Deutsche Post World Net meets 2008 operating targets - focus 2009 on cost and business performance
- 2008 underlying EBIT on target at 2.41 billion euros
- Reported EBIT loss at 567 million euros primarily amid U.S. restructuring costs; full-year revenue rises to 54.47 billion euros
- Group expects economic environment to remain challenging in 2009
- Company to propose 2008 dividend of 60 euro cent per share
Deutsche Post World Net, the world's leading provider of logistics services, reported full-year underlying EBIT, or earnings before interest and tax excluding non-recurring effects, of 2.41 billion euros, fully meeting its latest target. Including onetime writedowns and charges, the Group posted a full-year 2008 EBIT loss of 567 million euros compared with an EBIT of 2.1 billion euros in 2007. "2009 will be a year of hardship for the entire logistics industry," said Chief Executive Officer Frank Appel. "Just as we successfully tackled the main legacy issues last year, our focus now will be on costs and cash generation to help us through the difficult times ahead."
Given the unprecedented decline in volumes and the unpredictable economic outlook, the Group will refrain from giving a firm outlook for the year, Appel said. The sharp reductions in demand experienced in the fourth quarter deepened so far in the first quarter of 2009, impacting all regions and most industry sectors. "We expect that this level of volume decline will continue throughout the first half of the year if not longer," Appel said. Against this background, the company will propose to the Annual Shareholders' Meeting a 2008 dividend payout of 60 euro cents per share.
The Group reported a net loss after minorities of 1.69 billion euros for 2008 compared with a profit of 1.38 billion euros a year earlier. Charges for restructuring the U.S. Express division, non-cash writedowns in SUPPLY CHAIN/CIS and losses at the Postbank unit burdened the result, while the repayment from the German government in connection with EU state aid proceedings had a positive effect. Earnings per share amounted to minus 1.40 euros compared with 1.15 euros a year earlier. Full-year revenue gained 0.8 percent to 54.47 billion euros. The Group's revenue and EBIT figures are reported without Postbank, which is accounted for as discontinued operations.
Cost reductions and cash flow
In the fourth quarter of 2008, the net loss after minorities amounted to 3.16 billion euros compared with a profit of 253 million in 2007. Fourth-quarter earnings per share came in at minus 2.62 euros from 21 cents in the fourth quarter of 2007. Revenue declined by 3.3 percent in the quarter to 14 billion euros. Operating cash flow after working capital changes was at 1.4 billion euros in the fourth quarter of 2008 from 1.5 billion euros a year earlier, and free cash flow totaled 796 million euros, down from 1.1 billion euros. Cash flow performance is likely to remain strong in 2009, with further room for working capital improvements. The Group plans to cut capital expenditure by 20 percent to less than 1.4 billion euros this year.
Deutsche Post World Net in November announced a plan to save at least 1 billion euros by the end of 2010 by cutting non-operating costs, improving structures and processes, and removing unnecessary bureaucracy at corporate center and the Divisions.
MAIL Corporate Division
Helped by its high-quality offerings and flexible prices, Deutsche Post was able to slightly raise its market share in the first year with a fully liberalized German mail market, despite shrinking overall volumes. The Group now holds 87.7 percent of its home mail market compared with 87.2 percent a year earlier. With 14.39 billion euros, revenue at the MAIL Corporate Division almost matched the high year-earlier level of 14.57 billion euros. MAIL EBIT rose to 2.25 billion euros from 1.98 billion euros. Excluding the 572 million euro nonrecurring gain from the repayment of the German government, EBIT at the division declined 14.9 percent due to higher transportation and labor costs, a provision for VAT and, to a lesser extent, the overall market decline.
EXPRESS Corporate Division
Revenue in the EXPRESS Corporate Division declined 1.7 percent to 13.6 billion euros last year, held back by currency effects. Measured in local currencies, organic revenue rose 2.4 percent. Outside the U.S., Express revenue gained 3.9 percent helped by higher fuel surcharges. In Europe, revenue remained stable at 6.6 billion euros, with the new EU countries, France and Scandinavia contributing with a strong organic development. Volumes at its Time Definite International product group dropped 3.2 percent due to the weakening economic development. In the Americas region, revenue declined 14.5 percent to 3.6 billion euros. While organic revenue in Latin America showed double-digit percentage growth, revenue in the U.S. was burdened by the economic crisis as well as DHL's decision to exit the domestic express market. As a result, organic revenue in the U.S. declined 13.4 percent. Revenues in the Asia Pacific and EEMEA (Eastern Europe, Middle East and Africa) regions kept growing, with 6.6 percent and 15.2 percent, respectively.
