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Bloomberg.com: Worldwide
Deutsche Post Profit Falls 11% on DHL U.S., Postbank
By Jann Bettinga
July 31 (Bloomberg) --
Deutsche Post AG, Europe's biggest mail carrier, said second-quarter profit fell 11 percent on costs to revamp the DHL Express division's U.S. unit and after writedowns hurt earnings at Deutsche Postbank AG.
Net income fell to 254 million euros ($396 million), or 21 cents a share, from 285 million euros, or 24 cents, a year earlier, Bonn-based Deutsche Post said in a statement today. Sales rose 5 percent to 16.2 billion euros.
Chief Executive Officer
Frank Appel forecast in May that the DHL U.S. express-delivery unit will suffer a loss of $1.3 billion this year as a slowing U.S. economy hurts demand for air shipments and the business struggles to compete with United Parcel Service Inc. and FedEx Corp. Postbank, the retail bank Deutsche Post may sell, reported yesterday a 21 percent drop in quarterly profit due to writedowns on debt-related investments.
``The reorganization in the U.S. is a big issue,''
Jochen Rothenbacher, an analyst at Equinet in Frankfurt, said today. ``It will remain very, very difficult'' for the postal operator's U.S. express-delivery business, he added.
Deutsche Post
fell 45 cents, or 2.9 percent, to 15.09 euros in Frankfurt trading. The stock has declined 36 percent this year.
The company announced plans in May to limit losses at the U.S. express-delivery operations by shrinking the network, firing workers and transferring air deliveries to Atlanta-based UPS. The revamp will cost the mail carrier $2 billion through 2009, it forecast at the time.
Appel said today the unit's reorganization is ``on track'' and that talks with UPS over a final contract are making satisfactory progress.
Postbank Sale
Deutsche Post is in talks with ``various potential partners'' about a possible sale of Postbank, Appel also told reporters today, adding that the postal operator hasn't yet decided if or when the business would be sold. ``We will not sell Postbank hastily,'' and Deutsche Post is under no pressure, the CEO said. ``The appetite for major acquisitions is limited,'' he said on a conference call with analysts today.
Deutsche Post, which owns 50 percent plus one share of Postbank, announced June 25 it's holding ``exploratory'' talks about a disposal of the lender as it focuses on mail, express- deliveries and logistics.
Postbank said yesterday that second-quarter net income fell to 119 million euros from 151 million euros a year earlier after writing down the value of securities by 143 million euros. The quarter's markdowns bring Postbank's total losses related to the U.S. subprime-mortgage-market collapse to 429 million euros. Earnings before interest and taxes at Deutsche Post's financial services unit, which comprises the Postbank holding, dropped 26 percent to 185 million euros in the quarter.
Postbank's Value
Postbank may fetch 9 billion euros to 11 billion euros,
Carsten Werle, an analyst at Sal. Oppenheim in Frankfurt, wrote to investors this month. The bank has a market value of about 7.5 billion euros after the stock dropped 25 percent this year.
Reorganizing the U.S. express-delivery business cost the postal service 47 million euros in the quarter, causing Ebit at the Express unit to drop 52 percent to 31 million euros. The division is facing a ``weakening economic environment'' in the U.S., with customers switching to cheaper express-delivery shipments, Deutsche Post said, echoing statements from competitors such as UPS.
Appel today stuck to a full-year target that Ebit, excluding one-time costs or gains, will reach about 4.1 billion euros, provided there's no ``significant worsening'' of the global economy. The figure is expected to rise to about 4.7 billion euros in 2009, he said, repeating an earlier target.
Higher Dividends
The postal operator anticipates raising dividends ``broadly in line with underlying earnings in coming years,'' it said today. That corresponds to an average annual increase of about 10 percent, Deutsche Post added.
UPS, the world's largest package-delivery company, reported on July 22 a 21 percent drop in second-quarter net income as fuel costs rose and the cooling U.S. economy damped domestic shipments. FedEx, the second-biggest shipper of packages in the U.S., reported its first quarterly loss in 11 years on June 18 because of rising fuel costs and a writedown on its Kinko's copy shop unit. FedEx said earnings are ``difficult to predict'' because of volatile fuel prices and an ``uncertain economic outlook.''
Deutsche Post bought DHL in 2002, adding a global express- delivery service to its network. The company expanded U.S. operations with the purchase of Airborne Express in 2003 and hasn't made a profit in the country since then. Deutsche Post said in May the U.S. business will continue losing money at least through 2011.
Previous turnaround efforts at DHL have been hampered by delivery delays in 2005 at a new package-sorting hub in Wilmington, Ohio. Deutsche Post scrapped a 2009 breakeven target for the U.S. division last year and wrote down the value of the unit by 594 million euros in the fourth quarter.
To contact the reporter on this story:
Jann Bettinga in Frankfurt at
[email protected].