Deutsche Post DHL meets earnings guidance and proposes higher dividend for 2013
- Operating earnings increase to EUR 2.86 billion
- Net profit and cash flow climb sharply
- Group proposes to raise dividend to EUR 0.80 per share
- Earnings momentum to continue in 2014; 2015 guidance confirmed
- CEO Frank Appel: "We will continue to work hard to reach our goals"
Deutsche Post DHL, the world's leading postal and logistics group, generated revenues of more than EUR 55 billion and boosted profitability once again in 2013. Compared with the previous year, revenues declined slightly, by 0.8 percent to EUR 55.1 billion, as a result of negative exchange-rate and other inorganic effects. Adjusted for these factors, however, revenues rose by nearly 3 percent. This gain was fueled in part by higher postal rates as well as rising volume and revenues in the parcel business in Germany. Other revenue drivers included strong growth in the express business and revenue gains in the SUPPLY CHAIN division. These improvements were the result of the company's exceptional market position in the world's growth markets, where the DHL divisions are now generating a significant share of their revenues. This positioning also laid the foundation for margin improvements that led to an EBIT increase to EUR 2.86 billion. Operating earnings thus finished the year 2013 within the targeted corridor of between EUR 2.75 billion and EUR 3.0 billion. Consolidated net profit reached EUR 2.1 billion during the past year, an increase of more than EUR 450 million compared to 2012.
"We took a significant step forward in 2013. We built upon our existing strengths, affirmed our strong market position and significantly improved the company in all aspects of our Strategy 2015," said Frank Appel, the CEO of Deutsche Post DHL. "We will nevertheless continue to work hard to reach our 2015 goals given the continued sluggish global economic environment."
Guidance: Group remains confident
Even though the world economy is expected to see only a small acceleration of growth, the Group expects to continue its positive earnings trend in 2014 and increase EBIT to between EUR 2.9 billion and EUR 3.1 billion. While the MAIL division is anticipated to contribute about EUR 1.2 billion to this total, the DHL divisions should continue to grow earnings and generate an EBIT of between EUR 2.1 billion and EUR 2.3 billion during the year. The earnings guidance for the divisions in particular reflects the organizational transfer of various domestic parcel businesses from DHL to MAIL that was effective as of the beginning of this year in several international markets. In addition, the Group plans to lower the Corporate Center/Other expenses to below EUR 400 million in 2014. Furthermore, the company expects to generate sufficient free cash flow again to cover this year's dividend for financial year 2013.
Looking toward 2015, Deutsche Post DHL continues to forecast achievement of the targets set out in the company's Strategy 2015. The company expects to increase operating profit to between EUR 3.35 billion and EUR 3.55 billion. In light of the organizational changes introduced this year, the company has adjusted the specific targets for the MAIL and the DHL divisions: Deutsche Post DHL now expects the MAIL division to generate earnings of at least EUR 1.1 billion in 2015 (previously: at least EUR 1 billion). For the DHL divisions the company has adjusted its EBIT guidance by the corresponding amount. The operating earnings for the DHL divisions should now total between EUR 2.6 billion and EUR 2.8 billion in 2015. The expenditures for Corporate Center/Other are still expected to be reduced to around EUR 350 million by 2015.
Fiscal year 2013: Profitability improved
In light of the Group's good performance in 2013 and its confidence in the company's future performance, the Board of Management and the Supervisory Board will propose a dividend of EUR 0.80 per share.
In 2013, consolidated revenues totaled EUR 55.1 billion, a slight drop from the previous year's total of EUR 55.5 billion. Adjusted for negative exchange-rate and other inorganic effects, however, revenues climbed last year by 2.8 percent, or more than EUR 1.5 billion. During the same period, the Group's EBIT increased by 7.4 percent, or about EUR 200 million, to EUR 2.86 billion (2012: EUR 2.67 billion). In addition to operational improvements, this result reflects a number of one-time effects that impacted the comparison with the previous year's performance: In 2013, the utilization of parts of the postage stamp provision had a positive effect of EUR 50 million on earnings. Another factor positively impacting the year-over-year comparison was the absence of one-time effects in 2013 that in total had a negative impact of EUR 38 million on EBIT at the MAIL and EXPRESS divisions in 2012. In the SUPPLY CHAIN division, positive and negative one-time factors virtually offset each other in 2013. Even when adjusted for all major non-recurring factors, the Group's operating earnings would have risen in 2013 - driven by profitability gains generated by the DHL divisions. As a result of the company's increased operating profit, its improved financial result and a lower tax rate, consolidated net profit jumped by 27.5 percent last year to EUR 2.1 billion (2012: EUR 1.6 billion). Similarly, basic earnings per share climbed from EUR 1.36 in the previous year to EUR 1.73 in 2013. Adjusted for all one-time effects - including the EUR 186 million disposal gain resulting from the Postbank sale in the first quarter of 2012 - the company's net profit and earnings per share also climbed steeply.
