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Deutsche Post DHL ends 2015 strongly as EBIT falls 18.7% 09 March 2016

Supply Chain revenue up 7.2% as operating profit declines 3.4%

Deutsche Post DHL Group increased revenue in 2015 and met its forecast for operating profit. Following a very strong Q4, operationally the best in the Company’s history, consolidated EBIT for full-year 2015 amounted to €2.41 billion. The Group had targeted a figure of at least €2.4 billion. The EBIT contribution of the Post - eCommerce - Parcel (PeP) division amounted to €1.1 billion, as forecast, and the DHL divisions generated an operating profit of €1.66 billion. The full year decline in EBIT compared with the prior year (2014: €2.97 billion) was attributable to one-off expenses and investments recognised by the Group including expenses related to the new direction of the IT renewal in the Global Forwarding business unit. The Group had adjusted its earnings guidance in October 2015 due to one-off charges.

Consolidated revenue in 2015 climbed by 4.6% compared with the prior year to €59.2 billion. The DHL divisions contributed to the revenue increase with growth of 5.3% and the PeP division with an improvement of 2.8%. The German parcel business and the international express business continued to generate dynamic growth. Adjusted for positive currency effects, organic Group revenues were approximately at prior year levels at -0.4%. After further adjustment for other factors including lower fuel surcharges and a change in revenue recognition in a customer contract (NHS) in the Supply Chain division, revenue was up 2.6% on the previous year.

Revenue in the Post - eCommerce - Parcel division grew by 2.8% in 2015 to €16.1 billion, adjusted for currency effects, revenues were up 1.7%. Of the divisional revenue, €6.3 billion was generated by the eCommerce - Parcel business unit, which continued to see strong growth of 11.9% over the prior-year period. The increase was based on revenue gains of 9.5% for Parcel Germany, 8.7% for Parcel Europe and 23.5% for eCommerce, the latter being supported by significant currency effects. The PeP division processed more than 1.1 billion parcels in Germany in full-year 2015, 8.7% more than the previous year. This development is another reflection of the successful positioning of the Group in the dynamically growing eCommerce market, both in Germany and, to an increasing extent, internationally. In order to further build on this position, the Group is continuing to make significant investments in the development of its national and international parcel infrastructure. It expanded its parcel and e-commerce activities to the Austrian, Slovakian and Swedish markets in 2015 and so far in 2016 already entered the markets in Thailand and France. In contrast with eCommerce - Parcel, revenues in the Post business unit declined by 2.3% to €9.8 billion in 2015. The structural decline in volumes within the Mail Communication and Dialogue Marketing segments was accelerated by the effects of the strike associated with the wage negotiations held in the middle of the year. The negative effects could only be partly mitigated by price increases for postal products in Germany. Operating profit in the PeP division contracted by 15.0% to €1.1 billion in full-year 2015. In addition to higher expenses for materials and personnel, the decline primarily reflects the higher investments made in expanding the national and international parcel infrastructure and the effects of the strike in Germany. In addition, €99.0 million of the approximately €200.0 million charges in Group EBIT communicated last October was attributable to the PeP business.

The Express division continued to perform well in terms of volumes, revenue and earnings in 2015. Revenue climbed by 9.4% to €13.7 billion in full-year 2015. Adjusted for currency effects the increase was 2.3%. Without these positive currency effects and lower fuel surcharges, divisional revenue rose by 7.2% compared to last year. Once again, the main driver of the revenue increase was the strong growth achieved in international time definite (TDI) shipments, where volumes grew by 8.7% over the prior-year period. EBIT in the Express division grew by 10.4% to €1.4 billion. The division again achieved a good operating performance despite currency headwinds and significant investment in the air and road network. Thanks to strong time definite international shipment growth and effective yield management, the EBIT margin improved to 10.2% for 2015 as a whole (2014: 10.1%). The division’s results include one-off expenses of €66.0 million that are part of the one-off charges in the amount of around €200.0 million announced in October 2015 and were recognised in the fourth quarter.

Revenue in the Global Forwarding, Freight division was just under the prior-year level at €14.89 billion in 2015 (2014: €14.92 billion). Adjusted for currency effects the decrease in revenue amounted to 3.9%. Without these positive currency effects and lower fuel surcharges, it was 0.5% below last year’s figure. Apart from the weak market environment, the main reason for the revenue decline was the division’s selective market strategy. Divisional EBIT dropped to €-181.0 million for the full year (2014: €293.0 million), above all due to the negative one-off effects of €336.0 million associated with the IT renewal. This result also reflects the weaker operating trend in the first half of the year compared with the prior-year period, which could not be fully offset by the earnings stabilisation seen in Q3 and the improvement in earnings performance in Q4.

Revenue in the Supply Chain division increased by 7.2% to €15.8 billion in financial year 2015. This development reflects positive currency effects, lower fuel surcharges and the change in revenue recognition in the contract with the UK National Health Service (NHS) in Q4. The latter caused a decrease in divisional revenue by €465.0 million. Adjusted for all positive and negative factors described above, revenue was 2.7% over the prior year. All in all, the Supply Chain division concluded additional contracts worth around €1.35 billion with both new and existing customers in 2015. Operating profit for the period from January to December declined by 3.4% to €449.0 million. The planned restructuring costs of around €150.0 million relating to the division’s optimisation programme were almost fully compensated. Positive effects of the programme were already visible in Q4. In addition to the positive effects, higher income from real estate transactions partially offset the one-off charges.

Looking ahead, the structural and operating improvement in the business divisions together with moderate economic growth are expected to contribute to a significant increase in earnings in the current year. For 2016, Deutsche Post DHL Group has therefore re-confirmed its EBIT forecast of between €3.4 billion and €3.7 billion. The PeP division is expected to contribute EBIT of more than €1.3 billion to the 2016 earnings target and the DHL divisions between €2.45 billion and €2.75 billion. The Group is also maintaining its targets beyond 2016. Deutsche Post DHL Group continues to forecast an increase in operating profit by an average of more than 8.0% annually during the period from 2013 to 2020 (CAGR). The DHL divisions are expected to contribute to the improvement with average EBIT growth of 10.0% per year. Operating profit for the PeP division is expected to increase by an average of around 3.0% per year. The Group additionally targets expenses for Corporate Centre/Other at less than 0.5% of consolidated revenue by 2020.