Reported EBIT stood at minus 2.1 billion euros, burdened by non-recurring costs of 2.36 billion euros, mainly for the restructuring of the DHL U.S. Express business. Outside the U.S., operating profit was satisfactory, with the overall economic slowdown mainly having an effect on fourth-quarter earnings. The restructuring of the DHL U.S. Express business is well on track with all domestic offerings ceased by the end of January. Cost reductions could be accelerated as domestic revenues declined faster than originally anticipated.
GLOBAL FORWARDING / FREIGHT Corporate Division
Revenue at the GLOBAL FORWARDING / FREIGHT Corporate Division gained 9.4 percent to 14.2 billion euros last year. Global Forwarding revenues gained 12.5 percent to 10.6 billion euros, reflecting the division's focus on large-scale industrial projects. Airfreight revenue also rose 12 percent as higher fuel surcharges in the middle of the year outweighed declining volumes at the end of the year. Full-year oceanfreight revenue increased 13.4 percent, helped by higher freight rates.
Reported EBIT amounted to 389 million euros in 2008 compared with 409 million euros a year earlier. The result includes 41 million euros set aside for restructuring as well as 19 million euros in negative currency effects as well as acquisitions. Without those, EBIT gained 6 percent.
SUPPLY CHAIN / CIS Corporate Division
Revenue at the SUPPLY CHAIN / CIS Corporate Division declined 4.2 percent to 13.7 billion euros. Adjusted for negative currency and inorganic effects, revenue for the division grew 2.8 percent, while Supply Chain revenue gained 1.9 percent to 12.5 billion euros.
The Group generated new Supply Chain business worth an annualized 1.1 billion euros in 2008, with more than 90 percent of the existing contracts being renewed. The CIS business, which offers customers tailor-made digital and print solutions, kept its revenue on the year-earlier level of 1.2 billion euros, despite volume declines in marketing solutions and document management.
The division posted a loss of 675 million euros before interest and taxes compared with a profit of 577 million euros the year earlier. The loss is mainly the result of restructuring costs of 124 million euros, charges of 382 million euros to write down the Exel brand as well as impairment charges totaling 610 million euros. Organic EBIT at the Corporate Division SUPPLY CHAIN / CIS declined 5.5 percent, with EBIT at Supply Chain growing 5.7 percent.
Deutsche Post World Net in September agreed to sell a minority holding in Deutsche Postbank to Deutsche Bank AG. As a result, Postbank has been accounted for as discontinued operations starting in the third quarter 2008. The other element of the former FINANCIAL SERVICES Corporate Division, the pension service, has been moved to the MAIL Corporate Division. Postbank reported annual earnings on Feb. 19.
The sharp volume declines experienced in the fourth quarter of 2008 have continued and even steepened so far into the first quarter of the year in most of the Group's businesses. The MAIL Corporate Division is currently experiencing reductions in demand particularly for direct marketing products as customers reduce their advertising budgets. In addition, earnings are burdened by the full effect of last year's wage agreement, which given the high proportion of labor cost has an adverse effect on profitability. In EXPRESS, volume declines continued in all regions, with time-definite products more exposed than lowerprice products. In GLOBAL FORWARDING / FREIGHT volume declines also increased so far in the first quarter, however more so in Airfreight than in Oceanfreight. The weakness in volumes is, as expected, being partially offset by slightly improved gross margins and substantial cost measures. In the Corporate Division SUPPLY CHAIN / CIS, performance is sound in most sectors with the exception of automotive and technology.
Given the unprecedented decline in volumes and the unpredictable economic outlook, the Group doesn't believe it is possible to provide a firm outlook for the year. Based on early indications, the management board now expects some decline in 2009 underlying earnings compared with 2008, however with a significant improvement in reported earnings.
All information is provided without guarantee and subject to change without prior notice. This document contains forward-looking statements that relate to the business, financial performance and results of operations of Deutsche Post AG. Forward-looking statements are not historical facts, and may be identified by words such as "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. As these statements are based on current plans, estimates and projections, they are subject to risks and uncertainties that could cause actual results to be materially different from the future development, performance or results expressly or implicitly assumed in the forwardlooking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this presentation. Deutsche Post AG does not intend or assume any obligation to update these forward-looking statements to reflect events or circumstances after the date of this document.
About Deutsche Post World Net
Deutsche Post World Net is the world's leading logistics group.
Its integrated Deutsche Post, DHL and Postbank companies offer tailored, customerfocused solutions for the management and transport of goods, information and payments through a global network combined with local expertise. Deutsche Post World Net is also the leading provider of Dialog Marketing services, with a unique portfolio of efficient outsourcing and system solutions for the mail business. The Group generated revenue of more than 54 billion euros in 2008. With currently more than 500,000 employees in more than 220 countries and territories Deutsche Post World Net is one of the biggest employers worldwide.