Deutsche Post DHL generates double-digit earnings growth in 2011 - higher dividend proposed
- Group reaches EBIT guidance: operating earnings grow to more than EUR 2.4 billion
- Dividend increase to EUR 0.70 per share proposed
- Higher investment to spur future growth
- EBIT expected to rise to between EUR 2.5 and EUR 2.6 billion in 2012
- CEO Frank Appel: "We are making very good progress"
At more than EUR 2.4 billion, the Group's operating earnings were almost one-third higher than the previous year's level.
Deutsche Post DHL, the world's leading postal and logistics group, had a very successful fiscal year 2011, having generated significant gains in both revenues and earnings. Compared with the previous year, Group revenues rose by 2.8 percent to EUR 52.8 billion. Adjusted for exchange-rate and consolidation effects, the company's revenues climbed even more steeply at 5.3 percent, a reflection of the Group's excellent positioning in rapidly growing markets. With its parcel business, the MAIL division continues to profit from the fast-paced growth of Internet retailing.
The very strong performance of the logistics division resulted largely from the exceptional market position of DHL in the world's growth markets - particularly in Asia. This formed the basis for strong margin improvements in the DHL divisions, which fueled an above-average increase in the Group's EBIT. At more than EUR 2.4 billion, the Group's operating earnings were almost one-third higher than the previous year's level, reaching the earnings guidance that the company increased twice during 2011. Consolidated net profit totaled EUR 1.2 billion in the past fiscal year. Excluding the valuation effects related to the Postbank sale, this amounts to a rise of more than 50 percent year on year.
"2011 was a very good year for our Group," said Frank Appel, CEO of Deutsche Post DHL. "We hit all of our targets, made very good progress with the implementation of our Strategy 2015 and further bolstered the already very strong platform for a sustainable expansion of our earnings in the future."
In 2011, Deutsche Post DHL boosted its revenues by 2.8 percent to EUR 52.8 billion (2010: EUR 51.4 billion).
Against the background of a moderately growing global economy, the Group expects to produce further gains in revenues and earnings - driven by the DHL divisions - during the current fiscal year. The company forecasts an increase of Group EBIT to between EUR 2.5 billion and EUR 2.6 billion. While the MAIL division is expected to contribute between EUR 1.0 billion and EUR 1.1 billion to this figure, operating earnings at DHL should increase to around EUR 1.9 billion. Corporate Center/Other expenditures are forecast to again total about EUR 400 million.
The Group's consolidated net profit is projected to improve in line with the operating business in 2012. In addition, Deutsche Post DHL also expects the positive earnings trend to continue beyond the current fiscal year. In the process, the cost measures and growth programs introduced in the MAIL division should further stabilize its profitability, even if letter volumes continue to gradually decline. At the same time, the Group reiterated that the operating profit at DHL is expected to increase between 13 percent and 15 percent on average each year between 2010 and 2015.
"Today, the Group is positioned better than ever," Appel said. "Be it in the internet arena or the emerging markets of the world - we have a very strong presence in exactly the places where growth is being generated. At the same time, we have the flexibility we need to exploit opportunities as they arise and to respond at short notice to challenges that emerge. Combined with the development of additional products and solutions that are designed to meet the special needs of our customers, we have an excellent foundation for generating further profitable growth."
Fiscal year 2011
In 2011, Deutsche Post DHL boosted its revenues by 2.8 percent to EUR 52.8 billion (2010: EUR 51.4 billion). Adjusted for exchange-rate and consolidation effects, this amounts to organic growth in revenues of more than EUR 2.7 billion (+5.3%) compared with the previous year. Thanks to the improved revenues and good cost control, the company grew its operating profit by more than EUR 600 million to over EUR 2.4 billion. With earnings of EUR 1.7 billion and an improvement of nearly 55 percent compared with the previous year's level, DHL was the growth driver in the Group once again contributing the majority to the company's operating profit.
