Davy Research |
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Deutsche Post DHL
(DPW GY)
Confirms full year guidance; Q1 EBIT up 9.9% to €691m
08 May 2012
Stephen Furlong
| Closing Price: | 1426c | Rating: | Outperform | 26/01/11 |
FACTS: Deutsche Post DHL reports Q1 results. Conference call is at 14.00 CET at +44 2034271913 (UK) and +1 646 254 3362 (US); confirmation code: 2488027
ANALYSIS: Group revenues increased by 4.3% to €13.4bn in Q1 (Davy: €13.037bn; consensus:13.084bn) with EBIT up 9.9% to €691m (Davy: €666m; consensus: €654m) for Q1. The DHL divisions remained the group's growth drivers, with an earnings contribution of €409bn, a 13% improvement. Net profit grew by 64% to €533m (2011: €325m). Earnings per share climbed accordingly from €0.27 to €0.44.
Capital expenditures totalled €305m, bolstered further by investments in a more efficient aircraft fleet, the continued expansion of the network, state-of-the-art warehouses as well as a new world-class IT infrastructure in the Global Forwarding business. In January of each year, the group's operating cash flow and liquidity position are affected by the annual pension contribution that the company makes for its civil servants. This contribution totalled €530m in the first quarter of 2012. In addition, the termination of a factoring programme had a one-time negative impact on the company's operating cash flow. Overall, net cash used in operating activities totalled €357m in the first three months of this year In spite of these effects, the group enjoyed a net liquidity position of €308m at the end of the first quarter (2011: €938m).
Full year guidance is maintained, implying group EBIT to reach €2.5-2.6bn (Davy: €2.58bn), with the earnings of the Mail division of €1.0-1.1bn (Davy: €1.082bn). DHL's operating earnings are still expected to rise to around €1.9bn (Davy: €1.894bn). Corporate Center/Other expenditures are forecast to again total about €400m. Long-term guidance of stablisation in Mail and 13-15% compound growth in the DHL divisions was confirmed.
By division:
Mail division revenues totalled €3.6bn, up 1.1%. Within this, parcels saw volume growth of 14% and revenue of 13% to €844m. Volume and revenues in the division's traditional Mail business declined slightly with Mail volumes down 1.1%.
EBIT in the Mail division totalled €393m, up 5.4% (Davy: €346m, consensus: €368m) between January and March of 2012, a slight increase over the previous year's total of €373m.
In DHL Express, revenues climbed by 9.8% to more than €3bn. This performance is the result of a solid increase in Europe as well as double-digit growth in all other regions – TDI shipments up 9.6% with TDI revenues up 9.3%. EBIT climbed by 7.9% in the first three months of this year to €231m (Davy: €236m, consensus: €231m).
Global forwarding, freight division increased revenues to €3.7bn in the first quarter of 2012. While the drop in ocean freight was triggered by declining freight rates, the decrease in air freight was mainly caused by lower volumes. But growth in the European overland-transport as well as the industrial project business more than offset these declines. Despite rising fuel prices, the division profited – particularly at the beginning of the year – from improved purchasing conditions, increased efficiency and its selective market strategy. This led to considerable gross margin improvements in all categories. As a result, the division's operating earnings jumped by 22.5% from €87m (Davy: €83m, consensus: €75m). Revenues in the Supply Chain division also rose in the first quarter of 2012 by 6% to €3.4bn. At €190m, the volume of additional contracts signed with new and existing customers remained at a high level. EBIT rose by 16.7% to €91m (Davy: €99m; consensus €87m).
DAVY VIEW: As the title of the Q1 presentation ("simply delivering") states, DPDHL continues to deliver on its 2015 business plan. We continue to rate DPDHL 'outperform' with a €16.50 price target. The stock should gradually re-rate as it delivers on its 2015 business plan.