Dividend: Group proposes 14 percent increase
In light of the Group's good performance in 2013 and its confidence in the company's future performance, the Board of Management and the Supervisory Board will propose a dividend of EUR 0.80 per share to the Annual General Meeting on May 27, an increase of EUR 0.10 per share. Should shareholders approve this proposal, the Group will pay out a total of EUR 967 million to its shareholders, 14 percent more than in the prior year. Based on the consolidated net profit adjusted for non-recurring-items the dividend proposal represents a payout ratio of 49 percent. As a result, the company's dividend proposal remains in the middle range of the target corridor of between 40 percent and 60 percent that was set in 2010 as part of the finance strategy introduced that year.
Fourth quarter 2013: DHL ends the year strongly
At EUR 14.5 billion, revenues finished the final quarter of 2013 slightly below the 2012 level of EUR 14.6 billion. This dip in revenues resulted from negative exchange-rate and other inorganic effects. Adjusted for these factors, revenues in Q4 rose by more than EUR 600 million, or over 4 percent. The final three months of 2013 were the most profitable period for the Group during the year. At EUR 885 million, operating earnings in the final quarter of 2013 increased 7 percent above the previous year's level (2012: EUR 827 million). This improvement was led by a double-digit EBIT gain at DHL. The high negative exchange-rate effects were largely offset by positive net one-time effects in the SUPPLY CHAIN division. While adjustments to pension plans in the UK had a positive impact, one-time expenses were incurred for minor restructuring activities in Europe. Operating earnings in the MAIL division declined slightly in the fourth quarter due to higher factor costs. Also as a result of positive tax effects and lower financial charges, consolidated net profit in the fourth quarter climbed by 43.5 percent, increasing from EUR 538 million in 2012 to EUR 772 million in 2013. Correspondingly, basic earnings per share rose to EUR 0.64 (2012: EUR 0.45).
Capital expenditures: Foundation of growth further reinforced
To bolster its foundation for continued profitable growth, the Group invested a total of EUR 1.755 billion in 2013. The increase of more than EUR 50 million over the previous year's amount of EUR 1.7 billion, resulted primarily from the increased capital expenditures the MAIL division made to expand its parcel infrastructure. Nonetheless, the largest share of the Group's capital expenditures in 2013 continued to be realized in the DHL divisions. These investments flowed into areas that reinforce the foundation for future growth and long-term business success - and included the continued expansion of the network, a more efficient air fleet, state-of-the-art warehouses and a new IT infrastructure for Global Forwarding.
Cash flow: Group exceeds targets
During the past year, the Group made significant strides in its effort to improve cash flow generation: In 2012, one-time effects related to the funding of pension obligations, the VAT payment and restructuring expenditures totaled EUR 2.6 billion. This, in turn, resulted in a negative free cash flow of EUR 1.9 billion. In 2013, however, the Group was able to generate positive free cash flow totaling EUR 1.7 billion. With this improvement - an increase of nearly EUR 1 billion compared with the previous year's free cash flow of EUR 723 million after adjustment for the one-time effects - the company significantly exceeded its goal of generating sufficient free cash flow to cover the dividend of EUR 846 million that was paid out to shareholders in 2013. Key reasons for this improvement included the company's increased operating earnings as well as positive timing effects. Thanks to the strong cash-flow performance, net debt fell to EUR 1.5 billion at the end of the year (2012: EUR 2.0 billion). In the fourth quarter alone, the company realized an improvement of approximately EUR 1 billion.
