OREANDA-NEWS. November 18, 2014. Deutsche Post DHL, the world's leading postal and logistics group, continued to generate profitable growth in the third quarter of 2014, powered by its strong market position in the most dynamic segments and regions of the world.

Revenues climbed by more than 4 percent in the period between July and September to EUR 14 billion. In addition to slightly positive exchange-rate effects, it was the revenue gains generated by all four divisions that fueled this increase. The Group's higher revenues primarily reflected the further improved volume and revenue development in the German parcel business and continued strong gains in the international express business.

The Group's operating earnings climbed by nearly 5 percent during the third quarter of the current year to EUR 677 million. As a result of lower tax expenses and finance costs, the increase in the company's consolidated net profit was even higher, rising more than 17 percent to EUR 468 million.

"We continue to profit from our unique competitive position in emerging markets and our role as an eCommerce enabler. For this reason, we remain on track in spite of the current challenging environment," said Frank Appel, the CEO of Deutsche Post DHL. "Thanks to our continuous investments in the expansion of our network and infrastructure as well as our increased effort to optimize operational processes, we will be able to even more systematically address the needs of our customers and offer our services even more efficiently in the future. We are investing in the Group's sustainable growth for the years to come and, by taking these steps, we are today setting the course for the success of our Strategy 2020."

Third quarter of 2014: Profitability gains at PeP and DHL

At EUR 14 billion, Group revenues between July and September 2014 were more than EUR 500 million above the previous year's level of EUR 13.5 billion. Operating earnings climbed by more than EUR 30 million during the past quarter to EUR 677 million (2013: EUR 646 million). In the Post - eCommerce - Parcel (PeP) division, the additional income generated by increased postal rates and revenue growth in the parcel business compensated for higher material and personnel costs.

As a result, the division's EBIT rose to EUR 288 million (2013: EUR 277 million). At DHL, double-digit earnings gains at EXPRESS and SUPPLY CHAIN fueled the rise in EBIT to EUR 487 million (2013: EUR 472 million). Due to the company's increased operating earnings, lower tax expenses and an improved financial result, the Group's consolidated net profit climbed by nearly 70 million in the third quarter to EUR 468 million in 2014 (2013: EUR 399 million). This corresponds to a rise in basic earnings per share from EUR 0.33 in the previous year to EUR 0.38 in 2014.

Nine months: Continued revenue and earnings growth

In the first nine months of the current year, Group revenues totaled EUR 41.3 billion, reflecting an increase of 2 percent, or more than EUR 800 million, above the previous year's level (2013: EUR 40.5 billion). Adjusted for negative exchange-rate and other inorganic effects over the nine-month period, the revenue improvement would have been twice as high at more than 4 percent, or over EUR 1.7 billion. The Group's operating earnings increased by 4.2 percent to EUR 2.1 billion in the first nine months of 2014 compared with the previous year's level of EUR 2.0 billion. Consolidated net profit rose by 8.5 percent between January and September, climbing from EUR 1.3 billion in 2013 to EUR 1.4 billion in the current year. Basic earnings per share rose from EUR 1.09 last year to EUR 1.18 in 2014.

Capital expenditures and cash flow: Foundation of growth reinforced

In the third quarter, the Group's capital expenditures rose to EUR 494 million (2013: EUR 400 million). The PeP division and the EXPRESS division were primarily responsible for this increase. During the first nine months of the year, expenditures climbed from EUR 895 million last year to more than EUR 1 billion in 2014. By investing in the further expansion of the parcel infrastructure and the global express network, a more efficient aircraft fleet, state-of-the-art warehouses and the new Global Forwarding IT infrastructure, the company's four divisions have further strengthened the foundation for continued profitable growth and sustainable business success. At EUR 814 million, the Group's operating cash flow in the third quarter of 2014 was slightly above the previous year's level (2013: EUR 810 million). By contrast, the free cash flow fell to EUR 370 million in the third quarter as a result of the increase in cash outflow for capital expenditures (2013: EUR 429 million). At the same time, the Group's net debt was reduced by nearly EUR 300 million in the third quarter to EUR 2.7 billion, in line with the usual seasonal trends. As a result of the strong cash flow expected to be generated in the fourth quarter, the company assumes that it will significantly improve its liquidity position by the end of the year.

