Deutsche Post World Net has set out a “Roadmap to Value” aimed at making it the most attractive investment in the logistics industry .
“Following an expansion phase to build the leading logistics company worldwide, we’re now entering a new era,” said chairman and chief executive Klaus Zumwinkel. “We are implementing a series of long-term measures to raise profitability, generate more cash, increase payouts to shareholders and improve transparency.”
Deutsche Post plans to generate one billion euros to underpin EBIT growth through 2009. To boost cash, it aims to reduce net working capital by 700 million euros and raise at least one billion euros in proceeds from the disposal of property and other non-strategic assets over the next two years. The management board will also propose to raise the 2007 dividend by 20 per cent to 90 cents per share compared with 75 cents per share for 2006.
To help increase transparency, Deutsche Post World Net will unbundle its Services division and in principle has committed itself to a stable reporting structure in the future.
To establish the value-based approach throughout the group, Deutsche Post World Net will introduce a new performance metric, EBIT after Asset Charge, aimed at motivating managers to generate more value from their day-to-day businesses.
John Allan, who recently took over as chief financial officer, said: “The new metric will help us leverage our strengths and attack our weaknesses to raise returns for investors and to serve customers even better. We have highly motivated, best-in-class managers and employees around the globe and I am very confident that they are going to rise to this challenge.”
Sales at Deutsche Post were up 5.3 per cent to 46.5 billion euros for the first nine months of 2007 but EBIT was down two per cent to 2.5 billion euros.
The company now expects EBIT excluding non-recurring its of around 3.7 bn euros for the full year of 2007, slightly more than than forecast.
The Logistics division saw sales rise 7.3 per cent to 19 billion euros while EBIT grew by 25 per cent to 618 million euros.
Sales at the Mail division rose by one per cent to 11.2 billion euros while EBIT was 10.3 per cent below last year’s level at 1.3 billion euros in the first nine months.
In the Express division sales increased by 1.9 per cent to 10.1 billion euros while EBIT increased by 60 per cent to 246 million euros.
For 2008, the Group expects EBIT of around 4.2 billion euros. At the Mail division, EBIT of around 1.90 billion euros is expected. The Express division will probably reach EBIT of around 650 million euros, while EBIT at the Logistics division is likely to amount to around 1.05 billion euros. For the Financial Services division, the group forecasts EBIT of at least 1.15 billion euros.
Because a guidance for 2009 has already been communicated to the capital markets, the group will make one final exception to the new rule and provide an update on its medium-term earnings guidance today. Overall, Deutsche Post World Net aims for an EBIT of around 4.7 billion euros in 2009.
For the Mail business, there is now a high degree of confidence that a maximum of between 10 and 20 per cent of EBIT will be affected by the full opening of the German mail market compared with the 2006 level. Thus the company still expects the Mail division to reach EBIT of between 1.65 billion euros and 1.85 billion euros for 2009.
For the Express division, Deutsche Post World Net now forecasts EBIT of between 900 million euros and 1.1 billion euros. This range accounts for the economic slowdown in the U.S., which has brought the recovery process in the Americas region to a halt in the third quarter. The management is vigorously engaged in restarting the recovery, however, it no longer expects the region to be profitable by the end of 2009.
For the Logistics division, an EBIT of between 1.15 billion euros and 1.25 billion euros is forecast, while the Financial Services expects EBIT of at least 1.2 billion euros for 2009.