Deutsche Post DHL Annual Report 2013

2013 Annual Report

Business performance in the divisions

Excerpts from Deutsche Post AG's 2013 Group Annual Report.

Overview

Key figures by operating division
€m
  2012
adjusted
  2013   +/– %   Q4 2012
adjusted
  Q4 2013   +/– %
MAIL                        
Revenue   13,972   14,452   3.4   3,851   3,968   3.0
of which Mail Communication   5,284   5,619   6.3   1,394   1,476   5.9
Dialogue Marketing   2,548   2,363   –7.3   691   654   –5.4
Press Services   744   734   –1.3   189   194   2.6
Parcel Germany   3,477   3,750   7.9   1,038   1,112   7.1
Retail Outlets   850   883   3.9   229   240   4.8
Global Mail   1,712   1,783   4.1   496   480   –3.2
Pension Service   101   98   –3.0   23   22   –4.3
Consolidation/Other   –744   –778   –4.6   –209   –210   –0.5
Profit from operating activities (EBIT)   1,048   1,226   17.0   372   360   –3.2
Return on sales (%)1   7.5   8.5     9.7   9.1  
Operating cash flow   –1,445   940     –1,415   328  
EXPRESS                        
Revenue   12,778   12,712   –0.5   3,342   3,326   –0.5
of which Europe   5,614   5,891   4.9   1,482   1,561   5.3
Americas   2,276   2,259   –0.7   602   593   –1.5
Asia Pacific   4,301   4,289   –0.3   1,121   1,118   –0.3
MEA (Middle East and Africa)   961   924   –3.9   239   229   –4.2
Consolidation/Other   –374   –651   –74.1   –102   –175   –71.6
Profit from operating activities (EBIT)   1,110   1,133   2.1   280   320   14.3
Return on sales (%)1   8.7   8.9     8.4   9.6  
Operating cash flow   1,102   1,471   33.5   495   588   18.8
GLOBAL FORWARDING, FREIGHT                        
Revenue   15,666   14,838   –5.3   3,989   3,789   –5.0
of which Global Forwarding   11,604   10,727   –7.6   2,942   2,731   –7.2
Freight   4,192   4,246   1.3   1,081   1,093   1.1
Consolidation/Other   –130   –135   –3.8   –34   –35   –2.9
Profit from operating activities (EBIT)   514   483   –6.0   167   139   –16.8
Return on sales (%)1   3.3   3.3     4.2   3.7  
Operating cash flow   647   649   0.3   237   374   57.8
SUPPLY CHAIN                        
Revenue   14,340   14,277   –0.4   3,733   3,712   –0.6
of which Supply Chain   13,000   12,939   –0.5   3,391   3,343   –1.4
Williams Lea   1,345   1,345   0.0   345   371   7.5
Consolidation/Other   –5   –7   –40.0   –3   –2   33.3
Profit from operating activities (EBIT)   419   441   5.3   116   178   53.4
Return on sales (%)1   2.9   3.1     3.1   4.8  
Operating cash flow   432   637   47.5   275   376   36.7
  1. 1 EBIT/revenue.

 

MAIL division

Revenue up by 3.4%

In the reporting year, revenue in the division was €14,452 million and therefore well above the prior year’s figure of €13,972 million, despite 0.6 fewer working days. The figure for the reporting year included negative currency effects of €26 million. Our operating business performed well overall, especially in the Mail Communication, Parcel Germany and Global Mail business units. In the first half of 2013, we utilised some of the provision recognised for postage stamps, which resulted in a positive effect of €50 million.

 

Volumes increase following product discontinuation

In the Mail Communication business unit, the volume of letters we delivered in 2013 increased overall by 3.1%, although private customer volumes declined by 2.6%. Since we discontinued our Infobrief product, business customers have been sending more traditional letters. In the regulated sector, we raised prices for the first time in 15 years as permitted by the price-cap procedure. Revenue in the business unit increased in the reporting year by 6.3% from €5,284 million to €5,619 million. A further price increase was approved for 2014.

