Deutsche Post DHL confirms 2012 earnings guidance in a volatile environment

Group revenues increase to EUR 13.8 billion in the third quarter; improvements in all DHL divisions and the parcel business Group EBIT declines while DHL earnings continue to improve 2012 earnings guidance confirmed: EBIT of EUR 2.6 billion to EUR 2.7 billion expected CEO Frank Appel: "The strength of our business model keeps us on track"
 
Deutsche Post DHL, the world’s leading postal and logistics group, continued to increase its revenues during the third quarter: at EUR 13.8 billion, revenues generated between July and September climbed 5.7 percent above the previous year’s level. In addition to favorable exchange-rate effects, this increase also reflects the ongoing organic revenue growth produced by all three DHL divisions. These businesses continue to benefit from their strong market position in the world’s growth markets – particularly in Asia. As a result, the profit of the logistics division as a whole continued to increase. The company’s parcel business, an area that is generating a growing share of revenue in the MAIL division, remained dynamic. During the third quarter, it once again generated strong gains in both volume and revenues. However, this third quarter contained one less business day than the prior year. In combination with the impact of additional staff costs resulting from the new wage agreement this caused MAIL’s operating earnings to decline compared with the previous year’s total – as did Group EBIT. Nevertheless, based on its positive expectations for the final quarter of the year, the Group foresees higher earnings in all divisions and the company has therefore confirmed its earnings guidance for the ongoing fiscal year.
 
"The strength of our business model keeps us on track in a difficult economic environment: With our strong market position in the international express and the German parcel business still paying off, we have delivered a solid set of results in the third quarter", said Frank Appel, CEO of Deutsche Post DHL. "At the same time it is clear that we cannot afford to rest on our laurels given the volatile economic environment."  
 
Third quarter of 2012: profitable growth at DHL
After generating revenues of EUR13.1 billion in the third quarter of 2011, the Group -supported by positive exchange-rate effects – increased its turnover by more than EUR 700 million to EUR 13.8 billion between July and September 2012. Thanks to further efficiency improvements operating earnings at DHL also climbed further. At EUR 462 million, they rose 5 percent above the previous year’s level. In the MAIL division, expenditures related to the bankruptcy of the Neckermann mail-order company, increased staff costs as a result of the new wage agreement and the loss of one workday had a negative impact on the earnings position. These effects were partially offset by the continued dynamic growth of the parcel business. Due to the overall decrease in MAIL earnings, the Group’s EBIT also declined by 6.5 percent to EUR 604 million (2011: EUR 646 million). Nonetheless, consolidated net profit (EUR 382 million) and earnings per share (EUR 0.31) in the third quarter of 2012 remained at the previous year’s level due to lower tax expenses (2011: EUR 385 million and EUR 0.32).
 
Capital expenditures and cash flow: foundation of growth reinforced
During the third quarter of 2012, the Group further bolstered its foundations for growth by boosting capital expenditures as planned. At EUR 456 million, investments made in the third quarter of this year were 9.1 percent above the previous year’s level of EUR 418 million. During the first nine months of the year, a total of EUR 1.1 billion was invested, nearly EUR 100 million above the 2011 amount. The driving forces behind this increase were the DHL divisions, which increased their expenditures in order to reinforce the basis for continued profitable growth by investing in such areas as a more efficient aircraft fleet, the ongoing expansion of the divisions‘ network, state-of-the-art warehouses and a new IT infrastructure for Global Forwarding. The Group’s cash flow and liquidity continued to be impacted by the annual contribution made each January to the Bundes-Pensions-Service (EUR 530 million) and by the dividend payment issued in May (EUR 846 million). The Group’s liquidity was also affected by the repayment of state aid (EUR 298 million) and the subsequent VAT payment (EUR 482 million). As a result, the company had net debt of EUR 977 million at the end of the third quarter. The company’s free cash flow, also significantly impacted by one-time effects, fell from EUR 141 million during the first nine months of 2011 to minus EUR 772 million this year.  
 
First nine months: one-time effects in Q2 impacted earnings
In the first nine months of 2012, the company increased revenues by EUR 2.2 billion, or 5.8 percent, to EUR 40.9 billion (2011: EUR 38.7 billion). At EUR 1.8 billion, the Group’s operating earnings remained unchanged from the previous year’s level. But this result includes a number of one-time effects that impacted earnings and the comparison with the previous year’s performance – particularly in the second quarter. The effect from the subsequent VAT payment (EUR 181 million) was offset in part by positive one-time effects related to the reversal of a restructuring provision (EUR 99 million) and the income produced by disposals of companies that were not part of the Group’s core business (EUR 44 million). Adjusted for these factors and the sale of a subsidiary in the second quarter of 2011, the Group’s operating earnings would have increased slightly in the first nine months of 2012 compared with the previous year’s level. In the same period, the reported consolidated net profit improved by 13.0 percent to EUR 1.1 billion (2011: EUR 988 million). Likewise, earnings per share rose from EUR 0.82 last year to EUR 0.92 in 2012.

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