"A very good year for Deutsche Post DHL"
Deutsche Post DHL released its results for 2011 today. Revenues rose steeply once again, and operating earnings increased at an even higher rate. While both of the Group's pillars hit their ambitious targets, the logistics division has established itself as the company's growth driver. In an interview with Deutsche Post DHL News, CEO Frank Appel talks about the Group's good performance last year and discusses what the company has in store for 2012 in terms of business and focal points.
CEO Frank Appel
Mr. Appel, how would you describe the company's performance in fiscal year 2011?
Frank Appel: We are very satisfied with last year's performance. We hit all of our targets and are making very good progress with the implementation of Strategy 2015. Revenues rose in all divisions and our operating earnings generated a double-digit gain - in line with our guidance. We continue to be pleased with the performance of DHL, which has turned into the growth locomotive of Group earnings. The MAIL division fully met our expectations as well. Overall, it was a very good year for our Group once again. And, of course, our stockholders will share in this success: the Board of Management and the Supervisory Board will propose another dividend increase to EUR 0.70 at the upcoming Annual General Meeting.
What are you more pleased about: that DHL continues to produce strong growth or that the MAIL division is not weakening further?
Frank Appel: Our Strategy 2015 has two main goals: first, to significantly increase the earnings contribution by DHL year after year and, two, to stabilize the MAIL division's contribution over the long term in spite of the structural market changes that are weighing on its business operations. Both goals are equally important to us, and we have definitely taken the right approach in both areas. And this is the case not just in terms of earnings. Customer satisfaction, a centerpiece of our strategy, rose once again in both our MAIL division and at DHL. These are the foundations for the long-term business success that we are seeking to achieve.
Your MAIL division performed surprisingly well last year. Why?
Frank Appel: We succeeded in slightly increasing revenues and keeping the division's earnings nearly constant - in spite of the effect of the value-added tax in our corporate customer business that was fully felt in 2011 for the first time. This success is primarily the result of the dynamic growth being produced by the parcel business due to the e-commerce boom. E-commerce has entered the mainstream. This is also one of the key findings of our "Shopping 4.0" study through which we have taken a close look at the trends and developments in this area.
More and more people in every age group are taking advantage of this convenient form of shopping. And this is not just a passing fancy. The changes that are occurring in shopping habits are here to stay. This means that growth will continue in the parcel business. We are doing everything we can to exploit the great opportunity arising from this change. After all, we do not just profit from this trend. With our high-quality services, we also facilitate e-commerce in this form. We build the bridge between the digital and the real world. Our services ensure that products ordered online reach the customer - safely, quickly and conveniently. For this reason, we are taking steps to expand our capacities and to develop new services that meet the customers' needs.
Is the expansion of the parcel business your only response to the digital challenge?
Frank Appel: As the market leader in the parcel business, our parcel business is not just a beneficiary of the e-commerce boom. We are also a participant and partner in online retailing through the shopping platform "MeinPaket.de" and our online marketing subsidiaries nugg.ad and adcloud. And with the E-Postbrief we have another great product as confidentiality and the privacy of correspondence are quickly growing in importance in the digital arena. The systematic expansion of all of these digital activities, which is designed to help offset the falling volume being experienced by our traditional letter business, is a key part of our strategy and is increasingly bearing fruit.
Let's talk about DHL now. The growth momentum of your business seems to have slowed recently. Is this a cause for worry?
Frank Appel: I think DHL performed really well last year: we generated profitable growth in all three divisions and have achieved the targets that we announced during the year. And this was just the beginning: we are ideally positioned for the future, and this means that we will see further significant progress in years to come. Last year, we created further important conditions for this. One of these changes is the continuously improving internal coordination among our DHL divisions when it comes to the products and services we offer for key sectors as Life Sciences & Healthcare, Technology and Energy as well as for the Automotive industry.
