchangeable bond on Postbank stock in July prior to maturity. In the third quarter of 2005, EBIT was 735 million euros. Consolidated net profit was 537 million euros in the third quarter of 2006 after 412 million euros in the year-earlier quarter. That corresponds to an increase of 30.3 percent. Earnings per share increased to 45 euro cents in the third quarter of 2006 from 37 euro cents in the year-earlier period. In the first nine months of the year, the Group posted 36 percent higher revenues of 44.190 billion euros, including around 10.2 billion euros from acquisitions. EBIT rose by 7.5 percent to 2.588 billion euros.
"On the whole, the company is doing well: Logistics and Postbank continue to post exceptionally strong performance and have made rapid progress with respect to integration. At the bank we were even able to finalize the process earlier than planned," said Chief Financial Officer Edgar Ernst. "The MAIL and EXPRESS divisions, which both suffered a drop in earnings in the second quarter, posted higher profits again in the third quarter. In view of the traditionally strong Christmas quarter, I am very confident for the remaining weeks of the year."
MAIL Corporate Division
Following a positive third quarter, the MAIL division increased its revenues in the first nine months by 2.3 percent to 9.64 billion euros, while operating profit was slightly down by 3.3 percent to 1.45 billion euros. The mail and document service provider Williams Lea has been included in the Group's Mail International and Value-added Services business since April 1. This raised the share of MAIL revenues generated outside Germany to 20.5 percent. International operations thus more than compensated for the expected decline in domestic revenue. Compared to the year before, the first nine months were one working day shorter.
EXPRESS Corporate Division
In the first nine months of the year, revenue from the EXPRESS division rose by 2.4 percent to 12.96 billion euros from 12.66 billion euros. The Asia Pacific and Emerging Markets regions, in particular, contributed to the growth in revenue with double-digit increases. EBIT fell from 217 million euros in the previous year to 91 million euros. In the third quarter, however, the division saw marked improvements. Operating profit increased by 106 million euros year-on-year and by 44 million euros compared to the second quarter of 2006. The Americas region was able to continue its positive development from the second quarter into the seasonally weak third quarter. After having significantly improved service quality in the United States, the company is increasingly able to acquire new business at better rates.
LOGISTICS Corporate Division
Since the beginning of the year, the LOGISTICS division includes the activities of Exel, which was acquired in 2005. Business continues to develop well in terms of integration, performance and growth. Revenue in the first nine months of 2006 added up to 16.01 billion euros. In the previous year, revenue was 6.60 billion euros. All three business units - DHL Exel Supply Chain, DHL Global Forwarding and since July 1, DHL Freight - contributed with sustained organic growth. Acquisitions contributed 8.61 billion euros to revenue. EBIT for the LOGISTICS division reached 513 million euros in the first nine months after 244 million euros in the year-earlier period.
FINANCIAL SERVICES Corporate Division
The FINANCIAL SERVICES division consists mainly of Postbank. In the first nine months, the division generated revenue and income from banking transactions of 7.09 billion euros, an increase of 35.3 percent. In the year-earlier period, revenue was 5.24 billion euros. In comparison with the previous year, EBIT increased by 5.1 percent to 702 million euros. Postbank's cost-income ratio improved in the first nine months from 75.2 percent to 70.1 percent. Its pre-tax return on equity climbed from 14.9 percent to 17.3 percent. Postbank has already reported on its results in detail on November 7. Overall, FINANCIAL SERVICES improved in all of its key performance parameters.
SERVICES Corporate Division
Since the beginning of the year, Deutsche Post World Net has bundled its internal services in the SERVICES division with the objective of increasing the quality of service and reducing costs. SERVICES includes the Global Business Services with, among others, the following areas: Legal Services, Procurement, IT, Finance Operations, Real Estate and Global Customer Solutions. In the first nine months, SERVICES revenues were 3.45 billion euros. The division posted an operating loss of 134 million euros. The results include, among others, non-recurring income of 276 million euros from calling the exchangeable bond on Postbank stock prior to maturity.
For the current year, the Group is expecting revenue of a good 60 billion euros and EBIT of around 3.9 billion euros. Earnings will include substantial one-time expenses for the integration of Exel and BHW.
The Group has adjusted the full-year forecasts for the LOGISTICS, EXPRESS and FINANCIAL SERVICES divisions to account for positive developments in the logistics business and at Postbank, as well as the relocation of the European road transport business from the EXPRESS division to the LOGISTICS division as of July 1, 2006.
For the MAIL division, the Group expects stable to slightly increasing revenue and EBIT of around 2 billion euros for 2006 as a whole. In the EXPRESS division excluding DHL Freight, the Group anticipates EBIT between 300 and 400 million euros in 2006. This EBIT figure includes, among other things, the option to recognize one-time expenses for network optimization in Europe, which the new management is currently investigating. The LOGISTICS division is now expected to generate revenue of well over 20 billion euros, with EBIT of at least 750 million euros. The integration of BHW and the retail outlets into the Postbank division was finalized earlier than planned in October. Revenue and income from banking transactions in the FINANCIAL SERVICES division is therefore expected to increase. Double-digit percentage growth to at least 950 million euros is anticipated for the division's operating profit.