Deutsche Post DHL remains on growth track - earnings guidance for 2012 fulfilled

• Group generates operating earnings of EUR 2.67 billion
• All divisions with double-digit earnings growth in Q4
• Company proposes a dividend of EUR 0.70 per share
• Further earnings growth expected in 2013
• CEO Frank Appel: “We are delivering on our promises”

Deutsche Post DHL, the world’s leading postal and logistics group, is looking back on a successful 2012. Group revenues increased 5.1 percent to EUR 55.5 billion during the 12-month period. This increase mainly reflects the exceptional market position that DHL maintains in the world’s growth regions - especially in Asia. The company, which operates in more than 220 countries and territories in the world, is now generating about 70 percent of its revenues outside Germany. At the same time, with its highly successful parcel business, the Group’s MAIL division continues to benefit from the rapid growth of online retailing. The excellent position that the Group and its divisions maintain in the most dynamic markets also led to a strong rise in the company’s profitability last year. At EUR 2.67 billion, operating earnings finished the year within the announced target corridor of EUR 2.6 billion to EUR 2.7 billion and were more than 9 percent above the previous year’s level. The Group’s consolidated net profit climbed by about EUR 500 million to EUR 1.66 billion in 2012.

“With our strong performance in 2012, we have reached another milestone in our Strategy 2015,” said Frank Appel, CEO of Deutsche Post DHL. “In the past year, we made major progress on a journey that was, at times, far from easy. And we delivered on our promises - for the benefit of our customers, employees and shareholders.”

Guidance

For 2013, the Group expects the world’s economy to generate moderate growth. The pace of this growth should accelerate as the year progresses. As a result, the company forecasts a corresponding trend of increasing revenues, particularly in the DHL divisions. At the same time, the Group’s EBIT is projected to increase to between EUR 2.7 billion and EUR 2.95 billion. While the MAIL division is expected to contribute between EUR 1.1 billion and EUR 1.2 billion to this figure, DHL should generate operating earnings between EUR 2.0 billion and EUR 2.15 billion. Corporate Center/Other expenditures are forecast to again total about EUR 400 million. The Group’s consolidated net profit is projected to grow in line with the operating business in 2013. In addition, the company expects to further increase cash generation and, as a result, to generate sufficient free cash flow to at least cover this year’s dividend payment for 2012.

Looking beyond the current year, the company remains optimistic and expects the positive earnings trend to continue: at DHL, the Group expects that earnings will rise by an annual average of between 13 percent and 15 percent between 2010 and 2015. The profitability of the MAIL division should stabilize at a level of at least EUR 1 billion thanks to cost-cutting measures and growth programs that have been introduced. In combination with the planned reduction of expenditures for Corporate Center/Other, the Group expects operating earnings to increase to between EUR 3.35 billion and EUR 3.55 billion by 2015.

“The past three years have demonstrated that our Strategy 2015 is paying off,” CEO Appel said. “With our unique portfolio of products and services and our excellent position in the world’s growth markets - the emerging markets and online retailing - we have an exceptional base for generating further profitable growth. And we will build on these strengths and lead the Group - step by step - to its next milestones.”

Fiscal year 2012

In 2012, Deutsche Post DHL increased - partly due to favorable exchange-rate effects - its revenues by EUR 2.7 billion to EUR 55.5 billion (2011: EUR 52.8 billion). Thanks to the improved revenues and increased profitability, the company boosted its operating earnings by more than EUR 200 million to EUR 2.67 billion (2011: EUR 2.44 billion). By generating earnings of more than EUR 2 billion, reflecting a year-over-year increase of 19 percent, the DHL divisions are continuing to be the driving force of the Group’s EBIT growth. With all three divisions having produced double-digit earnings gains the DHL pillar contributed the majority to the Group’s profit. The operating earnings produced by the MAIL division during fiscal year 2012 were EUR 56 million below their level in the previous year. The main reason for the decline was a subsequent VAT payment that had a one-time negative impact of EUR 151 million on the division’s earnings in the second quarter. The subsequent VAT payment also had a negative impact of EUR 115 million on the Group’s financial result. However, due to the positive effects from the completion of the Postbank transaction, the financial result improved substantially to minus EUR 427 million (2011: minus EUR 777 million). Combined with the operating improvements, the Group’s consolidated net profit jumped by 42.6 percent to EUR 1.66 billion during the past fiscal year (2011: EUR 1.16 billion), and basic earnings per share rose from EUR 0.96 in 2011 to EUR 1.37 in 2012.

Dividend

Given the positive results of the past fiscal year, the Supervisory Board and the Board of Management will propose a dividend of EUR 0.70 per share to the Annual General Meeting on May 29, as in the previous year. Based on the consolidated net profit adjusted for non-recurring items, this year’s dividend proposal represents a payout ratio of 53 percent. As a result, the Group’s dividend proposal is once again within the range of 40 percent to 60 percent that the company set as a target corridor for future dividend payments with the introduction of its finance strategy in 2010.

Fourth quarter 2012

In the final quarter of the past fiscal year, the company continued on the growth path of previous quarters. Revenues climbed by more than EUR 450 million, or 3.2 percent, to EUR 14.6 billion (2011: EUR 14.1 billion). The Group’s operating earnings climbed by 38.1 percent to EUR 827 million (2011: EUR 599 million). As a result, the fourth quarter was by far the most profitable one for the Group during the past year. It was also the company’s strongest fourth quarter since 2007. All DHL divisions contributed to these gains as each division produced double-digit growth in earnings. The MAIL division profited from the structural and seasonal strengths of the parcel business as well as a positive base effect related to expenses in the course of the collective-bargaining agreement concluded in December 2011. As a result, the MAIL EBIT increased by more than 50 percent in the fourth quarter. Thanks to these strong gains in profitability in both of the Group’s two pillars, the company’s consolidated net profit more than tripled in the fourth quarter. At EUR 542 million, net earnings were EUR 367 million higher than the previous year’s level of EUR 175 million. Basic earnings per share rose from EUR 0.14 in the previous year to EUR 0.45 for the period between October and December 2012, a reflection of both the previously mentioned operating improvements and a sharp improvement in the financial result. The latter was largely due to negative valuation effects related to the Postbank transaction included in last year’s figures.