In addition to the strong revenue and efficiency gains, the expected absence of non-recurring expenses, which had totaled about EUR 370 million in the previous year, had a positive impact on operating earnings. The Group's net financial income fell from EUR 989 million in 2010 to minus EUR 777 million during the past fiscal 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 1.6 billion related to the Postbank transaction, expenses totaling more than EUR 300 million were incurred in 2011.
This extraordinary effect also had a major impact on the Group's consolidated net profit and overshadowed the underlying operating improvement. As a result, net profit fell from EUR 2.5 billion in the previous year to EUR 1.2 billion in 2011. This amounts to a decrease in earnings per share to EUR 0.96 (2010: EUR 2.10). However, adjusted for the Postbank valuation effects for both years, consolidated net profit and earnings per share would have risen by more than 50 percent in 2011 to EUR 1.5 billion (2010: EUR 972 million) or EUR 1.21 per share (2010: EUR 0.80), respectively.
The Group plans to share this success with its shareholders: Given the positive results of the past fiscal year and the Group's confidence about its future performance, the Supervisory Board and the Board of Management will again propose a dividend increase of EUR 0.05 per share to the Annual General Meeting scheduled for May 9. Based on the consolidated net profit adjusted for non-recurring items, this year's dividend proposal of EUR 0.70 per share represents a payout ratio of 58 percent. As a result, the Group's dividend proposal is once again at the upper end of the range of 40 percent to 60 percent that the company set as a target corridor for future dividend payments with the introduction of its finance strategy in 2010.
Fourth quarter of 2011
During the final quarter of the year, the company continued on its growth path with revenues rising to EUR 14.1 billion (+2.1%). Adjusted for exchange-rate and consolidation effects, the Group boosted fourth-quarter revenues in 2011 by nearly EUR 500 million (+3.5%) compared with the same quarter in the previous year. Fueled by this rise in revenues and the Group's increased efficiency, the company's operating earnings rose by 14.1 percent to EUR 599 million. While the Group's logistics division made the biggest contribution to the Group's EBIT and its growth during this period, the MAIL division also delivered a year-over-year increase.
The valuation of financial instruments related to the Postbank transaction also had an effect on the net financial result in the fourth quarter and - compared with the same period last year - had a negative impact of more than EUR 400 million on the development of the Group's net profit. As a result, consolidated net profit fell to EUR 175 million (2010: EUR 487 million), and earnings per share decreased to EUR 0.14 (2010: EUR 0.40). If the Postbank valuation effects were excluded for both years, consolidated net profit and earnings per share would have risen by more than 46 percent in the fourth quarter as a result of the operating improvements to EUR 369 million (2010: EUR 252 million) or EUR 0.31 per share (2010: EUR 0.21), respectively.
Capital expenditures and cash flow
In 2011, the Group significantly boosted capital expenditures, further strengthening the company's foundation for future growth. At EUR 1.7 billion, capital expenditures increased by around EUR 450 million over the previous year's level of EUR 1.3 billion. In the MAIL division, this included the announced expansion of the company's parcel network in order to enable above-average growth in this business in years to come. In addition, capital expenditures were significantly increased for the DHL divisions in order to further shore up the platform for continued expansion and sustainable company success.
The focal points of these investments included a more efficient fleet of aircraft, state-of-the-art warehouses, a world-class IT infrastructure and new vehicles. As a result of the significant improvement of operating earnings and the considerable drop in restructuring expenditures, the Group's operating cash flow climbed by EUR 444 million to EUR 2.4 billion (2010: EUR 1.9 billion). Similarly, free cash flow rose by 55 percent, or EUR 265 million, to EUR 749 million (2010: EUR 484 million). With net liquidity of EUR 938 million, the Group continued to enjoy a very solid liquidity position at the end of 2011. This total was indeed lower than the EUR 1.4 billion that the company had at the end of 2010.
