Deutsche Post DHL markedly boosts profits in the second quarter of 2011 - full-year earnings guidance improved
- Group revenues climb to EUR 12.8 billion in the second quarter - DHL and German parcel business generate strong growth
- EBIT more than doubled in Q2, consolidated net profit tripled
- Improved earnings guidance for 2011: EBIT expected to reach upper end of projected range of EUR 2.2 billion to EUR 2.4 billion
- CEO Frank Appel: "We are continuing to grow"
During the second quarter of 2011, Deutsche Post DHL continued the strong performance it showed in the first three months of the year and remained firmly on its growth path. Group revenues climbed 0.3 percent to EUR 12.8 billion from April to June 2011 compared with the same period last year. Adjusted for inorganic and exchange-rate effects, Group revenues rose by 5.8 percent, driven by the strong growth at DHL and the German parcel business. The DHL divisions continued to benefit from the ongoing global economic growth as well as its exceptional market position in the world's fast growing regions - particularly in Asia. The Group's parcel operations in Germany drew further strength from the dynamic Internet retailing business.
Thanks to continuing margin improvements in all DHL divisions, the Group markedly increased its operating earnings once again: At EUR 562 million, EBIT in the second quarter of 2011 was more than doubled compared to the same period last year. The improvement in consolidated net profit was even stronger. At EUR 278 million, it more than tripled. "We are continuing to grow and have kept the positive momentum of the last quarters," said Frank Appel, CEO of Deutsche Post DHL. "The second quarter once more proves the quality and sustainable nature of the efficiency gains we have achieved over recent years."
Second quarter 2011: revenues and profitability further increased
During the second quarter, the Group's revenues totaled EUR 12.8 billion. Adjusted for exchange-rate effects and the deconsolidation of various divested company units, the result reflects organic growth of more than EUR 700 million compared with the same period last year. In producing this result, the company continued on the growth course chartered at the beginning of the year. At the same time, the Group was able to even accelerate the pace of its earnings increases: At EUR 562 million, EBIT finished the second quarter more than EUR 300 million above the previous year's level of EUR 253 million. The DHL divisions produced EUR 471 million of the Group's operating earnings in the second quarter, nearly four times more than in the same period last year (2010: EUR 122 million).
In addition to operational improvements achieved by the company, the absence of any restructuring expenses, which totaled EUR 250 million last year, also had a positive impact on the development of Deutsche Post DHL's operating earnings. The operational improvements were also the key reason for the strong growth in consolidated net profit: From April to June, this figure totaled EUR 278 million, a level nearly EUR 200 million above the previous year's result of EUR 81 million. This amounts to an increase in quarterly earnings per share from EUR 0.07 in 2010 to EUR 0.23 in the second quarter of 2011.
Capital expenditure: foundation of growth reinforced
As planned, the Group's capital expenditure totaled EUR 371 million in the second quarter of 2011, more than 30 percent above the previous year's level of EUR 286 million. During the first six months of the year, a total of EUR 623 million was invested, an increase of more than EUR 140 million compared with the previous year's total of EUR 481 million. Spending was increased in particular at DHL in order to further strengthen the foundation of future profitable growth through investment made in, among other things, the modernization of the company's air fleet, warehouses and other property, plant and equipment.
During the first six months of a year, the Group's cash flow and liquidity are regularly impacted by the annual payment made in January to the Bundes-Pensions-Service, a special pension fund for the company's civil servants, and the dividend payment in May. Despite these recurring payments, which totaled more than EUR 1.3 billion this year, the Group maintained a strong liquidity position during the first six months of the year: At the end of the second quarter Deutsche Post DHL's net liquidity amounted to EUR 202 million.
First half of 2011: further growth in revenues and earnings
After the company generated revenues of EUR 24.8 billion in the first half of 2010, the Group increased its turnover to EUR 25.7 billion during the first six months of the ongoing fiscal year. Thanks to marked volume and revenue increases as well as the Group's improved efficiency, operating earnings jumped by 55.7 percent to EUR 1.2 billion. With an earnings contribution of EUR 834 million, reflecting an increase of nearly EUR 500 million over the same period last year, the DHL divisions generated the lion's share of the Group's EBIT and its growth.
In addition to improved revenues and increased earnings strength, the planned absence of any restructuring expenses, which totaled EUR 304 million during the prior year period, contributed to the significant improvement of the Group's operating earnings. The company's net financial income fell during the first half of 2011, dropping from EUR 1.2 billion in the same period last year to minus EUR 319 million. This was, however, almost solely a result of the valuation of financial instruments from the sale of Postbank. While last year's financial result included positive effects of EUR 1.4 billion related to the Postbank transaction, expenses totaling EUR 133 million were incurred in the first six months of 2011.