Capital expenditures

The Group further enhanced both its growth potential and efficiency by investing a total amount of EUR 1.7 billion in the past year (2011: EUR 1.7 billion). This figure includes capital expenditures for the expansion of the MAIL division’s parcel infrastructure, which is designed to support the above-average growth in the parcel business in years to come. However, the largest share of the Group’s investment sum went into the company’s DHL divisions. Among other areas, these expenditures were used for a more efficient aircraft fleet, the ongoing expansion of the divisions’ networks, state-of-the-art warehouses and a new IT infrastructure for Global Forwarding.

Cash flow

Despite the strong improvement in operating earnings, the Group reported a cash outflow from operating activities of EUR 203 million in the past year. In 2011, the company generated a positive operating cash flow of EUR 2.4 billion. The main reason for this development was the further funding of pension obligations in the amount of around EUR 2 billion in the fourth quarter. This development was also reflected in the company’s free cash flow, which fell to minus EUR 1.9 billion in 2012 (2011: EUR 749 million). Excluding one-time effects in the amount of EUR 2.6 billion, which also included the VAT payment (EUR 482 million) and restructuring expenses (EUR 140 million), the company’s free cash flow would have been close to the previous year’s level. These one-time effects were, in combination with the repayment of state aid (EUR 298 million), also the driving force in the development of the company’s net debt position, which, as a result, stood at about EUR 2 billion at the end of December 2012 (2011: net liquidity of EUR 938 million).

MAIL division

At EUR 14.0 billion, revenues generated by the MAIL division in 2012 remained at the previous year’s level, although 2012 had three fewer working days than 2011 and the volume of the traditional mail business continued its gradual decline, as expected. The division continued to benefit from the strong momentum being generated by its parcel business. Propelled by expanding online retailing and own innovative services - which extend from practical shopping portals to an array of delivery options - revenues in the parcel business climbed sharply. Driven by double-digit volume growth with business customers, revenues in this business unit increased by 9 percent to EUR 3.5 billion. As a result, the booming parcel business generates one-fourth of the MAIL division’s total revenues and contributed to the stabilization of the division’s profitability: At EUR 1.05 billion, operating earnings did indeed decrease by more than EUR 50 million in 2012 compared to the previous year (2011: EUR 1.11 billion). This decline, however, solely resulted from the VAT payment. Excluding this one-time effect of EUR 151 million, operating earnings in the MAIL division would have climbed, despite the loss of working days, the expenses related to the Neckermann bankruptcy and the increased staff costs arising from the collective-bargaining agreement.

EXPRESS division

In 2012, the EXPRESS division profited from its strong market position in the dynamic growth regions of the world, continued its successful revenue and earnings performance and further expanded its worldwide market share. Revenues generated in the past fiscal year rose by more than EUR 1 billion, or 9.3 percent, to EUR 12.8 billion (2011: EUR 11.7 billion). In addition to positive currency effects, the strong growth produced by international time-definite shipments was once again the main reason for the steep rise in revenues. During the period, double-digit growth in revenues was generated in all regions - with the exception of Europe, where revenues climbed significantly as well. Revenues and volumes rose particularly strongly in Asia and the Americas region, where, in particular, good business performance in the United States was a key reason for this positive development. In addition to the operating improvements, one-time effects - the EXPRESS share of the VAT payment, which totaled EUR 30 million, was offset by the reversal of restructuring provisions (EUR 99 million) and income from the sale of the domestic express business in Australia and New Zealand (EUR 44 million) - contributed a total of EUR 113 million to the rise of the division’s earnings. Altogether, the division’s EBIT increased by 21 percent to EUR 1.11 billion during the past year (2011: EUR 916 million).

GLOBAL FORWARDING, FREIGHT division

In a challenging market environment, GLOBAL FORWARDING, FREIGHT boosted revenues by more than EUR 500 million, or 3.6 percent, to EUR 15.7 billion during 2012 (2011: EUR 15.1 billion), primarily due to positive currency effects. While volume and revenues fell in air freight during 2012, sales in ocean freight and overland transport increased. Thanks to the selective growth strategy and, in part, to improved buying conditions, gross margins were increased once again in all three business segments. In combination with further efficiency gains, the division sharply boosted its operating earnings by 16.4 percent despite the costs associated with the introduction of the new IT infrastructure. The division’s EBIT climbed from EUR 440 million in 2011 to EUR 512 million in 2012.

SUPPLY CHAIN division

SUPPLY CHAIN also generated profitable growth in 2012. Revenues and earnings finished the year well above the previous year’s level. The division’s revenues climbed by 8.4 percent to EUR 14.3 billion (2011: EUR 13.2 billion). In addition to positive currency effects, organic growth in the Automotive and Life Sciences & Healthcare sectors acted as the division’s main growth drivers. The division’s strong performance is also reflected in the continuing high volume of EUR 1.2 billion in new contracts concluded with new and existing customers, the improved profit margins in these contracts and the consistently high contract renewal rate. In combination with strict, ongoing cost controls, the world market leader in contract logistics also steeply boosted earnings: At EUR 416 million, operating earnings jumped by 14.9 percent, or more than EUR 50 million, above the previous year’s total of EUR 362 million.