The newly created position of Chief Commercial Officer at DHL is contributing greatly to this effort. At the same time, it is also true that our business cannot completely separate itself from global economic developments. The world's economy did indeed continue its upswing at the end of the year, but its growth was not as dynamic as it was in the first half of 2011. Given this, we are very pleased with the results - after all, we are not primarily focusing on volume. Rather, we are determined to continuously improve the quality of our business and earnings. In these terms, the figures of all DHL divisions show that we have definitely taken the right approach.
Will you be able to continue to perform so well if the economy slows further?
Frank Appel: We should not be overly pessimistic. The latest forecasts project that the world economy will produce solid growth of 3 percent to 3.5 percent this year. There is no global recession lurking around the corner right now. This is particularly true for the emerging markets, which will produce growth rates in the high single digits this year. DHL is particularly well positioned there, both in terms of trade with industrial countries and trade between the growth centers of Asia, Latin America and the Middle East.
Our express business in Asia is a good example: we are by far the market leader for international, time-definite deliveries. This is the result not only of our quality and the extent of our network, but also of our deep local roots. In Singapore, for instance, we have been doing business since 1972, in India since 1979 and in China since 1986. This is a good basis for long-term, sustainable growth. Generally speaking, we can remain calm during the slight slowdown of global economic growth. But this would also be the case if we experienced a sharper downturn - which I do not expect: we are in a much better position today to respond quickly to a change in business conditions than we were just a few years ago.
What would the impact on the company be if the euro countries were unable to get a grip on their national debt crisis and the euro zone collapsed?
Frank Appel: Europe and the euro are projects of historic dimensions - and, as a result, they deserve our total commitment. The current problems can be solved, and I believe Europe, acting as a community of mutual solidarity, can and will overcome its crisis. For this reason, I think the scenario you just described is merely a theoretical one. Anyway, there is no way for a company to prepare for such an event. The key matter is that the important positions in a company are held by people who are willing and capable of acting flexibly and correctly in such situations. This is the case for us.
Dramatic changes in the competitive environment of your industry are brewing. What impact would a merger of two of your major competitors, UPS and TNT Express, have on Deutsche Post DHL?
Frank Appel: Of course, we keep a very close eye on developments in our industry. And this naturally includes the future of TNT Express. We are not at all concerned about it and feel very good about our competitive position. From our own experience, we know very well how long it can take to integrate acquired companies. This may not be good for the company's customer business.
In addition, we will not let up in our own efforts to continue improving the products and services we provide to customers - and, as a result, to further strengthen our market position. We also expect significant anti-trust issues regarding a possible acquisition of TNT Express by UPS and are eager to see how international competition authorities will react if the two companies really did agree to merge.
What about your own acquisition plans?
Frank Appel: Our focus is on organic growth. We have very successfully integrated the companies we acquired in the past and feel very good about our current position. Our latest figures clearly show that we are very strong and that we have no need for any strategic acquisitions.
What are your expectations for business this year?
Frank Appel: The global economy and world trade will also grow in 2012. For this reason, we expect revenues to rise as well, driven by the DHL divisions. Thanks to our improved efficiency, this will be reflected in our earnings. We intend to increase the Group's operating earnings to between EUR 2.5 billion and EUR 2.6 billion. The DHL divisions should remain the drivers of growth and increase their earnings to about EUR 1.9 billion. In the MAIL division, our forecast is to stabilize earnings at a level between EUR 1.0 billion and EUR 1.1 billion. We also expect the Group's earnings to continue to grow after this year. To further bolster our very solid foundation for further growth, we will increase our capital expenditures once again and invest about EUR 1.8 billion in the current year alone.
What will be the focal points of these investments?
Frank Appel: In 2012, the focal point will remain the refinement of our customer services in all divisions. After all, this is the basis of our success. In the MAIL division, we will invest in the expansion of the parcel business, as I mentioned. The focus here will be on capacity, speed and transparency. The parcel should be as fast as the letter. Customers should have as much flexibility as possible and should be able to better track the exact location of their shipments at a particular moment. At DHL, we are working in 2012 to even better align the divisions in terms of our "One DHL" concept. In a nutshell: we intend to provide better and better services for more and more customers in a more and more efficient manner. In 2012, we will devote our full energies to this task.