Dusseldorf Deutsche Post raised its earnings forecast four times last year – most recently in November 2021, when it announced an operating profit of 7.7 billion euros. She has even surpassed that, as Post CEO Frank Appel announced on Wednesday.
With eight billion euros, the world’s second largest logistics group not only doubled its earnings before interest and taxes (EBIT). The value, which was created in particular by booming e-commerce and astronomical freight rates as a result of the corona crisis, is a record. “In a challenging year, we achieved the best result in the company’s history,” said Appel.
After the figures were announced, the share gained around seven percent – probably also because Swiss Post wants its shareholders to participate massively in the success. CFO Melanie Kreis announced that not only is the dividend to be increased by a third to EUR 1.80 per share, but also a share buyback program worth EUR 2 billion is planned.
According to Appel’s forecast, there will hardly be any further increase in earnings for the group in the current year. He expects earnings in 2022 to deviate by no more than five percent from last year’s EBIT. The uncertainties caused by the Ukraine war are not even included.
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In Ukraine, where the group has ceased operations since the outbreak of war, 450 people are employed. There are also 3,500 employees in Russia, which is also no longer served by the parcel, freight and express subsidiaries operated by DHL. “It is still too early to decide on depreciation,” said CFO Kreis on request. However, Appel put the share of Russia and Ukraine in the overall business at “less than one percent”.
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Nevertheless, the war presented the Bonn logistics group with challenges. One of the main ones are the increased fuel costs, which many truck suppliers commissioned by DHL describe as threatening their existence. “We will continue to treat our suppliers fairly,” says Appel. To what extent he wants to compensate for the additional costs, he left open.
The group is facing additional fuel expenses simply because its freight and express divisions have to bypass Russia on their way to Asia. Appel explained that this had happened more often in the past. The problem is known.
It will be more expensive for customers
He does not automatically see disadvantages for his own business as a result. Due to the failure of Russian airlines, there is an additional shortage in air freight. Because this traditionally leads to higher freight rates, the result is likely to increase earnings – and the price for customers.
Already in the Corona year 2021, the DHL Express and Forwarding/Freight divisions in particular had benefited from such delivery bottlenecks. The worldwide network for express delivery increased its operating profit by 53 percent to 4.2 billion euros – and delivered more than half of the group profit. The transport business managed under “DHL Global Forwarding, Freight” even doubled its earnings and delivered a good 1.3 billion euros.
In contrast, the German mail and parcel business, which grew by just ten percent, brought up the rear in terms of earnings growth. Parcel delivery had grown by 13 percent over the year as a whole, but there was a minus of two percent in the fourth quarter. CFO Kreis announced that business in the first quarter will probably remain below the previous year.
Spicy in this context: Tobias Meyer, of all people, is responsible for this division, who is to replace Frank Appel at the top of the group in the coming year. Like the other divisional directors, he did not appear at the press conference. A spokeswoman justified the unusual absence for this event with the Ukraine war.
>> Read about this: post boss Frank Appel will retire in 2023 – this is how the successor will be regulated
Overall, however, the Dax group delivered a brilliant result for 2021. With a turnover of 81.7 billion euros, he exceeded the estimates of the analysts, who had counted on just 79.4 billion. With a one-third improved return on sales of 9.8 percent, it left US rival Fedex far behind, which had reported a margin of 7 percent last year.
However, in 2021 it still lagged behind the logistics world market leader UPS. A few days ago, Big Brown published a return on sales of 13.2 percent thanks to a 51 percent jump in profits for the past year.
High investments despite the danger of war
At the same time, Deutsche Post’s free cash flow, which has grown to EUR 4.1 billion, is fueling growth fantasies in-house. The takeover of the spirits logistics company Hillebrand, whose 1.5 billion euro purchase is about to be completed, was already being negotiated in the past financial year.
Further takeovers are now conceivable, announced CFO Kreis, without naming the company. They would have to fit the core business of logistics, bring additional income to the existing business and be easy to integrate. The Bonn-based company had only said goodbye to non-group activities, including the construction of the Streetscooter electric delivery van, a few months ago.
They also want to continue to invest heavily in their traditional business. The budget of 4.2 billion euros that Appel’s supervisory board approved for 2022 exceeds the previous year by almost eight percent – despite the imponderables of the Ukraine war.
The US analysis company Bernstein Research left its rating of Deutsche Post at “Outperform” and named a price target of 65 euros – with the current share price of 43 euros. The British investment bank Barclays, which gave a similar buy recommendation with “Overweight”, even named EUR 77 as a price target.
More: More and more companies are giving up business in Russia