OREANDA-NEWS. May 14, 2015. Deutsche Post DHL Group, the world's leading mail and logistics group, further increased revenue in the first quarter of 2015. Revenue grew by 8.8% over the prior-year quarter to EUR 14.8 billion (2014: EUR 13.6 billion). Adjusted for positive currency effects, revenue also grew, with improvements in all four divisions contributing to an organic increase of 2.1%. This development reflects sustained growth in revenues and volumes in the international express business as well as in the German parcel business. The Group's operating profit slightly decreased by 1.0% in the first quarter to EUR 720 million, primarily due to the weak performance registered by the Global Forwarding, Freight business and planned, non-recurring restructuring costs in the Supply Chain division.

"We saw a moderate start to the year, as we expected," said Frank Appel, CEO of Deutsche Post DHL Group. "Our strategy, aimed at growth in e-commerce and the emerging markets, in particular, is progressing. At the same time, as we transition from Strategy 2015 to our new Strategy 2020, we are now consciously undertaking a number of specific measures. These measures will allow us to build a strong base to bring our strategic priorities forward. We are investing significantly to ensure that our four divisions are optimally positioned, even though this is having a temporary impact on our performance, as we previously discussed. Our overarching focus today is on the sustainable, profitable growth of our business."

Outlook: Earnings forecast for 2015 and 2016 and long-term targets confirmed

Although Deutsche Post DHL Group expects global growth to be moderate at best in 2015 and continues to make substantial investments in its long-term success, the Group has confirmed its targets. Operating profit is projected to increase to between EUR 3.05 billion to EUR 3.2 billion in 2015. The Post - eCommerce - Parcel (PeP) division is expected to contribute at least EUR 1.3 billion to that figure, while the DHL divisions are projected to record an EBIT increase to between EUR 2.1 billion to EUR 2.25 billion. For Corporate Center/Other, the Group anticipates stable expenses of approximately EUR 350 million in 2015. In addition, the Group continues to expect free cash flow to again be generated in an amount sufficient to cover the dividend to be paid out for financial year 2014.

For 2016, Deutsche Post DHL Group reconfirms its forecast of a rise in EBIT to between EUR 3.4 billion and EUR 3.7 billion. The PeP division is expected to contribute more than EUR 1.3 billion to this figure and the DHL divisions between EUR 2.45 billion and EUR 2.75 billion.

Deutsche Post DHL Group 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. The Group additionally plans to keep expenses for Corporate Center/Other at less than 0.5% of consolidated revenue until 2020.

First quarter of 2015: Revenue increases by EUR 1.2 billion

The first quarter of 2015 saw a year-on-year revenue increase of 8.8%, or nearly EUR 1.2 billion, to EUR 14.8 billion (2014: EUR 13.6 billion). The DHL divisions contributed 10.9% to that figure and the PeP division 3.6%. After adjustment for currency effects, Group revenue increased by 2.1%.

Consolidated EBIT fell slightly by 1.0% in the first three months to EUR 720 million (2014: EUR 727 million). The PeP division marginally increased EBIT by 0.8% to EUR 399 million, with the ongoing dynamic growth of the Parcel business offset by further declines in Post volumes and higher costs. The Express division registered an increase in operating profit of 20.3% to EUR 332 million in the first quarter due to continued strong growth in the international time definite (TDI) business. By contrast, EBIT in the Global Forwarding, Freight division decreased to EUR 17 million (2014: EUR 49 million), mainly due to the impact of the division's transformation program and continued margin pressure within the overall market. Operating profit in the Supply Chain division declined in the first quarter to EUR 53 million (2014: EUR 85 million), due principally to non-recurring costs for the division's optimization program.

Consolidated net profit slightly decreased by 1.4% in the first quarter to EUR 495 million (2014: EUR 502 million). This corresponds to basic earnings per share of EUR 0.41 per share (2014: EUR 0.42).

Capital expenditure: Group reinforces its growth base with further investments

Deutsche Post DHL Group invested significantly, again, in the first quarter of 2015 in order to strengthen its base for future success. Investments were made in all four divisions with a focus on positioning the Group for future profitable growth. In the first three months, the Group invested EUR 274 million (2014: EUR 176 million). Capital expenditure was principally directed towards expanding the domestic and international parcel infrastructure, modernizing global and regional express hubs and developing a more efficient aircraft fleet, as well as for the transformation initiative within the Global Forwarding business and new contract start-ups in Supply Chain.

