OREANDA-NEWS. May 26, 2014. Deutsche Post DHL, the world's leading postal and logistics group, continued to boost revenues and earnings in the first quarter of 2014.

At nearly EUR 13.6 billion, revenues generated in the first three months of the current year rose more than 1 percent above the previous year's level. Adjusted for negative exchange-rate effects and other inorganic factors, the revenue increase would have been more than 5 percent.

This growth is an expression of the strong position held by the Group and its divisions in the world's growth markets. As a result of this position, adjusted revenues climbed in all four divisions. The company also continued to improve operating earnings: In the first quarter of 2014, consolidated EBIT increased by more than 2 percent to EUR 726 million. The company's consolidated net profit also rose during the first quarter of the year and totaled EUR 502 million, a slight increase over the previous year's level.

"We performed well in the first quarter," said Frank Appel, the CEO of Deutsche Post DHL. "Despite negative exchange-rate effects and the continued sluggish global economy, we once again generated profitable growth. We got off to a good start in 2014, in line with our expectations and market circumstances. Because we strive for and achieve continuous improvement, we have been able to consistently deliver what we have promised to our customers and investors even when facing sub-optimal business conditions."

Outlook: Earnings guidance confirmed

For the full year 2014, the Group expects only slight improvement in the global economic environment. Nonetheless, the company still believes that its positive earnings trend will continue and that Group EBIT will rise to between EUR 2.9 billion and EUR 3.1 billion in 2014. While the newly created Post - eCommerce - Parcel division (PeP, formerly MAIL) is anticipated to contribute about EUR 1.2 billion to this total, the DHL divisions should continue to grow earnings and generate an EBIT of between EUR 2.1 billion and EUR 2.3 billion for the year. In addition, the Group plans to reduce Corporate Center/Other expenses to below EUR 400 million in 2014. Furthermore, the company expects to again generate sufficient free cash flow to cover this year's dividend for financial year 2013.

The Group also expects that earnings will continue to grow beyond the current year. For the period 2013 to 2020, the Group expects earnings growth of more than 8 percent per year on average based on the 2013 EBIT of EUR 2.86 billion. The 2015 EBIT target of between EUR 3.35 billion and EUR 3.55 billion remains unchanged. The DHL divisions are expected to continue to be the main contributor to the Group's revenue and profitability growth, with an annual average EBIT growth of approximately 10 percent per year over the period. At the same time the PeP division is forecast to increase operating earnings by an average of around 3 percent each year. Furthermore, the Group expects to reduce Corporate Center/Other expenses to below 0.5 percent of Group revenues until 2020.

First quarter 2014: Profitability improved

Revenues generated in the first quarter of 2014 totaled EUR 13.6 billion compared with EUR 13.4 billion in the previous year. Adjusted for exchange-rate and other inorganic effects, revenues rose by more than EUR 700 million. The Group's EBIT, which was also significantly impacted by negative exchange-rate effects, rose by more than EUR 15 million to EUR 726 million (2013: EUR 710 million). The EXPRESS division was the main driver of the Group's improved profitability as it produced a considerable double-digit percentage gain in operating earnings. The company's financial result fell from minus EUR 43 million in the first quarter of 2013 to minus EUR 79 million this year. The previous year's figure included interest income from the reversal of a tax provision. Fueled by the Group's growing operating earnings power and lower tax expenses, net profit for the first quarter increased slightly to EUR 502 million (2013: EUR 498 million). This corresponds to an increase in basic earnings per share from EUR 0.41 last year to EUR 0.42 in the first quarter of 2014.

Capital expenditures: Foundation of growth reinforced once again

The Group's capital expenditures totaled EUR 176 million in the first quarter of 2014 (2013: EUR 215 million). In the DHL divisions - which remained the focal point of the Group's capital expenditures - the platform for further profitable growth in the logistics business was reinforced by investments in network expansion, air-fleet maintenance, state-of-the-art warehouses and the new Global Forwarding IT infrastructure. In the PeP division, significant investments were made in the expansion of the parcel infrastructure.

