Deutsche Post DHL remains on growth path - full-year earnings guidance increased
- Group revenues climb to EUR 13.1 billion in the third quarter
- Group EBIT markedly increased - double-digit earnings growth generated by all divisions
- Increased earnings guidance for 2011: EBIT expected to be above EUR 2.4 billion Group
- CEO Frank Appel: "Our growth trend clearly continues"
Deutsche Post DHL boosted revenues and significantly improved its profitability in the third quarter of 2011. Compared with the previous year, Group revenues increased by 2.5 percent to EUR 13.1 billion between July and September. Adjusted for exchange-rate and consolidation effects, the upward trend was even more pronounced: revenues increased by 5.7 percent and continued the high growth level achieved in the first half of the year.
All of the Group's divisions contributed to the company's strong performance: The MAIL division profited from its parcel business, which continued to benefit from the rapid growth of Internet retailing. At the same time, DHL's excellent positioning in the growth markets of the world - particularly Asia - enabled another powerful performance of the company's logistics divisions. In addition, thanks to significant margin improvements all divisions also produced double-digit growth rates in profitability. As a result, the Group's operating earnings climbed by 18.5 percent to EUR 646 million. At the same time, the company's consolidated net profit increased to EUR 385 million between July and September 2011 from EUR 226 million in the prior year's quarter.
"Our growth trend clearly continues," said Frank Appel, CEO of Deutsche Post DHL. "Our third quarter performance underscores our exceptional market positioning once again. We are located in all of the regions and markets that continue to generate particularly strong growth: in the emerging markets of Asia, the Middle East and Latin America as well as in the dynamic German parcel market."
Outlook: earnings guidance increased - EBIT expected to be above EUR 2.4 billion
Thanks to the strong third-quarter performance, Deutsche Post DHL has raised its earnings guidance for the full year: The Board of Management now expects the Group's EBIT to be above EUR 2.4 billion in 2011. Previously, the company had projected that operating earnings were likely to finish at the upper end of the previously announced range of EUR 2.2 billion to EUR 2.4 billion.
The MAIL division is now expected to contribute around EUR 1.1 billion to this total (previously: EUR 1.0 billion to EUR 1.1 billion). At the same time, the Group projects that operating earnings in the DHL divisions will increase at double-digit rates to above EUR 1.7 billion (previously: EUR 1.6 billion to EUR 1.7 billion). Expenses in Corporate Center/Other should total about EUR 400 million. The Group also expects that consolidated net profit, adjusted for the valuation effects related to the Postbank transaction, should continue to improve during 2011 in line with the operating business.
"We are in an exceptional position to benefit from the market dynamics," Appel said. "In upcoming months, we will channel our positive momentum into further improving our product offering for our customers and continuing to prepare ourselves for future market challenges. This strong foundation will allow us to remain on our successful growth course also if the economic tailwind should ease somewhat."
Third quarter 2011: strong growth in revenues and earnings
The Group's revenues grew to EUR 13.1 billion in the third quarter. Adjusted for exchange-rate and consolidation effects, this result reflects organic growth of more than EUR 700 million (+5.7%) compared with the previous year's level. The Group's earnings improvement was even stronger: At EUR 646 million, EBIT generated in the third quarter grew more than EUR 100 million (+18.5%) above the previous year's level of EUR 545 million. There of a total of EUR 440 million was produced by the three DHL divisions, an increase of more than EUR 50 million compared with the same period last year.
The Group's consolidated net profit reached EUR 385 million during the last quarter, climbing more than 70 percent above last year's amount of EUR 226 million. This amounts to an increase in quarterly earnings per share from EUR 0.19 between July and September 2010 to EUR 0.32 in 2011. In addition to operating improvements, which were the result of the strong efficiency gains achieved in recent years, positive effects related to the valuation of the Postbank transaction contributed significantly to the strong increase in consolidated net profit. Adjusted for the Postbank valuation effects, the Group's net earnings growth would have been 13 percent during the third quarter.
Capital expenditure: foundation for future growth further reinforced
During the third quarter of 2011, the Group significantly increased its capital expenditures, further strengthening the company's foundation for future growth: At EUR 418 million, capital expenditure jumped nearly 50 percent above the previous year's level of EUR 282 million. During the first nine months of the year, the Group made investments of EUR 1 billion, exceeding the previous year's figure by nearly EUR 300 million as planned. Investments increased in particular in the DHL divisions in order to further bolster the platform for profitable growth and sustainable company success. The focal points of these expenditures included a more efficient aircraft fleet, state-of-the-art warehouses, a high-end IT infrastructure and new vehicles.
Propelled by the pronounced rise of operating earnings, the Group's operating cash flow climbed by EUR 194 million to EUR 826 million in the third quarter of 2011. Similarly, free cash flow grew from EUR 327 million in the third quarter of 2010 to EUR 480 million this year. In the first nine months of 2011, the Group's net liquidity fell by only about EUR 800 million compared with the end of 2010 despite the annual payment to the Bundes-Pensions-Service, a special pension fund for the company's civil servants, and the dividend payment, which together amounted to more than EUR 1.3 billion. With EUR 592 million, the Group continued to have a very solid liquidity position at the end of the third quarter. Compared with the level at the end of second quarter this reflects an increase of EUR 390 million.
