Deutsche Post Back to Double-Digit Profit Growth on Revamp

Can Deutsche Post Maintain Double Digit Growth?
  • First-quarter Ebit rises 21% on express, parcel deliveries
  • Restructuring helps profit at supply-chain, forwarding units

Deutsche Post AG’s operating profit rose at the fastest rate in 13 quarters, propelled by booming parcel deliveries for online retailers as well as savings from reorganizations at the freight-forwarding and supply-chain businesses.

First-quarter earnings before interest and taxes jumped 21 percent to 873 million euros ($994 million) from 720 million euros a year earlier, beating the 844.2 million-euro average of analyst estimates compiled by Bloomberg. The Bonn-based mail operator reiterated its full-year profit forecast and said the corporate tax rate will be lower than expected.

The dominant mail carrier in Germany increased postage prices at home at the beginning of the year, while demand increased from corporate customers for overnight letter deliveries and handling of goods ordered over the Internet. Deutsche Post, which also owns the DHL express and logistics brand, is betting that growth generated by electronic commerce will more than offset weakening letter volume, which fell 5.8 percent in the quarter.

The earnings “underpin our positive stance,” Christian Cohrs, an analyst at M.M. Warburg with a buy recommendation on Deutsche Post stock, wrote in a report to clients.

Deutsche Post rose as much as 3.4 percent to 26.72 euros, the highest intraday price since Dec. 3, and was trading up 3 percent as of 9:19 a.m. in Frankfurt. That pushed the stock to a 2.5 percent gain this year, valuing the company at 32.3 billion euros.

‘On Track’

Earnings growth exceeded 10 percent for the first time since the second quarter of 2013. Ebit in the final three months of 2015 rose 5.7 percent. Deutsche Post’s profit-improvement efforts have included giving more decision-making to local managers at the freight-forwarding business and focusing the supply-chain unit on the consumer, automotive and health-care industries.

Full-year Ebit will be in a range of 3.4 billion euros to 3.7 billion euros, while the corporate tax rate will be about 14 percent this year, down from an earlier estimate of 18 percent, Deutsche Post said Wednesday in a statement.

Revenue in the quarter fell 6.1 percent to 13.9 billion euros, held back by currency effects and a reduction in fuel surcharges as well as an accounting shift, the company said. The volume of time definite international express shipments rose 7.9 percent. Profit more than doubled at the supply-chain division and tripled at the freight-forwarding unit, which was burdened a year earlier by the costs of a snagged software installation.

“Last year was a year of transition, and we are now firmly on track to achieve our targets for 2016,” Chief Executive Officer Frank Appel said in the statement.

Air-freight volume dropped 11 percent in the quarter, while ocean-freight shipments increased 2.6 percent, Deutsche Post said in an analyst presentation. Parcel shipments in Germany rose 5.5 percent, while revenue from that business jumped 14 percent in Europe outside Germany, and 12 percent further abroad.

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