Deutsche Post Profit Rises on Growth in Emerging Markets

Deutsche Post AG said global air-freight demand faces sustained pressure from the move to ship-borne cargoes, where margins for freight forwarders are typically lower, with the express-delivery market more buoyant.

“There has been quite a significant shift from air freight to sea as large multinationals make changes to their supply chains,” Roger Crook, who heads the forwarding arm, said today in a briefing at the company’s Bonn base. “This is continuing, and there is weakness in some markets as well.”

Deutsche Post, which claims the No. 1 spot in air-freight forwarding, said its volumes in the sector shrank 4.8 percent to 3.95 million tons last year. Kuehne & Nagel International AG, the second-largest provider of the service alongside Deutsche Bahn AG’s Schenker unit, forecasts volumes may rise as little as 1 percent this year after a flat market in 2013.

Air-freight forwarders are also being affected by over-capacity, which can weigh on prices, as carriers from the Gulf and Asia stock up with long-haul jets, adding belly-freight space faster than older cargo aircraft are retired.

While DSV A/S said Feb. 6 that air-freight markets may grow as much as 3 percent this year, A.P. Moeller-Maersk A/S’s shipping line, the world’s largest, forecast demand for seaborne container transport will gain by 4 to 5 percent.

Express Boost

Ken Allen, who heads Deutsche Post’s DHL Express business, said it last year outgrew United Parcel Service Inc., FedEx Corp. and TNT Express NV in the key time-definite market.

Such shipments rose 8.4 percent to 646,000 per day, Deutsche Post said, spurring operating profit to a record 8.9 percent of sales, versus 3.3 percent from freight forwarding and 3.1 percent at its supply chain business.

Profit before interest and tax rose 7 percent to 2.86 billion euros ($4 billion) last year as Chief Executive Officer Frank Appel sought to counter the impact of sluggish European economies by focusing on parcel deliveries in its home market and time-definite shipments to and from Asia.

German parcel volumes rose 7.4 percent to a record 1.03 billion units last year.

Deutsche Post’s profit will amount to 3.35 billion euros to 3.55 billion euros in 2015, up from somewhere between 2.9 billion euros and 3.1 billion euros, the company said.

Deutsche Post shares traded 1.5 percent lower at 25.55 euros as of 3:20 p.m. Frankfurt, valuing the company at 30.9 billion euros. The stock has slumped 3.6 percent this year, versus a 40 percent in the past 12 months.

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