First nine months 2011: DHL as earnings growth driver
In the first nine months of fiscal year 2011, revenues rose by 3.2 percent to EUR 38.8 billion. At 6 percent the rise in revenue was significantly higher when adjusted for exchange-rate and consolidation effects. Thanks to its improved revenues and increased earnings strength, the company boosted its operating earnings by more than 40 percent to EUR 1.8 billion. With an earnings contribution of EUR 1.3 billion and an improvement totaling more than EUR 500 million compared with last year, the DHL divisions were the driving force behind most of the Group's EBIT and its growth.
In addition to the steep rise in revenues and improved efficiency, the planned absence of any restructuring expenses, which totaled about EUR 300 million last year, had a positive impact on the operating earnings development. During the first nine months of 2011, the Group's net financial income fell by EUR 1.4 billion to minus EUR 411 million year on year. This decrease was solely due to the valuation of financial instruments related to the sale of Postbank.
While last year's financial result included positive effects of EUR 1.3 billion related to the Postbank transaction, expenses totaling EUR 107 million were incurred in the first nine months of 2011 as a result of it. This extraordinary accounting effect also had a major impact on the Group's consolidated net profit and overshadowed the underlying operating improvement: During the first nine months of 2011, consolidated net profit fell from EUR 2.1 billion in 2010 to EUR 988 million in the current fiscal year. This amounts to a decrease in earnings per share to EUR 0.82 (2010: EUR 1.70). However, adjusted for the Postbank valuation effects for both years, consolidated net profit and earnings per share would have increased by more than 50 percent each during the first nine months.
MAIL division: increasing momentum in the parcel business
In the third quarter of 2011, revenues in the MAIL division improved by 2.6 percent to EUR 3.4 billion (2010: EUR 3.3 billion). Despite the discounts that the Group is providing its customers following the imposition of the value-added tax in July 2010, the division succeeded in stabilizing revenues in its traditional mail business. At the same time, the division further boosted the growth momentum of its parcel business thanks to dynamic Internet retailing and the division's strong product offering that is tailored to meet the customers' needs.
The third-quarter increases achieved both in terms of revenues and the number of transported parcels exceeded the growth rates produced in the first half of the year: While total volume was more than 11 percent above the previous year's level, the division's revenues climbed by more than 10 percent to EUR 748 million between July and September. This positive trend was a main driver for a significant earnings improvement in the MAIL division: EBIT totaled EUR 302 million in the third quarter, reflecting an increase of 17.5 percent above the previous year's level of EUR 257 million.
EXPRESS division: accelerating growth
During the third quarter of 2011, the EXPRESS division continued its successful revenue and earnings development, even further accelerating the business momentum. Between July and September, revenues hit EUR 2.9 billion, 7.7 percent more than during the same period last year, when the division generated EUR 2.7 billion of revenues. Adjusted for exchange-rate and inorganic effects, revenues climbed by 12.7 percent in the past quarter, finishing above the very high growth rates that the division had recorded in the first two quarters of the year.
Above all, this strong performance reflected double-digit growth in volume and revenues for international shipments. The Asia-Pacific region once again proved to be the growth driver for both the Group and the EXPRESS division. During the third quarter, the division also generated double-digit growth in operating earnings: At EUR 219 million, EBIT produced in 2011 was 10 percent higher than last year (2010: EUR 199 million). In addition to the strong growth in volumes and revenues, this strong performance was also driven by continued strict cost management.
GLOBAL FORWARDING, FREIGHT division: revenue and margin improvements
In the GLOBAL FORWARDING, FREIGHT division, revenues increased by 1.9 percent in the third quarter, rising from EUR 3.7 billion in 2010 to EUR 3.8 billion this fiscal year. Adjusted for exchange-rate and consolidation effects, revenues climbed by 3.4 percent between July and September. While revenues in air and ocean freight came under pressure during the third quarter, the Group's overland transport business continued to produce strong gains. Even though fuel prices remained high, the division profited from lower freight rates, improved purchasing terms and its concentration on selective growth in attractive business areas.
As a result, the division was able to achieve further margin improvements, despite increasing competition. Accordingly, profitability climbed sharply between July and September: At EUR 122 million, third-quarter EBIT rose 22 percent above the EUR 100 million that were achieved in the same period of last year.
SUPPLY CHAIN division: operating earnings rise steeply
At EUR 3.3 billion, revenues produced by the SUPPLY CHAIN division during the third quarter of 2011 remained at last year's level. However, this figure reflects the division's actual operating performance only to a limited extent. Adjusted for exchange-rate and consolidation effects - such as the divestment of a subsidiary in the United States that was not part of the division's core business - revenues generated by the SUPPLY CHAIN division actually rose by 6.2 percent during the three-months period.
This growth was fueled in particular by significant growth in the Asia-Pacific region as well as the Life Sciences & Healthcare and Automotive sectors. At EUR 280 million, the volume of new contracts concluded with new and existing customers remained very high. The margin gains achieved in these new contracts also underscore the division's ongoing successful performance. A further demonstration of this success was the steep rise in operating earnings. EBIT rose from EUR 83 million in the third quarter of 2010 to EUR 99 million in 2011, reflecting an increase of nearly 20 percent.