This extraordinary accounting effect also had a major impact on the Group's consolidated net profit: During the first half year, consolidated net profit fell from EUR 1.8 billion in the previous year to EUR 603 million. This represents a decrease in earnings per share from EUR 1.51 in 2010 to EUR 0.50 in the current fiscal year. However, adjusted for the Postbank valuation effects for both years, consolidated net profit and earnings per share would have increased by more than 80 percent during the first six months of the year.
Outlook: full-year guidance improved - EBIT expected at upper end of target range
Following its strong performance in the first six months of the year, the company improved its earnings guidance for full year 2011. The Board of Management continues to project an EBIT of EUR 2.2 billion to EUR 2.4 billion, but now - based on the positive results achieved in the first half of the year - believes that the company's operating earnings will finish the year at the upper end of this range. Earnings in the MAIL division are still expected to total between EUR 1.0 billion and EUR 1.1 billion. The company also continues to project double-digit growth in DHL's operating earnings, which should reach EUR 1.6 billion to EUR 1.7 billion.
Expenses in Corporate Center/Other should total about EUR 400 million. 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 remain confident concerning our future business development, also against the backdrop of a more normalized level of global economic activity," Appel said referring to the Group's improved earnings guidance. "We have the necessary skills and the required flexibility to remain firmly on our successful growth course - both during the second half of the year and beyond."
MAIL division: profitable growth in the parcel business
Second quarter revenues in the MAIL division remained stable compared to the prior year at a level of EUR 3.3 billion. Even though volumes stabilized, revenue in the traditional mail business continued to decline as a result of discounts that the Group is providing its customers following the imposition of the value-added tax in July 2010. However, the continuing momentum being generated by the parcel business almost completely offset this reduction.
In light of the rise in Internet retailing, revenues in this business segment climbed nearly 8 percent to EUR 667 million between April and June. At 10 percent, the increase in the number of transported parcels recorded in the second quarter even exceeded the growth rate generated in the first three months of the year. During the second quarter, EBIT in the MAIL division totaled EUR 183 million, about 25 percent below the previous year's level of EUR 243 million. This was largely the result of the value-added-tax effect and expenditures related to the setup of the digital business. This drop could, however, be partially offset by increased earnings in the parcel business and the division's strict, ongoing cost management.
EXPRESS division: accelerated growth
The EXPRESS division continued its successful revenue and earnings performance in the second quarter of 2011 and further increased the pace of its growth. Revenues rose by 2.9 percent to EUR 3.0 billion (2010: EUR 2.9 billion). Adjusted for exchange-rate and consolidation effects, organic revenue growth totaled 11.3 percent between April and June. This result was a reflection of the double-digit growth rates in volumes and revenues in international shipments. The Asia-Pacific region once again underscored its role as the growth driver within the Group as a whole and at EXPRESS in particular.
The division's operating earnings also improved markedly in the reporting period. While a loss of EUR 30 million was incurred in the second quarter of 2010, EBIT climbed to EUR 244 million in 2011. In addition to revenue and volume growth as well as systematic cost management, the successfully completed restructuring measures played a major role in this increase. During the same period last year, these measures resulted in non-recurring expenses in an amount of EUR 228 million.
GLOBAL FORWARDING, FREIGHT division: revenue and margin improvements
In the GLOBAL FORWARDING, FREIGHT division, revenues rose to EUR 3.7 billion in the second quarter of 2011. The result represents an increase of 3.6 percent over the previous year's level of EUR 3.6 billion. However, this figure only partially reflects the division's actual operating performance. Adjusted for negative exchange-rate effects, the division's organic revenue growth totaled 7.1 percent. This gain was a result of solid growth in air and ocean freight as well as double-digit growth in the European overland transport business.
In spite of rising fuel costs, the division profited from lower freight rates and improved purchasing conditions, developments that resulted in margin improvements. As a result, EBIT climbed by 13.1 percent, from EUR 99 million in the second quarter of 2010 to EUR 112 million in the same period of 2011. Last year's operating earnings contained restructuring costs totaling EUR 3 million.
SUPPLY CHAIN division: operating earnings more than doubled
At EUR 3.2 billion, revenue in the SUPPLY CHAIN division fell 3.4 percent during the second quarter of 2011 from the previous year's level of EUR 3.3 billion. This decrease, however, was solely attributable to negative exchange-rate effects and the sale of a U.S. subsidiary that was not part of the division's core business. Excluding these effects, revenue would have climbed by 6.1 percent.
The division's strong performance is also reflected in the continued high volume of contracts concluded with new and existing customers totaling EUR 220 million in the second quarter as well as in the marked improvement in the profit margins of these new agreements. This was also a driver of the significant rise of operating earnings, which more than doubled from EUR 53 million in the second quarter of 2010 to EUR 115 million in the current year. The significant improvement was also supported by the division's strict, ongoing cost management and the gain on the disposal of the U.S. subsidiary. Furthermore, the previous year's result contained restructuring expenses of EUR 17 million.