Post - eCommerce - Parcel division: Parcel business remains very dynamic

In the third quarter of 2014, revenues of the PeP division rose by 2.4 percent to EUR 3.7 billion (2013: EUR 3.6 billion). In the German postal business, the drop in volume – due in part to the volumes included in last year’s figures as a result of the national parliamentary elections – could be offset only to a limited extent by higher postal rates. In contrast, the Group's parcel business remained very dynamic. Overall, revenues generated by the eCommerce - Parcel segment climbed by more than EUR 100 million to EUR 1.4 billion between July and September. In doing so, the segment that is capitalizing on the opportunities created by the continuous growth of online retailing is now producing more than one-third of the division's total revenues. With volume growth of more than 8 percent, the German parcel business continued to play a major role in increasing volumes and revenues for both the segment and the entire division. In the third quarter of 2014, operating earnings in the PeP division climbed by 4 percent to EUR 288 million (2013: EUR 277 million). The additional revenues generated by higher postal rates and the successful parcel business more than offset the increase in personnel costs and higher material expenses.

EXPRESS division: Strong revenue and earnings gains

The EXPRESS division continued its strong revenue and earnings performance in the third quarter. Between July and September 2014, revenues rose by 7.6 percent, or more than EUR 200 million, to EUR 3.1 billion (2013: EUR 2.9 billion). Once again, strong growth in the division's international time-definite shipments was the main factor driving this revenue improvement. This positive trend reflects the significant volume and revenue gains achieved by these products in all regions. At the same time, the operational improvements achieved by investing substantially in the modernization of the aircraft fleet, the expansion of the global network and the training of employees were mirrored in the steep rise in the operating margin from 8.6 percent last year to 9.8 percent in the third quarter of 2014. The division's EBIT jumped by 23 percent in the third quarter to EUR 305 million (2013: EUR 248 million).

GLOBAL FORWARDING, FREIGHT division: Revenues climb

Third-quarter revenues in the GLOBAL FORWARDING, FREIGHT division grew for the first time in nearly two years. At EUR 3.8 billion, revenues generated between July and September 2014 rose by nearly 3 percent, or more than EUR 100 million, above the previous year’s level (2013: EUR 3.7 billion). Adjusted for negative exchange-rate effects, the increase would have been even more pronounced. The revenue gains were primarily the result of new business acquired in the first half of the year, which led to solid volume and revenue growth in both air and ocean freight. However, as a result of the margin pressure that continues to be felt by the entire industry and the high level of expenses for the division's new IT and process infrastructure, the division's operating earnings fell to EUR 72 million in the third quarter of 2014 (2013: EUR 126 million) despite the growth in revenues.

SUPPLY CHAIN division: Successful new customer business

At the SUPPLY CHAIN division, revenues rose in the third quarter of 2014 by 4 percent to EUR 3.7 billion (2013: EUR 3.5 billion). This development is the result of significant gains in Asia along with positive exchange-rate effects. Despite of the strategy of more selectively concluding new business, the volume of new contracts concluded with new and existing customers totaled about EUR 285 million in the third quarter of 2014. Once again, this figure underscores the success of the division's business model and is a precondition for the division's continued profitability growth. Operating earnings totaled EUR 110 million during the third quarter of 2014, 10 percent above the previous year's figure of EUR 100 million.

Outlook: Earnings guidance confirmed
For the full year 2014, the Group continues to anticipate only slight improvement in the global economic environment. Nonetheless, following the company's good performance during the first three quarters, the Group continues to expect that the company’s EBIT will climb to between EUR 2.9 and EUR 3.1 billion in 2014. While the Post - eCommerce - Parcel division is forecast to contribute around EUR 1.3 billion to this total, the DHL divisions are projected to increase operating earnings as planned to between EUR 2.0 billion and EUR 2.2 billion. Corporate Center/Other expenses are expected to fall below EUR 400 million in 2014. The Group also remains committed to its goal of at least covering the dividend paid in May for financial year 2013 from this year’s free cash flow.

Deutsche Post DHL also believes that the growth in earnings will continue beyond the current year. For 2015, the company expects a significant EBIT increase – in spite of the previously announced investments in the new IT and process infrastructure (NFE) at the GLOBAL FORWARDING, FREIGHT division and in an optimized positioning of the SUPPLY CHAIN division, which will have a one-time negative impact on operating earnings in 2015. Once the costs for these projects and structural measures are realized, the anticipated operating improvements should produce stronger and sustainable earnings growth in 2016 and beyond. For financial year 2016, the company continues to expect an increase in consolidated EBIT to between EUR 3.4 billion and EUR 3.7 billion. While the DHL divisions should contribute between EUR 2.45 billion and EUR 2.75 billion, the PeP division is expected to generate operating earnings of more than EUR 1.3 billion in 2016. Corporate Center/Other expenses should fall to about EUR 350 million next year and remain at approximately this level in 2016.

In the period between 2013 and 2020, the company is striving to boost earnings by an average of more than 8 percent annually. Of this total, the DHL divisions are expected to contribute an average EBIT growth of about 10 percent per year. At the same time, the PeP division is projected to increase its operating earnings by an annual average of around 3 percent. Furthermore, the Group expects to reduce Corporate Center/Other expenses to below 0.5 percent of Group revenues by 2020.