presentation h1 2015 (pdf)
TRANSCRIPT
Deutsche Post DHL Group Q2 2015 resultsLawrence A. Rosen, CFO6 August 2015
Q2 EBIT development reflects PeP strike and execution of Strategy 2020
Q2 2015 HIGHLIGHTS
2015 guidance adjusted to include one-off strike effect, 2016/20 guidance confirmed
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015 PAGE 2
Investing to position our businesses for sustained growth in line with strategic and financial objectives of Strategy 2020
Express performance continues strong trajectory with further9% TDI volume growth driving 14% EBIT increase
• PeP wage agreement sets solid foundation, with one-off EBIT impact from strike of ~ EUR -100m in Q2
• Forwarding turnaround measures in execution, newtransformation course to be set in the next months
• Supply Chain accelerating restructuring measures2009 2015 2020
SUMMARY OF MAJOR EFFECTS ON Q2 RESULTS
PAGE 3DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Division
Non-recurring effects (+/-)
Net EBIT impact (Q2 yoy)
Strategic rationale
Strike effects:Revenue lost / delayed No wage costs for striking employees Costs for alternative labor / overtime
PeP Global Forwarding, Freight Supply Chain
~ EUR -100m EUR +18m
Disposal of Sinotransstake (EUR +99m)One-time costs for turnaround measures (EUR -81m)
King´s Cross stake sale driving significantly higher real estate related income(EUR +53m)Restructuring costs (EUR -55m)
EUR -2m
Tarif negotiations settled with more competitive long-term wage structure
1. Stabilization of operating performance
2. Review course of transformation
King´s Cross sale provided opportunity to accelerate restructuring process
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GROUP P&L Q2 2015
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
EUR m Q2 2014 Q2 2015 Chg. Management comments
Revenue 13,695 14,700 +7.3% Positive currency effects support revenue growth. Organic revenue slowdown to 0.6% reflects PeP strike effects as well as impact from lower energy prices
EBIT 656 537 -18.1% Group EBIT decline with strong Express growth being offset by strike effect and continued weakness in Forwarding
t/o PeP 189 75 -60.3% EBIT decline due to ~ EUR -100m strike effects
t/o DHL 542 535 -1.3% Express continues strong growth path. Supply Chain and Forwarding, Freight EBIT supported by asset sales while continuing transformation / restructuring
Financial result -97 -101 -4.1% Slightly below previous year due to currency effects
Taxes -70 -65 +7.1% H1 tax rate of 16.5%, reflecting new full year estimate
Cons. net profit1) 461 326 -29.3% Net profit and EPS primarily affected by EBIT decline
EPS (in EUR)2)0.38 0.27 -28.9%
PAGE 41) Attributable to Deutsche Post AG shareholders; 2) Undiluted
2015 EBIT GUIDANCE ADJUSTED FOR PEP STRIKE EFFECT
EUR bn 2015 2016 2020
PeP At least 1.2 (from at least 1.3) > 1.3 ~ 3% CAGR 2013-20
DHL 2.1-2.25 2.45-2.75 ~ 10% CAGR 2013-20
CC/Other ~ -0.35 ~ -0.35 < 0.5% of group revenue
Group 2.95-3.1(from 3.05-3.2) 3.4-3.7 > 8% CAGR 2013-20
FY 2015:
Free Cash Flow to exceed 2014 dividend
Tax rate around 16.5% (from around 18%)
Gross Capex of around EUR 2.0bn
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015 PAGE 5
2016 and 2020 Guidance confirmed
EUR m Q2 2014 Q2 2015
Cash from operating activities before changes in Working Capital 729 335
OCF generation reflects overall EBIT decline, restructuring cash-outs and smaller pension funding in a subsidiaryStrong management of working capital continues to contribute positively vs prior year
Changes in Working Capital -246 -69
Net cash from operating activities after changes in Working Capital 483 266
Net Capex -235 -382 Cash out for Capex increasing in line with full-year expectationRise in net M&A proceeds resulting from disposals of Sinotransstake in DGF and King´s Cross development stake in DSCInterest expense decline reflecting lower interest rate environment
Net M&A 3 219
Net Interest -43 -36
Free Cash Flow 208 67 FFO/Debt at 26.3% (March 31: 24.9%)
FREE CASH FLOW Q2 2015
EBIT decline, asset sales and capex increase main influences on FCF
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015 PAGE 6
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Seasonality drives usual Q2 net debt increase with annual DPDHL dividend payment of EUR 1,030bn
NET DEBT (-)/LIQUIDITY (+)
PAGE 7
-2,989
34 -908
-7271,072-1,499
Net Othereffects
incl. M&A
Net capex
Changesin W/C
Net debt(Dec 31, 2014)
OCF before change in W/C
Net debt(Jun 30, 2015)
75
in EUR m
Net interest
-1,036
Dividend Paid