 

Mail Communication: volumes
mail items (millions)        
    2012   2013   +/– %   Q4 2012   Q4 2013   +/– %
Business customer letters   6,403   6,672   4.2   1,643   1,745   6.2
Private customer letters   1,175   1,144   –2.6   341   335   –1.8
Total   7,578   7,816   3.1   1,984   2,080   4.8

 

Unaddressed advertising mail on upwards trend

In the Dialogue Marketing business unit, volumes declined overall. Whilst unaddressed advertising mail saw an upwards trend, addressed advertising mail declined because we discontinued our Infobrief product. The mail-order business continued to hold back on advertising expenditure. Moreover, the insolvencies of our customers Neckermann and Praktiker had an adverse impact. Revenue in the business unit declined by 7.3% in the reporting year to €2,363 million (previous year: €2,548 million). The quarter-on-quarter decline was somewhat less pronounced.

 

Dialogue Marketing: volumes
mail items (millions)        
    2012   2013   +/– %   Q4 2012   Q4 2013   +/– %
Addressed
advertising mail
 
5,869
 
5,470
 
–6.8
 
1,607
 
1,529
 
–4.9
Unaddressed
advertising mail
 
4,197
 
4,281
 
2.0
 
1,158
 
1,253
 
8.2
Total   10,066   9,751   –3.1   2,765   2,782   0.6

 

Press services revenue down

Revenue in the Press Services business unit totalled €734 million in the reporting year, 1.3% below the prior-year figure of €744 million. Circulation figures continued their downwards trend in the German press services market and further publications were discontinued.

 

Parcel business sees strong sustained growth

In the Parcel Germany business unit, revenue in the reporting year was €3,750 million, exceeding the prior-year figure of €3,477 million by a substantial 7.9%. Fourth-quarter growth was somewhat lower. We are laying the logistical foundation for continued strong growth in e-commerce by expanding our portfolio and improving our services.

 

Parcel Germany: volumes
parcels (millions)        
    2012   2013   +/– %   Q4 2012   Q4 2013   +/– %
Business customer parcels1   835   902   8.0   244   261   7.0
Private customer parcels   120   124   3.3   40   41   2.5
Total   955   1,026   7.4   284   302   6.3
  1. 1 Including intra-group revenue.

 

Retail outlets increase revenue

Revenue generated by the 26,000-plus sales points amounted to €883 million in the reporting year, a 3.9% increase over the prior year (€850 million). In the fourth quarter, revenue growth was actually 4.8%, driven by factors including strong parcel growth.

 

Sustained positive performance in international mail business

In the Global Mail business unit, volume declined in the reporting year, whilst revenue rose by 4.1% to €1,783 million. The trend that sees customers shifting from lightweight to heavier items continues across all regions. Furthermore, the development witnessed in both domestic business in the United States, and cross-border mail to and from Germany was particularly strong.

 

Mail International: volumes
mail items (millions)        
    2012   2013   +/– %   Q4 2012   Q4 2013   +/– %
Global Mail   1,900   1,804   –5.1   515   473   –8.2

 

Increased costs slow improvement in earnings

EBIT in the MAIL division was up 17.0% to €1,226 million in financial year 2013, a substantial increase on the adjusted prior-year figure of €1,048 million. The figure for the reporting year included a positive effect of €50 million from the utilisation of some of the provision recognised for postage stamps. Furthermore, the previous year was affected adversely by €151 million resulting from the additional VAT payment. Significantly higher labour and material costs noticeably slowed an improvement in earnings. Return on sales was 8.5%, exceeding the prior year (7.5%). In the fourth quarter of 2013, EBIT amounted to €360 million, 3.2% less than the prior year (adjusted: €372 million).

Operating cash flow in the reporting year was €940 million, significantly exceeding the prior-year figure of €–1,445 million. The prior year included the effects from the additional VAT payment (€−290 million) as well as the funding of our pension obligations (€−1,897 million). Working capital in the reporting year was €−424 million.

EXPRESS division

Operating business continues to perform well

In the reporting year, revenue in the division amounted to €12,712 million – only slightly below the previous year’s figure of €12,778 million. Operationally, we have continued to grow: excluding the considerable negative currency effects of €546 million and revenues of €75 million related to the divested domestic express business in Australia, New Zealand and Romania included in the prior year, revenue increased by 4.3%.

In the Time Definite International (TDI) product line, per-day shipment volumes rose by 8.4% compared with the prior year. An increase of 8.4% in the fourth quarter affirmed this positive trend.

In the Time Definite Domestic (TDD) business, our customers sent 9.3% more shipments each day year-on-year. Growth in the fourth quarter amounted to 9.1%.

For reasons of materiality, we no longer report the Day Definite Domestic (DDD) product line separately with effect from the first quarter of 2013.