Cash flow: Usual seasonal trend

At EUR -377 million (2014: EUR -348 million), free cash flow for the quarter reflected the usual seasonal trend in which the Group's cash flow is impacted by the annual advance payment for civil servants' pensions. This year, the payment amounted to EUR 530 million. The year-on-year decrease in free cash flow was predominantly the result of higher payments for capital expenditure (net cash capex).

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

Revenue in the Post - eCommerce - Parcel division increased by 3.6% in the first quarter to EUR 4.1 billion (2014: EUR 4.0 billion). EUR 1.5 billion of that figure was attributable to the eCommerce - Parcel business, which continued to register dynamic growth to achieve an improvement of 13.7% over the prior year. The increase, including positive currency effects, reflects revenue growth of 25.8% in eCommerce, 12.1% in Parcel Germany and 4.8% in Parcel Europe. This positive trend demonstrates that Deutsche Post DHL Group continues to benefit from its successful positioning in the high-growth e-commerce, parcel market. Innovations such as parcel boxes for apartment buildings and the recently piloted car drop delivery service continue to advance the Group's leading position in the market.

In contrast to eCommerce - Parcel, revenue in the Post business decreased by 1.7% in the first quarter to EUR 2.6 billion, once again illustrating the impact of structural change as the mail market shrinks. The above figure includes revenue declines in both mail communication (-0.6%) and dialogue marketing (-2.8%). Price increases for postal products in Germany helped to mitigate the effects of the volume decline.

Operating profit in the PeP division rose by 0.8% to EUR 399 million (2014: EUR 396 million). This reflects the higher revenues in eCommerce - Parcel, which were partially offset, however, by lower Post volumes, higher staff and purchased goods and services costs as well as expenses especially related to the international expansion of the Parcel business.  

Express: Success story continues

The Express division significantly increased both revenue and earnings in the first three months of the year. Revenue climbed by 12.5% in the first quarter to EUR 3.2 billion (2014: EUR 2.9 billion). Adjusted for currency effects, the increase amounted to 2.3%, held back by lower fuel surcharges. The main driver of the sustained positive trend in the Express division was further strong growth in the TDI business, where first-quarter volumes rose by 7.1% compared with the prior-year period.

The division performed even better with respect to operating profit: EBIT rose by 20.3% to EUR 332 million (2014: EUR 276 million). This again demonstrates the positive effects of volume growth. The EBIT margin increased to 10.2% in the first quarter compared with the prior-year figure of 9.6%.

To continue leveraging the division's strong position, Express will continue to invest in its global aviation and hub network.

Global Forwarding, Freight: Earnings impacted by transformation program

Despite the still-challenging market environment, reported revenues in the Global Forwarding, Freight division increased by 7.6% to EUR 3.8 billion (2014: EUR 3.5 billion). Adjusted for currency effects, revenue increased by 2.7%. Ocean freight volumes rose by 2.3% in the first three months, while air freight volumes remained at approximately the prior-year level (+0.3%).

In contrast, the division's operating profit experienced a sharp decline to EUR 17 million in the first quarter (2014: EUR 49 million). This is due to ongoing margin pressure in the overall market, as well as direct and indirect costs related to the transformation program. In the wake of the weak development, the new management of the division will intensively focus on improving the operating performance. In parallel, the results from the countries that have piloted the transformation program, as well as the impact of the worldwide organizational alignment implemented as part of the transformation, will be reviewed in detail. Based on this review, the future implementation approach will be defined.

Supply Chain: EBIT declines due to non-recurring costs for optimization program

Revenue in the Supply Chain division increased by 12.4% in the first quarter of the year to EUR 3.9 billion (2014: EUR 3.5 billion). Adjusted for currency effects, revenues rose by 0.8% over the prior-year period. The division was able to conclude new business contracts with a volume of EUR 260 million (annualized), particularly in the Automotive, Consumer and Life Science & Healthcare sectors. EBIT declined to EUR 53 million in the first quarter (2014: EUR 85 million). Planned, non-recurring costs for the Supply Chain optimization program were chiefly responsible for the decrease. The division intends to take advantage of the optimization program to increase margins to 4% to 5% by 2020 through further standardization, greater efficiency and improved utilization of economies of scale.