N.B: Net pension provision down EUR 2.7bn to EUR 5.9 bn (from EUR 8.6 bn at end of Q1) reflecting discount rate increase during Q2
1,576 1,520510 501
Q2 2014Q2 2015
-1.8%-3.6%
Q2 2015Q2 2014
m EUR
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Diligent preparation, good execution as well as employee commitment allowed to minimize customer disturbance from strike actions
Mail Communication (-5.3%) and Dialogue Marketing (-12.8%) volume development notably affected by the strike as well as price increases
Unabated strong volume and revenue growth in Parcel Germany, despite strike effects
Continued growth in international Parcel activities in and outside of Europe supported by positive currency developments
Despite strike impacts, revenue growth in eCommerce - Parcel continued to outweigh Post revenue decline
PeP: STRONG OPERATING EFFORT TO CONTAIN STRIKE IMPACTS
PAGE 81) Parcel Europe ex Germany; 2) Parcel outside Europe
Business HighlightsMail Communication revenue Dialogue Marketing revenue
Parcel Germany revenue Parcel Germany volumes
Parcel Europe revenue1) DHL eCommerce revenue2)
+9.3%
163 177 232 293
+26.3%+8.6%
Q2 2015Q2 2014
Q2 2015Q2 2014 Q2 2015Q2 2014
m EUR
m EUR
m EURm EUR
906990
+8.1%m units
Q2 2015Q2 2014
236 255
PeP – DIVISIONAL RESULTS Q2 2015
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015 PAGE 9
EUR m Q2 2014 Q2 2015 Chg. Management comments
Revenue 3,642 3,712 +1.9% Revenue increase reflecting growth across eCommerce - Parcel activities as well as price increases in Post products, offsetting Post volume weakness due to strike
EBIT 189 75 -60.3% EBIT decline mainly due to ~ EUR -100m strike related effects
Operating Cash Flow 188 169 -10.1% Strong working capital management helps to offset large part of EBIT decline
Capex 62 127 >+100% Capex well above last year, reflecting planned investment increase in Parcel activities
LONG TERM WAGE AGREEMENT FINALIZED
PAGE 10DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Comprehensive package for all stakeholders safeguarding PeP competitiveness and facilitating further profitable growth
Tariff agreement until Jan 31, 2018• 1 October 2015: one-time payment 400€• 1 October 2016: +2.0%• 1 October 2017: +1.7%
No change to 38.5 working hours Extension of no redundancy agreement until 2019 No more outsourcing limit for parcel delivery, but job
commitment for current DP parcel delivery staff; no outsourcing of letter or joint delivery until end 2018
DHL Delivery entities remain in place: expect further hiring of dedicated Parcel delivery employees to support dynamic Parcel growth
DHL : LOGISTICS PROVIDER FOR FC BAYERN CHINA STORE
PAGE 11DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
• DHL eCommerce enables FC Bayern to merchandise goods in China via a flagship store on Alibaba’s Tmall
• DHL eCommerce provides full cross-border logistics solution, including customs & returns
• Service execution provided in cooperation with DHL Supply Chain, DHL Global Forwarding and local partners
eCommerce
DHL eCommerce: strong capabilities for international e-commerce tradelanes
DHL Service OfferingDHL eCommerce also responsible for:
WEBSHOP & LISTING, MARKETING, CUSTOMER SERVICE, ORDER MANAGEMENT & ACCOUNTING
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Continued strong growth with TDI volume +8.6% Comprehensive global footprint paying off as
Europe volumes (+14.4%) shows strongest growth in Q2 ahead of MEA (+9.2%) and Asia/Pacific (+6.1%)
Decline in Americas volumes (-2.4%) reflects change in customer mix; very solid growth in base revenue/day in the region, i.e. excluding fuel surcharge and FX effects
Growth again ahead of market driven by focus on offering best and fastest premium service for our TDI customers
Slower revenue increase compared to volume growth due to lower fuel surcharge, as in Q1
EXPRESS: STRONG TDI GROWTH CONTINUES
PAGE 12
Time Definite International (TDI)1)
Revenues per day in EUR m
Time Definite International (TDI)Shipments per day ‘000s
36.838.2
+3.8%
700760
+8.6%
Business Highlights
Q2 2015Q2 2014
Q2 2015Q2 2014
1) Currency translation impacts are eliminated. Data aggregated with same currency rate
EXPRESS – DIVISIONAL RESULTS Q2 2015
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
EUR m Q2 2014 Q2 2015 Chg. Management comments
Revenue 3,089 3,455 +11.8%Continued strong TDI volume growth supported by positive FX effects. Organicrevenue growing +2.7%, impacted by significant decrease in fuel surchargerevenue