 

EXPRESS: revenue by product
€m per day1        
    2012
adjusted
  2013   +/– %   Q4 2012
adjusted
  Q4 2013   +/– %
Time Definite
International (TDI)
 
34.1
 
36.5
 
7.0
 
36.5
 
39.5
 
8.2
Time Definite
Domestic (TDD)
 
4.3
 
4.6
 
7.0
 
4.6
 
4.8
 
4.3
  1. To improve comparability, product revenues were translated at uniform exchange rates. These revenues are also the basis for the weighted calculation of working days.

 

 EXPRESS: volumes by product
Thousands of items
per day1
       
    2012
adjusted
  2013   +/– %   Q4 2012
adjusted
  Q4 2013   +/– %
Time Definite
International (TDI)
 
596
 
646
 
8.4
 
643
 
697
 
8.4
Time Definite
Domestic (TDD)
 
749
 
819
 
9.3
 
791
 
863
 
9.1
  1. To improve comparability, product revenues were translated at uniform exchange rates. These revenues are also the basis for the weighted calculation of working days.

 

Above-average growth in some Europe region countries

Revenue in the Europe region increased by 4.9% in the reporting year to €5,891 million (previous year: €5,614 million). The figure included revenues of €15 million related to the domestic express business in Romania, which was sold in the first quarter of 2013. Excluding this sale and negative currency effects of €85 million related mainly to our business activities in the UK, Switzerland, Scandinavia, Russia, Turkey and several countries in Eastern Europe, revenue growth was 6.7%. Our business saw above-average growth especially in large countries such as Germany, the UK, Russia, the Netherlands, Spain and France. Daily shipment volumes in the TDI product line grew by 8.2% in the reporting year and 7.0% in the fourth quarter.

 

Volumes in the Americas region see final-quarter double-digit increases

In the reporting year, revenue in the Americas region amounted to €2,259 million – slightly below the previous year’s figure of €2,276 million. This figure included negative currency effects of €146 million related mainly to our business activities in the United States, however also in Canada and other Central and South American countries. Excluding these effects, revenue in the region increased by 5.7%. Daily shipment volumes in the TDI product line improved by 7.3% in the reporting year, recording double-digit growth of 10.1% in the fourth quarter.

 

Sustained strong business growth in the Asia Pacific region

Despite the adverse impact of considerable negative currency effects of €270 million, which related mainly to Japan, Australia and India, revenue in the Asia Pacific region was €4,289 million and thus almost on a par with the prior year’s figure of €4,301 million. Excluding these effects and the above-mentioned disposals of €60 million, revenue grew by 7.4%. In the TDI product line, our customers sent 9.0% more shipments per day in 2013 than in the previous year; volumes in China, Australia and India saw double-digit growth. Volume growth in the fourth quarter amounted to 8.9%.

 

Volumes in the MEA region continue to rise

In the MEA region (Middle East and Africa), revenue in the reporting year was €924 million and thus 3.9% below the prior year’s figure of €961 million. The figure for the reporting period included negative currency effects of €53 million. Excluding these effects, revenue grew by 1.7% in the reporting year. Per-day shipment volumes for the TDI product line increased by 9.0%, recording an encouraging 10.7% in the fourth quarter.

 

EBIT exceeds high prior-year figure

EBIT in the division was €1,133 million in 2013, exceeding the record high of the previous year (adjusted: €1,110 million) by 2.1%. The prior-year figure included one-time effects, which had a positive impact on earnings of €113 million. The EBIT figure for the reporting year included a €12 million deconsolidation gain on the divestment of the domestic express business in Romania. Excluding these effects, earnings improved considerably by 12.4% in the reporting year. In the fourth quarter they even improved by 14.3% to €320 million (previous year, adjusted: €280 million).

Return on sales rose to 8.9% for the reporting year (previous year: 8.7%) and 9.6% for the fourth quarter (previous year, adjusted: 8.4%). Excluding the one-time effects mentioned above, return on sales rose from 7.8% to 8.8% year-on-year.

Thanks to increased profitability and further optimised working capital management, we increased the division’s operating cash flow in the reporting year by 33.5% to €1,471 million (previous year: €1,102 million). In the fourth quarter, we also benefited from considerable seasonal effects in working capital, which together with increased profitability allowed operating cash flow to increase to €588 million (previous year: €495 million).

