Deutsche Post’s profits hurt by consolidation costs
Integration costs relating to Deutsche Post World Net’s acquisition of U.K. logistics company Exel in December saw the German conglomerate’s second quarter consolidated net income slide 48 percent to 254 million euros ($324 million), compared to 488 million euros in the same quarter last year.
Deutsche Post reported consolidation costs of 1.82 billion euros ($2.3 billion) for the quarter, above similar costs of 1.76 billion euros in the prior year period.
Consolidated earnings before interest and tax (EBIT) in the second quarter dropped 19.1 percent to 641 million euros ($818) from 792 million euros. Consolidated revenue improved 32.2 percent to 14.5 billion euros ($18.5 billion), compared to 11 billion euros in the second quarter 2005.
The company’s logistics division’s EBIT rose 153.7 percent in the second quarter to 170 million euros ($217 million), from 67 million euros last year.
Revenue for the logistics unit was the highest of any of its business sectors for the second quarter running at 4.9 billion euros ($6.3 billion), up 162.5 percent from 1.9 billion euros in the second quarter 2005.
Deutsche Post’s enlarged logistics unit now operates under the DHL brand with two logistics brand areas: DHL Exel Supply Chain and DHL Global Forwarding.
“We are already seeing disproportionately high revenue increases from our acquisitions, and all our integration projects, especially Exel, are moving ahead fast. After a temporary downturn, they will have a significant positive effect on earnings,” said Klaus Zumwinkel, Deutsche Post’s chairman and chief executive officer.
The mail division posted EBIT of 350 million euros ($447 million) down 23.7 percent over the same quarter last year, with revenue up 1.7 percent to 3.15 billion euros ($4 billion). The mail and document service provider Williams Lea has been included in Deutsche Post’s mail international and value-added services business since April 1, helping to increase the revenue generated outside Germany to one-fifth of total mail revenue. “Increasing competition and a lack of stimuli from the domestic economy affected the mail communication business,” Deutsche Post said in a statement.
Deutsche Post express division’s EBIT slumped 73.8 percent to 42 million euros ($54 million), contrasted against 160 million euros last year. Revenue for Deutsche Post’s express sector was flat at 4.6 billion euros ($5.9 billion).
For the year to date, Deutsche Post posted consolidated net income of 736 million euros ($939 million), down 22.3 percent compared to 947 million euros after the first six months last year. Consolidated EBIT was down 6.8 percent in the first half to 1.6 billion euros ($2 billion) while revenue jumped 36.4 percent to 29.3 billion euros ($37.4 billion).
After six months, Deutsche Post’s logistics division’s EBIT increased 143.6 percent to 324 million euros ($413 million) with revenue up 178.6 percent to a unit-leading 9.9 billion euros ($12.7 billion).
For the full year, Deutsche Post said it expects revenue of about 60 billion euros ($76.6 billion) and EBIT of at least 3.9 billion euros ($5 billion). In 2005, the company posted EBIT of 3.8 billion euros ($4.9 billion) on revenue of 44.6 billion euros ($56.9 billion).