"We focus on growth"
Today, Deutsche Post DHL announced its results for 2010. Revenue grew at a double-digit rate, rising to more than EUR 51 billion, and underlying EBIT climbed overproportionally by nearly 50 percent. In this interview CEO Frank Appel talks about the reasons for the company's good performance during the past financial year and provides a future outlook.
CEO Frank Appel
Mr Appel, 2010 was a very successful year for Deutsche Post DHL. Why do you think the company was able to perform so well?
Frank Appel: We can indeed be very satisfied with the previous financial year. We met or exceeded all of our targets. We generated a double-digit revenue increase surpassing the EUR 50 billion mark. In terms of operating profit, we increased our original guidance twice last year and still finished the year above our latest forecast. The key performance indicators are now back to the highest levels we achieved before the economic and financial crisis. And we have even moved above these levels in some areas. All of this shows one thing: the Group is in very good shape. The restructuring programs that we introduced during the crisis have taken hold and are bearing fruit.
And our Strategy 2015, which we continue to pursue systematically, is coherent and is increasingly becoming effective. Thanks to our presence in all important regions and our range of customer-focused products and services, we have gained an above-average share of growth in global trade flows. This means: as the world's largest provider of logistics services, we are profiting particularly strongly from the ongoing positive growth of the global economy because we positioned ourselves at an early stage to take advantage of the upswing.
You just touched on this point: the recovery of the economy played an important role last year in the Group's positive earnings. Will this also be the case in 2011?
We remain fundamentally optimistic about the economy. But we are not euphoric. We assume that the economic recovery will continue this year - even if it may be on a somewhat lower level. However, we must acknowledge that there is a certain possibility of a setback, resulting for instance from the continued uncertainties in financial markets due to the sovereign-debt crisis in Europe or the turbulences in the North African region and the Arab world.
Another factor is that, like 2010, regions in the world are growing at significantly different rates. The biggest growth rates are still expected to be generated particularly in Asia and the other emerging markets, while Europe and North America will most likely continue to grow more slowly. The critical factor for us and our future success is that we, as the global No. 1, are strongly represented everywhere where growth is being generated.
If the economy grows, your business booms. If it slows, it suffers. Is Deutsche Post DHL too reliant on the general state of the economy?
As the industry leader in logistics, we naturally cannot completely avoid the impact of swings in the economy. But we have worked hard in recent years to cushion the blow. After all, these swings in the economy are expected also in the future. I think that, after successfully making structural changes, we are now positioned in such a way that we can also generate reasonable earnings if the economy should get off track again. Our goal is also to produce growth rates that are significantly above those of the market. And we are very confident that this will be the case in future years - regardless of the particular economic situation.
DHL has now clearly become the Group's growth driver. For the first time, the division contributed more to the Group's operating profit than the MAIL division did. How do you assess this development?
Let me make one point first: we have two strong pillars, and that will remain the case. It is correct to say though, that DHL has performed exactly the way we expected and planned it. We are reaping the fruits of the systematic expansion of this division - for which we have been criticized sometimes in the past. Today, you can see that the expansion strategy in global logistics was absolutely right. As a result, we have diversified beyond our traditional postal business. And the best thing is: we have just begun tapping the growth potential of DHL.
And what will happen with the MAIL division? How bad is the state of your former core business?
We have indeed been fighting a structural top line decline for years now. But we have taken on the challenge and are well on track to master it. You can see just how robust the business is by realizing that we were able last year to successfully manage both higher discounts offered in response to the imposition of value-added tax on revenue with our business customers and the loss of our major customer Arcandor. At the same time, we have invested in this division's future by expanding our digital business. Against this backdrop, an operating profit of EUR 1.15 billion can be considered a success. And we are well on our way towards stabilizing earnings at a level of around EUR 1 billion over the long term.
Thanks to the new wonder weapon E-Postbrief? It will hardly be able to save the MAIL division all by itself.
The E-Postbrief is an exceptional product that specifically addresses a certain need in the market - that is, the need for a more confidential, binding and reliable form of electronic communication. We are very satisfied with the success that the product has achieved in its first months after market launch.
But the E-Postbrief is only one element in our strategy to offer innovative solutions in digital and traditional forms of communication and to use this approach to defend our position as THE postal service for Germany over the long term. One area that is frequently overlooked when looking at the MAIL business: with our rapidly growing parcel business, we are one of the major winners in the e-commerce boom. In the fourth quarter alone, our business customers sent over 10 percent more parcels than they did in the previous year!
What sort of interim report can you give two years after announcing your Strategy 2015?
We have three core goals in the Strategy 2015: we intend to be the provider of choice for our customers, an attractive investment for our stockholders and the employer of choice for our employees. These core goals are closely interrelated and should help us to tap our Group's full potential. They have now become a permanent part of our company's DNA. And we are seeing on every level that we are progressing. Employee satisfaction is growing, and our products are being widely accepted - as our numbers show. In terms of investors, we hear a lot of support for our strategy. And we are confident that we will be able to further strengthen the capital market's confidence in this company and its prospects in the years ahead.
This will be achieved through transparency and reliability, for instance with regard to our dividend policy. With a proposed increase of the dividend to EUR 0.65 per share for the past financial year, we have a distribution ratio of 59 percent based on the consolidated net profit adjusted for non-recurring items - and, as a result, we are right within our communicated target corridor of 40 percent to 60 percent.
And what are the prospects for financial year 2011?
We are focusing on growth, in terms of both revenues and earnings. As I mentioned earlier, we expect the world economy will continue to grow, a development that will particularly support the DHL divisions. As a result, we expect to generate an operating profit of EUR 2.2 billion to EUR 2.4 billion. The MAIL division should contribute about EUR 1 billion to EUR 1.1 billion, and EBIT of the DHL divisions should further increase to between EUR 1.6 billion and EUR 1.7 billion. So we will over proportionally benefit from the economic growth in all parts of the world and further expand our position as the leading logistics group. And of course, this is not the end of our evolution. The year of 2011 will only be another important step on our way to sustainably strengthening our earnings power.