Germany’s postal and logistics giant Deutsche Post DHL reported a decline in group EBIT (earnings before interests and taxes) of 18.1% to EUR537 million (US$586 million) in the second quarter of 2015 compared to EUR656 million in the same period last year.
The company said recent investments in line with its Strategy 2020 were a major cause of the fall, as were the postal strike in Germany and the “unsatisfactory earnings development” in its freight forwarding division.
Consolidated net profit declined by 29.3% to EUR326 million (from EUR461 million in 2014), again mainly due to the strike.
By division, operating earnings at the postal unit—Post-eCommerce-Parcel (PeP)—contracted by 60.3% to EUR75 million due to the strike. EBIT at the express division increased by 13.6% to EUR376 million, supported by continued strong growth in international shipments. But global freight forwarding saw its operating earnings trimmed down to EUR40 million (against EUR102 million year-over-year).
Supply chain delivered an EBIT increase of 9.2% to EUR119 million. The division benefited from real estate-related transactions which allowed it to accelerate its restructuring program during the second quarter.
Group revenue in the period between April and June grew by 7.3% to EUR14.7 billion (from 2014’s EUR13.7 billion). Adjusted for currency effects, organic revenue was 0.6% higher than the prior-year period, with lower fuel surcharges limiting stronger growth. The DHL divisions grew by 9.1% and the PeP division by 1.9%.
“While the international express and e-commerce-fueled parcel businesses continued to develop dynamically, stronger group revenue growth was held back by declines in the post segment, mainly due to the strike action, as well as lower fuel surcharges in the DHL division,” according to a company statement.
To reflect the one-off earnings impact of EUR100 million from the strike in the second quarter, the group has adjusted its 2015 guidance, with the EBIT for the full year now expected to reach between EUR2.95 billion and EUR3.1 billion. The previous forecast had been between EUR3.05 billion and EUR3.2 billion.
“After the successful execution of Strategy 2015, the current year represents a year of transition. In the second quarter we worked very hard and took important steps towards the successful implementation of our Strategy 2020. With that, we want to ensure the long-term, profitable growth of the Group.,” said Frank Appel, group CEO.
To achieve this, he said they have had to sustain some short-term impact on their results, but Appel said “we are convinced that these measures will contribute to accelerated earnings growth in the next year and enable us to achieve all our targets set for 2016 and beyond.”
The postal segment is expected to generate operating earnings of at least EUR1.2 billion in 2015, while the forecast of EUR2.1 billion to EUR2.25 billion in EBIT for the DHL divisions remains unchanged.
For 2016, Deutsche Post DHL confirms its forecast of a rise in EBIT to between EUR3.4 billion and EUR3.7 billion. The end of the strike and the structural improvements undertaken within the individual divisions should drive a more dynamic earnings growth trend in 2016, it added.
The PeP division is expected to contribute more than EUR1.3 billion to the 2016 target and the DHL divisions between EUR2.45 billion and EUR2.75 billion.
The company continues to forecast that operating profit will increase by an average of more than 8% annually during the period from 2013 to 2020 (CAGR). The DHL divisions are expected to contribute to the improvement with average EBIT growth of 10% per year. At PeP, operating profit is expected to increase by an average of around 3% per year.
First half performance
In the first half of the year, group revenue increased by 8.1%, or about EUR2.2 billion, to EUR29.5 billion (against EUR27.3 billion in the same period last year). Adjusted for positive currency effects, revenues increased 1.3% over the prior-year period. Organic revenue growth in all four divisions contributed to this increase, with lower fuel surcharges holding back stronger growth.
Group operating earnings in the first six months declined by 9.1% to EUR1.26 billion (2014: EUR1.38 billion). Reported one-time factors that impacted the second quarter also had an effect on the half-year results. Consolidated net profit was EUR821 million for the first six months, 14.7% below the prior-year level of EUR963 million).
