OREANDA-NEWS. August 13, 2014. Deutsche Post DHL, the world's leading postal and logistics group, boosted revenues in the second quarter of 2014 and generated a strong increase in profitability. Between April and June, revenues totaled EUR 13.7 billion, nearly 1 percent above the previous year's level.

Adjusted for negative exchange-rate effects and other inorganic factors, revenues rose more than 4 percent, fueled by organic increases in revenue in all four of the company's divisions. This result reflects the strong position maintained by the Group and its divisions in rapidly growing market segments and regions.

The Group's operating earnings rose by nearly 6 percent to EUR 654 million in the second quarter. Adjusted for various non-recurring factors in the previous year's figure, EBIT climbed by nearly 11 percent. Consolidated net profit also rose sharply, increasing by more than 9 percent to EUR 461 million.

"The company's successful performance in the second quarter is a further demonstration of our Group's fundamental strength," said Frank Appel, the CEO of Deutsche Post DHL. "We have both a high-potential business base and the ability to generate reliable gains in revenues and earnings even under challenging business conditions. With our double-digit increase in EBIT, we demonstrated these two strengths during the past quarter."

Outlook: Earnings guidance adjusted

For the remainder of 2014, the Group expects only slight improvement in the global economic environment. Nonetheless, the company believes that the positive earnings trend will continue and that consolidated EBIT will rise to between EUR 2.9 billion and EUR 3.1 billion. However, the company adjusted its expectations regarding the EBIT contributions to be made by the respective divisions:

The Group now estimates that the Post - eCommerce - Parcel (PeP) division will contribute an additional EUR 100 million to earnings following its good operating performance in the first half of the year. As a result, the division's total EBIT contribution in 2014 is now expected to be around EUR 1.3 billion. Due to a challenging market environment for the GLOBAL FORWARDING, FREIGHT division together with higher investments for that division's transformation program (New Forwarding Environment - NFE) the Group now expects operating earnings in the DHL divisions will rise to between EUR 2.0 billion and EUR 2.2 billion. Previously, the company had assumed that the DHL EBIT would increase to between EUR 2.1 billion and EUR 2.3 billion. As previously announced, 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 expects to generate further earnings growth beyond the current year. Between 2013 and 2020, the company expects earnings growth of more than 8 percent per year on average for the Group. The DHL divisions are expected to continue to be the main contributor to the company's revenue growth and to the anticipated strong increase in profitability, with an annual average EBIT growth of approximately 10 percent per year. 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 by 2020.

To achieve these long-term targets and to further bolster the divisions' exceptional position in global growth markets, the Group will make further investments in 2014 and 2015. The focal points are the NFE program in the GLOBAL FORWARDING, FREIGHT division and the continued organizational and contract mix optimization of the SUPPLY CHAIN division. The non-recurring expenses related to these efforts will have a one-time negative impact on the company's operating earnings primarily in 2015. Nonetheless, the Group still expects to generate a significant EBIT increase next year. Once the non-recurring expenses for the structural measures end, the expected operating improvements should produce stronger and sustainable earnings growth in 2016 and beyond.

Since the company has not yet determined the exact amount of the additional NFE investment as well as the project and strategic restructuring measures at SUPPLY CHAIN, the Group has consciously decided to refrain from providing a specific guidance for 2015. For 2016, in the absence of the non-recurring costs, the company now expects a higher Group EBIT of EUR 3.4 billion to EUR 3.7 billion. The DHL divisions should contribute EUR 2.45 billion to EUR 2.75 billion of this total, and the PeP division is expected to generate EBIT of more than EUR 1.3 billion in 2016. As previously announced, Corporate Center/Other expenses should be lowered to about EUR 350 million by the end of 2015 and kept at this level in 2016.

"With the 'Strategy 2020' announced in April, we laid the foundation to enable us to continue to profitably and sustainably expand our business in future years," Frank Appel said. "To reach our goal of defining all aspects of the logistics industry by 2020, we intend to build on our strengths and forge ahead in the key initiatives announced. For this reason, we are investing in the continued optimization of our divisions and will remain focused not on the Group's short-term profitability, but on its long-term and sustainable success. The identified measures will make an important contribution to our strategy and will do much to help us become the driving force in the industry."

Second quarter 2014: EBIT rises strongly

Revenue rose by nearly EUR 100 million to EUR 13.7 billion in the second quarter of 2014, compared with EUR 13.6 billion in the same period last year. Adjusted for exchange-rate and other inorganic factors, revenues rose by around EUR 570 million. Consolidated EBIT, which was also significantly impacted by negative exchange-rate effects, rose from EUR 619 million in 2013 to EUR 654 million this year.

Adjusted for non-recurring factors such as the utilization of provisions in the PeP division and minor company disposals at SUPPLY CHAIN that, in total, had a net positive impact on earnings last year, EBIT climbed by nearly 11 percent. The EXPRESS division was the main driver of the Group's improved profitability with a strong double-digit percentage gain in operating earnings.

With the non-recurrence of a positive one-time effect from the second quarter last year, the financial result declined from minus EUR 40 million in 2013 to minus EUR 95 million this year. Fueled by the Group's increased operating earnings power as well as lower tax expenses resulting from a reduction in the expected tax rate for the full year, net profit for the second quarter rose to EUR 461 million (2013: EUR 422 million). This corresponds to a rise in basic earnings per share from EUR 0.35 last year to EUR 0.38 in the second quarter of 2014.

Capital expenditures and cash flow: Foundation of growth reinforced once again

In the second quarter, the Group's capital expenditures rose from EUR 280 million last year to EUR 335 million in 2014. The DHL divisions remained the focal point of these capital expenditures. With their investments in network expansion, air fleet maintenance, state-of-the-art warehouses and the new Global Forwarding infrastructure, these divisions have further strengthened the foundation for planned growth. In the PeP division, capital expenditures were primarily used to further upgrade the parcel infrastructure. In the second quarter, the Group's free cash flow fell slightly from EUR 235 million in 2013 to EUR 208 million in the ongoing financial year. The Group's net debt totaled EUR 2.9 billion at the end of the second quarter of 2014. Compared with the end of 2013, this figure reflects a seasonally typical rise, which totaled EUR 1.4 billion this year. The major reasons for this increase were the dividend paid in May (EUR 968 million) and the annual prepayment for civil service pensions to the German Federal Post and Telecommunications Agency (EUR 535 million).

First six months: Revenue and earnings growth continues

In the first half of the year, Group revenues totaled EUR 27.3 billion, about EUR 250 million above the previous year's level (2013: EUR 27.0 billion). Adjusted for negative exchange-rate and other inorganic effects, revenues rose by 4.8 percent, or nearly EUR 1.3 billion, in the first six months. Compared with the first half of 2013, operating earnings increased by 3.8 percent to EUR 1.4 billion (2013: EUR 1.3 billion). The one-time factors described in the quarterly results also affected the figures for the first half of the year. Adjusted for these factors, consolidated EBIT rose by 6 percent between January and June 2014. During the six-month period this year, consolidated net profit increased by nearly 5 percent, climbing from EUR 920 million in 2013 to EUR 963 million in the current financial year. Basic earnings per share rose from EUR 0.76 last year to EUR 0.80 in 2014.