DHL writedown takes toll on Deutsche Post earnings
Deutsche Post AG, Europe's biggest mail carrier, posted a 61 percent drop in fourth-quarter profit after writing down the value of its DHL Express unit in the United States.
Net income fell to 255 million euros, or 21 cents a share, from 649 million euros, or 54 cents, a year earlier, the Bonn-based company said yesterday. Sales rose 3.9 percent to 17 billion euros.
Chief Executive Officer Frank Appel, who took charge last month, is faced with turning round DHL's US express-delivery business. The postal service last year scrapped a 2009 break-even target for the US business and announced two months ago that it would write down the value of DHL Express's Americas division by about 600 million euros, hurting 2007 profit.
"Our focus remains on organic growth and improving cash generation and cash payout to shareholders," Appel said in the statement.
The postal service bought DHL in 2002, adding a global express-delivery business that competes with Atlanta-based United Parcel Service Inc. and Memphis, Tennessee-based FedEx Corp in their home market. UPS, the world's largest package-delivery company, increased US package volume 1.4 percent in October to December, the smallest fourth-quarter gain since 2004, as the country's economic growth slowed.
"DHL Express has probably lost market share to UPS and FedEx, two strong competitors, because customers are uncertain about what will happen with the US business," said Axel Funhoff, a Brussels-based analyst at ING. "The unit is also facing a weakening US economy."
US gross domestic product expanded at an annual rate of 0.6 percent in the fourth quarter, slowing from 4.9 percent gain in the prior three months, according to the US Commerce Department.
Deutsche Post has declined 7.3 percent in German trading this year, valuing the company at about 26 billion euros. Of 33 analysts who cover the stock, 23 recommend buying it, six recommend holding it and four tell clients to sell.
Chief Financial Officer John Allan ruled out on Jan 24 a spinoff of the US unit or a complete exit from the country's express-delivery market. Deutsche Post may sell the business to FedEx, the German business daily Financial Times Deutschland reported in January.
Appel was named CEO on Feb 18 to replace Klaus Zumwinkel, who resigned three days earlier amid a German tax-evasion probe. Appel was previously head of Deutsche Post's logistics unit, managing the company's biggest division by revenue.
Agencies
(China Daily 03/07/2008 page17)