However, this development primarily reflects the company's planned increase in capital expenditures. Compared with the level at the end of the third quarter, Deutsche Post DHL increased its liquidity by nearly EUR 350 million.
Revenues in the MAIL division rose slightly to EUR 14.0 billion in fiscal year 2011 (2010: EUR 13.9 billion). Despite the discounts that in 2011 the Group has been granting its customers for an entire year for the first time following the imposition of the value-added tax in July 2010, revenues in the traditional mail business stabilized. At the same time, the company profited extensively from the growth generated by the parcel business.
Thanks to growing Internet retailing and a product range that is tailored to the needs of customers, the business accelerated its growth momentum as the year progressed, resulting in an 11 percent rise in volume in the fourth quarter. The total number of parcels shipped last year and the revenues produced by them were also well above the 2010 level: while volume rose by 10 percent, revenues in this business unit jumped by 9 percent, hitting a record level of EUR 3.2 billion.
As a result, the company's flourishing parcel business is generating nearly 25 percent of total revenues in the MAIL division. Together with strict cost management, it also contributed to the stabilization of the division's profitability: at more than EUR 1.1 billion, operating earnings finished the fiscal year only very slightly below the previous year's level (2010: EUR 1.1 billion).
Revenues and earnings grew strongly in the EXPRESS division in 2011. Revenues climbed to EUR 11.8 billion, an increase of 5.9 percent above the previous year's level of EUR 11.1 billion. Adjusted for exchange-rate and inorganic effects, which are primarily related to the divestment of the division's domestic business operations in China, Canada and Australia, revenues grew strongly by 10.9 percent in 2011. This strong performance was driven primarily by double-digit growth in volume and revenues for international shipments.
The Asia-Pacific region once again underscored its role as the growth engine of both the Group and the EXPRESS division. The rise in operating earnings was even higher: at EUR 927 million, EBIT in 2011 was 86.5 percent higher than the previous year's level of EUR 497 million. In addition to strong revenue and volume growth as well as systematic cost management, successfully completed restructuring steps played a major role here. In the previous year, these measures had led to restructuring expenses of EUR 288 million.
GLOBAL FORWARDING, FREIGHT division
The GLOBAL FORWARDING, FREIGHT division increased revenues by 4.9 percent from EUR 14.3 billion in 2010 to EUR 15.0 billion in 2011. Adjusted for exchange-rate and consolidation effects, revenues climbed by 5.7 percent during the past fiscal year. Even though air and ocean freight revenues came under pressure in the second half of the year as market growth slowed considerably, all business units contributed to the overall increase. The overland transport business performed particularly well, producing revenue growth of nearly 10 percent.
Even though fuel prices remained high, the division profited from lower freight rates, improved purchasing conditions and the focus on selective growth in attractive business areas. As a result, the division was able to achieve further margin improvements and the division's profitability rose steeply: at EUR 429 million, EBIT in 2011 was 12.0 percent above the previous year's level of EUR 383 million.
SUPPLY CHAIN division
The contract logistics business of Deutsche Post DHL also generated profitable growth in the past fiscal year. Revenues and earnings were well above the previous year's level. The division reported a revenue increase of 1.2 percent to EUR 13.2 billion (2010: EUR 13.1 billion). As a result of portfolio adjustments made during 2011 - such as the divestment of a subsidiary in the United States that was not part of the division's core business - this result only partially reflects the division's operating performance. Adjusted for these consolidation and exchange-rate effects, SUPPLY CHAIN's revenues rose by nearly 6 percent, or more than EUR 700 million, in 2011.
This increase was fueled in particular by strong growth in the Asia-Pacific region as well as in the Life Sciences & Healthcare and Automotive sectors. Additional contracts worth EUR 1.3 billion were concluded last year, an increase of around EUR 200 million versus the previous year. Combined with additional operating improvements and strict cost management, increased business activity drove up the division's earnings in 2011. At EUR 362 million, operating earnings were 56.7 percent above the previous year's level of EUR 231 million.