By Neetha Mahadevan
FRANKFURT-- Deutsche Post AG has lowered its earnings outlook
for 2015 after second-quarter net profit fell more than expected on
costs related to strikes and the post and parcel delivery group's
reorganization.
Shares in the German group, the biggest European competitor for
United Parcel Service and FedEx Corp., fell more than 4% on the
Frankfurt exchange as analysts started revising their earnings
estimates lower.
Deutsche Post said net profit fell nearly 30% to EUR326 million
($356 million) in the three months to end-June from EUR461 million
a year earlier despite a 7.3% increase in revenue to EUR14.7
billion. Analysts had expected net profit of around EUR411
million.
The group maintained its longer-term earnings forecasts but
lowered its 2015 target after strikes shaved EUR100 million off
earnings at its postal-services unit. German labor union Verdi had
staged a series of strikes from April, one of which lasted four
weeks, over managements plans to expand its parcel division by
using workers earning ower pay, before a deal was reached last
month.
Deutsche Post is currently restructuring its business to try to
improve profitability amid rapid growth in demand for express
delivery as Europe's online consumer markets boom, a trend which
has caught the attention of the German group's international
rivals.
FedEx Corp. agreed to buy parcel firm TNT Express NV though the
deal is yet to be approved by the European Union's antitrust
watchdog. UPS, whose earlier planned takeover of TNT was blocked on
antitrust grounds, is also investing in a string of expansion
projects on the continent.
Deutsche Post's DHL Express--the dominant European player by
market share--is doubling the size of its Leipzig, Germany, hub, at
a cost of EUR150 million.
"The current year represents a year of transition," said Chief
Executive Frank Appel.
The strikes were also a double blow to Deutsche Post's
postal-service business, already under pressure from the global
decline in physical as opposed to electronic mail. Chief Financial
Officer Larry Rosen said that as well as lost revenue, the company
lost out on customers who shifted to competitors or other means of
communication during strikes as well as incurring extra costs to
satisfy unhappy clients.
Deutsche Post's international freight business also encountered
difficult trading in the quarter.
Investec analyst Alex Paterson said he was particularly
concerned by the poor performance from global forwarding and
freight, as well as weakness in the group's post and express
divisions, under pressure from China's less buoyant economy.
"No solution has been found to the problems at global forwarding
and freight," Mr. Paterson said, adding that any solution will take
two to three years to fully implement, leading to "further downside
risk to forecasts."
Deutsche Post's Mr. Rosen said the company has initiated a
comprehensive turnaround program for the freight and
global-forwarding division after "the trend in earnings was again
very disappointing," amid low growth in airfreight volumes and
persistent pressure on margins in ocean freight.
The group said earnings before interest and taxes fell 18% to
EUR537 million from EUR656 million. For the full-year, Deutsche
Post now expects EBIT of EUR2.95 billion to EUR3.1 billion, versus
EUR3.05 billion to EUR3.2 billion previously forecast.
Write to Neetha Mahadevan at neetha.mahadevan@wsj.com
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