Cash flow: Typical seasonal performance

At minus EUR 349 million (2013: minus EUR 136 million), free cash flow reflected typical seasonal factors in the first quarter of 2014: At the beginning of each year, the annual payment for civil service pensions that the company makes to the German Federal Post and Telecommunications Agency impacts the company's cash flow development. This year, the payment totaled EUR 535 million. The decline in free cash flow from the previous year's level was mainly due to timing effects as some of the investments recorded at the end of last year only resulted in a cash outflow in the first quarter of 2014. The Group's net debt totaled EUR 1.9 billion at the end of the quarter. This represented a typically seasonal rise of EUR 417 million compared with the end of 2013. Thanks to the company's ability to generate cash in the past 12 months, the Group's net debt was reduced by about EUR 350 million compared to the level at the end of the first quarter of 2013.

Post - eCommerce - Parcel division: Continued strong growth in the German parcel business

During the first quarter of 2014, revenues in the Post - eCommerce - Parcel division rose by 3.6 percent to EUR 4 billion (2013: EUR 3.8 billion). After parts of the domestic parcel business outside Germany were transferred to the Post - eCommerce - Parcel division at the beginning of the year, figures for the current as well as the previous year were adjusted. The revenue growth generated in the first quarter of 2014 resulted in part from a slight increase in working days, higher postal rates introduced at the beginning of the year and additional volume related to the switch to SEPA. However, the main driver of growth remained the ongoing strong volume and revenue improvements produced by the German parcel business. Here, the company continued to profit from its strong market position and its innovative eCommerce-related delivery services. Operating earnings generated by the PeP division in the first quarter totaled EUR 398 million, roughly the same level as during the previous year's quarter (2013: EUR 397 million). The rise in revenues was offset by higher material and labor costs and increased spending on the expansion of the parcel infrastructure.

EXPRESS division: International express business grows strongly

The EXPRESS division continued to generate significant gains in revenues and earnings. Reported revenues climbed in the first three months of the year from EUR 2.8 billion in 2013 to EUR 2.9 billion this year. Adjusted for inorganic factors and substantial negative exchange-rate effects, revenues increased by more than 8 percent. Once again, strong growth in the division's international time-definite shipments was the main factor fueling this revenue improvement. This positive trend is the result of the significant gains achieved in all regions. In particular, the double-digit percentage volume increases in the Asia Pacific and Middle East and Africa regions underscored DHL EXPRESS' exceptional market position in emerging markets. In the first quarter of 2014, the division's EBIT climbed by more than 14 percent to EUR 275 million (2013: EUR 241 million). In addition to increased revenues, efficiency gains in aviation and ground operations played a significant role in the profitability improvement. This increase was also reflected in the higher operating margin, which rose by 100 basis points to 9.6 percent.


GLOBAL FORWARDING, FREIGHT division: Growth in ocean freight

In a business environment that remains challenging, revenues generated by the GLOBAL FORWARDING, FREIGHT division fell in the first quarter of 2014 by 2.2 percent to EUR 3.5 billion (2013: EUR 3.6 billion). Adjusted for negative exchange-rate effects, however, revenues rose by 2.5 percent. Volumes and revenues in the air-freight business remained at the previous year's level primarily because of weak demand from some major customers in the Technology and Engineering & Manufacturing sectors. At the same time, volumes and revenues in ocean freight climbed thanks to new business wins at the beginning of the year. Nonetheless, the division's first-quarter EBIT fell from EUR 87 million last year to EUR 48 million in 2014. The main cause of this decline was the planned rise in expenses for the division's new IT infrastructure and general margin pressure.


SUPPLY CHAIN division: Higher revenues

At DHL SUPPLY CHAIN, revenues rose slightly in the first quarter of 2014 to EUR 3.5 billion (2013: EUR 3.5 billion). Adjusted for negative exchange-rate effects and last year's disposal of subsidiaries that were not part of the company's core business, revenues climbed by nearly 7 percent or more than EUR 200 million in the first quarter. This growth was fueled by strong gains in emerging markets as well as in the Life Sciences & Healthcare and Automotive sectors. The volume of new contracts concluded with new and existing customers totaled EUR 175 million in the first quarter, a level that was below the previous year's first quarter total. This decline, however, resulted largely from the exceptionally high number of contracts signed at the end of 2013. The annualized contract renewal rate remained high and underscored the SUPPLY CHAIN division's ongoing strong operational performance. At EUR 84 million, the division's EBIT in the first quarter of 2014 stood on roughly the same level as in the prior year's quarter (2013: EUR 83 million). Operating earnings were negatively impacted.