Bloomberg News

Deutsche Post Stock Jumps as Forecast Raised on Asia, Parcels

November 09, 2011

Nov. 9 (Bloomberg) -- Deutsche Post AG, Europe’s largest postal service, gained the most in 18 months in Frankfurt trading as growth in Asian express shipments and German parcel volume prompted the company to raise its full-year forecast.

Deutsche Post gained as much as 7.1 percent to 11.45 euros, the biggest intraday increase since May 10, 2010, and was up 6.7 percent at 9:42 a.m. The Bonn-based company said today that earnings before interest and tax in 2011 will total more than 2.4 billion euros ($3.3 billion), exceeding the top end of its earlier forecast range.

The company, the world’s biggest carrier of air and sea freight by volume, has focused expansion on express-package and cargo businesses in emerging markets while seeking to stabilize earnings at its traditional mail unit. United Parcel Service Inc., the world’s biggest package-delivery service, said on Oct. 25 that it’s cutting plane capacity for Asia after shipments to the U.S. decreased.

“The mail division in particular surprised me in sales as well as in profit,” said Stefan Kick, an analyst at Silvia Quandt Research in Frankfurt, who recommends buying the shares. “Asia was very strong as well. So far they don’t seem to be feeling the economic slowdown much, but it’s hard to predict how things will develop from here on.”

‘Flexibility’

The company isn’t seeing any deceleration of revenue or earnings growth, though it isn’t “ignoring the possibility that the economic environment could get rougher, especially in developed countries,” Chief Executive Officer Frank Appel said in a statement. “We are able at any time to flexibly adapt our capacities,” such as scaling back its air fleet, to reduce costs should demand weaken.

Half of Deutsche Post’s international time-definite shipments involve Asia, and the company has a 36 percent market share in the segment in the Asia-Pacific region, compared with 21 percent at FedEx Corp. and 10 percent at UPS, Deutsche Post said today in a presentation.

Third-quarter Ebit rose 19 percent to 646 million euros, beating the 583.7 million-euro average of 11 analyst estimates compiled by Bloomberg. Net income jumped 70 percent to 385 million euros. Excluding gains this year and reductions in the 2010 period following the disposal of the former Postbank unit, profit increased 13 percent to 359 million euros. Group sales rose 2.5 percent to 13.1 billion euros.

Online Retailing Volume

Revenue at the German mail division rose 2.6 percent, and Ebit jumped 18 percent, helped by parcel traffic stemming from online retailing, Deutsche Post said. Sales rose 1.9 percent at the freight-forwarding unit, with growth held back as air and sea cargo “came under pressure,” while overland transport, mainly carried out in Europe, posted “strong gains,” it said.

The company’s earlier forecast for 2011 was Ebit at the upper end of a 2.2 billion-euro to 2.4 billion-euro range.

“Our third-quarter performance underscores our exceptional market positioning once again” through the company’s presence in the fastest-growing markets, Appel said. “This strong foundation will allow us to remain on our successful growth course also if the economic tailwind should ease somewhat.”

Deutsche Post announced a 750 million-euro investment in September to upgrade its German consumer parcel-delivery unit through 2013 to expand into handling food and medicines. The company aims after the project to deliver 95 percent of packages the next day in an effort to almost double its share of the consumer market to 15 percent from 8 percent.

--With assistance from Alex Webb and Tom Lavell in Frankfurt. Editors: Tom Lavell, Thomas Mulier

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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