GLOBAL FORWARDING, FREIGHT division

Freight forwarding business profitable in weak market

Revenue in the division decreased by 5.3% to €14,838 million in the reporting year (previous year: €15,666 million). This figure included negative currency effects of €491 million. The freight forwarding business declined in the first three quarters of 2013 in an appreciably weakened market. In the fourth quarter, revenue was 5.0% below the prior-year period at €3,789 million (previous year: €3,989 million) due also to the inclusion of negative currency effects of €184 million in this figure. Excluding currency effects, revenue saw a 0.4% year-on-year decrease. The business remained profitable overall.

In the Global Forwarding business unit, revenue declined by 7.6% in the reporting year to €10,727 million (previous year: €11,604 million). Excluding negative currency effects of €465 million, the decline was 3.6%. Gross profit decreased by 5.7% to €2,503 million (previous year: €2,655 million).

Our strategic project New Forwarding Environment continues to make good progress.

 

Gross profits in air and ocean freight decline

Revenues and volumes in air and ocean freight decreased over the course of the reporting year as a whole, whereas the decline in the fourth quarter was lower.

Our air freight volumes in 2013 were 4.8% below the prior-year figure, due primarily to a decline in demand from several large customers in both the Technology and Engineering & Manufacturing sectors. Although higher freight rates were announced, short-term purchases on the spot market kept rates stable. Airlines are expanding their passenger capacities by putting new aircraft into operation. However, freight capacities are being reduced significantly and selectively in order to drive up the rates. This has led to increased pressure on margins since the end of the third quarter. In addition, several large airlines adjusted the basis for calculating fuel surcharges, which also had a negative impact on margins. Our air freight revenue in the reporting year declined by 10.0%, which resulted in a 12.6% decrease in gross profit. In the fourth quarter, volumes were 2.2% and revenue 5.9% below the prior-year quarter.

Our ocean freight volumes in the reporting year were down 1.2%. The main driver for this decrease was a decline in demand in the Americas region. The intra-Asian routes continue to record the highest volumes. The volumes on these routes increased year-on-year. Exports from Europe remain stable, whilst demand on the north-south routes is increasing. The rates on the east-west trade lanes remain volatile. Ocean carriers are responding to supply and demand by limiting effective capacity and adjusting travel speed. Our ocean freight revenue decreased by 5.5% in the reporting year; gross profit declined by 3.1%. In the fourth quarter, volumes again increased slightly by 0.9%; revenue remained 7.9% below the prior year.

Our industrial project business (in the following table, reported as part of Other) saw weaker performance in the reporting year compared with the prior year. Discontinuing the unprofitable part of our ship charter business in China in 2012 resulted in a drop in revenue; however, this could be partially offset by the addition of new profitable business. The share of revenue related to industrial project business and reported under Other was 37.9% and therefore almost on a par with the previous year (38.7%). Gross profit improved by a double-digit percentage compared with the prior year.

 

Global Forwarding: revenue
€m        
    2012   2013   +/– %   Q4 2012   Q4 2013   +/– %
Air freight   5,517   4,968   –10.0   1,397   1,315   –5.9
Ocean freight   3,738   3,532   –5.5   921   848   –7.9
Other   2,349   2,227   –5.2   624   568   –9.0
Total   11,604   10,727   –7.6   2,942   2,731   –7.2

 

Global Forwarding: volumes
thousands        
        2012   2013   +/– %   Q4 2012   Q4 2013   +/– %
Air freight   tonnes   4,147   3,949   –4.8   1,070   1,046   –2.2
of which exports   tonnes   2,327   2,215   –4.8   606   591   –2.5
Ocean freight   TEUs1   2,840   2,807   –1.2   701   707   0.9
  1. 1 Twenty-foot equivalent units.

 

Slight revenue growth in European overland transport business

In the Freight business unit, revenue was up by 1.3% to €4,246 million in 2013 (previous year: €4,192 million). In addition to the effect of one additional working day, business grew primarily in Germany, Eastern Europe, the Benelux countries and France. Despite continuing pressure on margins in the highly competitive European transport market, gross profit was €1,152 million in the reporting year and thus on a par with the prior year’s figure of €1,155 million.

 

EBIT includes higher expenses for NFE

EBIT in the division was €483 million and therefore 6.0% below the prior-year level (adjusted: €514 million). Whilst gross profit margins declined, efficiency increased and the relationship between gross margin and EBIT improved. As in the previous year, earnings included expenses for the NFE project, which, as expected, were higher than in 2012. Return on sales was 3.3% as in the previous year.