MAIL division: Parcel business remains very dynamic
In 2013, revenues in the MAIL division climbed by 3.4 percent to EUR 14.5 billion (2012: EUR 14.0 billion). As planned, the E-Post offering contributed around EUR 100 million to this total. In addition, revenue gains in the domestic mail business that resulted from the postal rate increase from the beginning of 2013 and the continued dynamic growth in the German parcel business were the driving forces behind the improvement. The company proactively capitalized on the growth opportunities arising from the e-commerce trend by continuously developing innovative products and delivery services. These improvements include the expansion of evening delivery service to an increasing number of metropolitan areas, the continued extension of the Packstation network and the introduction of DHL parcel boxes to customers throughout Germany. As a result of these efforts, the number of transported parcels broke the 1 billion barrier for the first time in 2013. Fueled by this growth, revenues in the parcel business - a segment that now produces around 26 percent of the MAIL division's total revenues - increased nearly 8 percent last year and reached a record level of EUR 3.8 billion. In 2013, the MAIL division's operating earnings climbed by 17 percent to reach EUR 1.2 billion. Nevertheless, the comparison with the previous year's results was significantly impacted by the stamp provision utilization in the second quarter of 2013 and the absence of the VAT charge taken in 2012. Excluding these effects, EBIT in the MAIL division would have fallen slightly last year as a result of higher material and staff costs.
EXPRESS division: International express business sees strong growth
The EXPRESS division continued to generate significant gains in revenues and earnings in 2013. Reported revenues amounted to EUR 12.7 billion, a slight decrease from the previous year's total of EUR 12.8 billion. However, revenue in 2012 included the divested domestic express businesses in Australia, New Zealand and Romania. Adjusted for this effect and significant negative exchange-rate effects, revenues rose by more than 4 percent organically. Once again, the main factor fueling these gains was the growth of international time-definite shipments. This positive result was achieved in all regions. The division's EBIT rose by more than 2 percent last year and totaled EUR 1.1 billion (2012: EUR 1.1 billion). The comparison with the 2012 figures is distorted, however, by the absence of various positive one-time factors in 2012. These factors were related to the reversal of restructuring provisions, gains from divestments and partially offset by the VAT payment. In total, these one-time effects increased the 2012 profit by EUR 113 million. Excluding the one-time effects, operating improvements resulting from investments made in the network, employee training and improvements in customer service resulted in a double-digit percentage EBIT gain and a significant improvement in the operating margin of more than 100 basis points to nearly 9 percent.
GLOBAL FORWARDING, FREIGHT division: Stable EBIT margin
In a business environment that remains challenging, revenues in the GLOBAL FORWARDING, FREIGHT division decreased by 5.3 percent in 2013 to EUR 14.8 billion (2012: EUR 15.7 billion). Adjusted for negative exchange-rate effects, the decrease has been a little more than 2 percent. Volume and revenues in air freight fell below the previous year's level primarily because of weakened demand from several large customers in the Technology and Engineering & Manufacturing sectors. Ocean freight volume and revenues also decreased. The main reason for this development was lower demand in the Americas and Europe regions. In contrast, demand rose on intra-Asian and North-South routes. A small rise in revenues generated by overland transportation resulted largely from a slight business improvement in Germany, Eastern Europe, the Benelux countries and France. Thanks to a selective market strategy and continued strict cost controls, the division was able to maintain its operating margin despite the decline in revenues and increased investments in the transformation of its IT infrastructure. Nevertheless, the division's EBIT fell to EUR 483 million (2012: EUR 514 million).
SUPPLY CHAIN division: Successful new customer business
At DHL SUPPLY CHAIN, revenues fell slightly to EUR 14.3 billion in 2013 (2012: EUR 14.3 billion). Adjusted for negative exchange-rate effects and the impact of the disposal of three subsidiaries that were not part of the company's core business, revenues climbed by nearly 6 percent, or more than EUR 800 million. This increase was fueled primarily by strong growth in the Asia-Pacific region as well as in the Life Sciences & Healthcare, Automotive, Consumer and Technology sectors. At EUR 1.5 billion, the volume of new contracts concluded with new and existing customers reached a record level. Once again, these gains clearly demonstrated the strength of the division's successful business model. During 2013, the division's EBIT climbed by 5.3 percent to EUR 441 million (2012: EUR 419 million). Expenditures related to company divestments, minor restructuring activities in Europe and the insolvency proceedings involving a customer in the United States were almost completely offset by a non-recurring positive effect resulting from modification of pension plans in the UK.