In the fourth quarter of 2013, EBIT fell year-on-year by 16.8% to €139 million.

Net working capital was reduced considerably year-on-year, thanks to strict cash management, leading to an operating cash flow of €649 million (previous year: €647 million).

SUPPLY CHAIN division

Revenue growth impacted by negative currency effects

Revenue in the division decreased slightly in the reporting year by 0.4% to €14,277 million (previous year: €14,340 million). We disposed of our investments in three businesses which were no longer considered to be core activities. This reduced revenue by €212 million. Excluding these disposals and considerable negative currency effects of €694 million, revenue grew by 5.9%. The main currency effect came from the appreciation of the euro against the pound sterling. In the fourth quarter of 2013, revenue decreased by 0.6% year-on-year to €3,712 million (previous year: €3,733 million). Excluding the effects mentioned above, revenue growth was 7.5%.

SUPPLY CHAIN: revenue by sector, 2013

Asian supply chain business records highest revenue growth

Revenue in the Supply Chain business unit for 2013 was €12,939 million, a slight 0.5% decline from the previous year (€13,000 million). Excluding business disposals and high negative currency effects, growth was 6.0%. The largest revenue increases were seen in the Life Sciences & Healthcare, Automotive, Consumer and Technology sectors along with significant growth in Airline Business Solutions. Revenue from the top 20 customers increased by 5.4%.

SUPPLY CHAIN: revenue by region, 2013

In the Americas region, revenues in the major sectors Consumer, Life Sciences & Healthcare and Automotive improved due to additional volume and new business. The strongest revenue growth was seen in Brazil, principally in the Technology sector.

The largest percentage revenue increase was achieved in the Asia Pacific region, primarily in Australia, China and Thailand. Revenue growth in Australia resulted from additional volumes and new business, above all in the Consumer, Life Sciences & Healthcare and Technology sectors, as well as from Airline Business Solutions. In China, revenue increased significantly in the Consumer and Technology sectors, whilst in Thailand we benefited from new business and higher volumes in the Automotive, Consumer and Retail sectors.

In Europe, volumes in the Automotive sector and in Airline Business Solutions increased on account of higher end-customer demand. Revenue in the Life Sciences & Healthcare sector improved due to additional business with the UK National Health Service. The economic environment adversely affected business in other parts of Europe.

Revenue in the Williams Lea business unit was €1,345 million in the reporting year (previous year: €1,345 million). Excluding negative currency effects, revenue increased by 4.5% with accelerated growth in the second half of the year. Additional activity and the start of new contracts were partly offset by lower volumes in the banking and legal sectors, as well as some contract losses.

 

New business worth around €1,520 million secured

In the reporting year, the Supply Chain business unit concluded additional contracts worth around €1,520 million (previous year: around €1,210 million) in annualised revenue with both new and existing customers. Substantial signings were secured with major customers in the Consumer, Retail, Life Sciences & Healthcare and Technology sectors. The annualised contract renewal rate remained at a consistently high level.

 

Earnings impacted by one-time effects and business disposals

EBIT in the division was €441 million in the reporting year (previous year, adjusted: €419 million). This figure included a non-cash one-off gain on the adjustment of pension plans of €50 million in the fourth quarter, arising from the transition of defined benefit to defined contribution pension plans in the UK. In the reporting year, this one-off benefit was offset by €30 million in restructuring expenses mainly for initiatives to reduce indirect costs in Europe. The division also incurred expenses associated with business disposals.

Earnings were impacted by contract losses and the first-quarter charges associated with the Chapter 11 insolvency filing of a major Williams Lea customer based in the United States. The further improved management of our contract portfolio and strong performance in the Americas and Asia Pacific regions offset lower volumes and margin pressure in other markets. The return on sales was 3.1% (previous year: 2.9%). In the fourth quarter of 2013, EBIT amounted to €178 million (previous year, adjusted: €116 million), benefitting from the above-mentioned one-time effects and improved business performance.

Operating cash flow for the reporting year increased to €637 million, from €432 million in the previous year.

Checked
© 2014 Deutsche Post AG
2013 Annual Report

Tailor Made

You require a width of at least 1,024 pixels to display the online annual report.

2013 Annual Report

PDF download (5MB)