EBIT 331 376 +13.6% Strong EBIT growth driven by continued TDI volume increase, EBIT margin up 20bp yoy to 10.9%
Operating Cash Flow 345 262 -24.1%
Reduction in OCF mainly due to large utilization of a restructuring provision related to 2008/09 US Express restructuring (EUR ~50m cash out; provision at EUR ~200m now)
Capex 85 154 +81.2% Acceleration in line with investment plans. Continue to invest principally in international hub and gateway infrastructure upgrade
PAGE 13
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
DHL NETWORK INVESTMENTS – ENABLING EXPRESS GROWTH
PAGE 14
Tokyo GTW 2014/15
New Singapore HUB 2014/15
Saudi Arabia/ Egypt GTWs 2014/15
LHR Airport Expansion 2014
Cincinnati (CVG) HUB Expansion 2014/15
East Midlands HUB Expansion 2015
New Brussels HUB 2015/16
Leipzig HUB Expansion 2014-2016
Continued network investments across all regions cement service leadership as a key driver of our TDI growth
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Air freight volumes decline due to active yield management in competitive markets. Ocean volume flat, mainly due to continued weakness in Asian exports
GP/ton in Air Freight increased by 9.5% GP/TEU in Ocean Freight declined 6.3%
Division GP flat reflecting continued market challenges as well as currency effects
Thorough review of EBIT performance by new divisional management led to turnaround and transformation agenda. First organisational measures implemented during Q2
GLOBAL FORWARDING, FREIGHT: FOCUS ON BUSINESS TURNAROUND
Air freight ‘000s Tons
Ocean freight ‘000s TEU1)
1,007 933
-7.3%
748 750
Q2 2015
+0.3%
Q2 2014
1) Twenty Foot Equivalent Unit
Business Highlights
PAGE 15
Q2 2015Q2 2014
GLOBAL FORWARDING, FREIGHT– DIVISIONAL RESULTS Q2 2015
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015 PAGE 16
EUR m Q2 2014 Q2 2015 Chg. Management comments
Revenue 3,638 3,778 +3.8% Revenue increase driven by FX effects. Organic revenue down -1.5%
Gross Profit 885 897 +1.4% Persistent difficult market environment with underlying GP margin pressure, despite positive FX effects
EBIT 102 40 -60.8% Further affected by ongoing transformation and turnaround program as well as difficult market conditions, partially offset by Sinotrans stake sale
Operating Cash Flow 45 125 >+100% Improving on better working capital management
Capex 60 34 -43.3% Capex decrease reflects decreased investments for NFE
MANAGEMENT AGENDA DEFINED AND IN EXECUTION MODE
PAGE 17DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Adjust organizational structureRe-empower countries and re-establish stronger accountabilityRe-enable staff and adjust incentives
Improve absolute Gross ProfitIncrease and improve cost performanceSpecific country focus Improve service performance
Sharpen commercial focusInvest in skills and capabilities though “Certified” programReview and renew our IT with a business-centric approach
First changes to improve operating performance implemented, next turnaround measures in execution, decision on IT renewal expected in next months
RE-EMPOWER: TURN AROUND: REGAIN LEADERSHIP: CURRENTPRIORITY
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Sound order intake in Q2 (EUR 266m) especially in Technology, Consumer and Life Sciences & Healthcare
Strong growth in developed markets, also Asia Pacific with substantial volume and new business growth
Further steps taken in implementing Strategy 2020 as presented at November 2014 Capital Markets Tutorial
Restructuring charges cover implementation of consistent and lean organizational structure as well as addressing underperforming business areas
SUPPLY CHAIN: ACCELERATING RESTRUCTURING EFFORTS
New signings, EUR m1)
Revenue by sector Q2 2015
335 266
Q2 2014 Q2 2015
1) Annualized revenue
Business Highlights
PAGE 18
23%
19%
20%
9%
11%
3%10% 5%
Technology
Life Sciences & Healthcare
Consumer
RetailOthers
Williams Lea
Energy
Automotive
SUPPLY CHAIN – DIVISIONAL RESULTS Q2 2015
DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015 PAGE 19
EUR m Q2 2014 Q2 2015 Chg. Management comments
Revenue 3,618 4,045 +11.8%FX continues to support revenue development. Organic revenue growth was 0.7% reflecting termination of larger customer contract in 2014 as well as lower fuel prices
EBIT 109 119 +9.2%Higher real estate related income driven by King´s Cross stake sale allowed to accelerate restructuring charges to EUR 55m. Good contribution to EBIT growth from new business start-ups
Operating Cash Flow -6 -34 <-100% OCF decline reflects volume, FX and timing related working capital movements
Capex 62 63 +1.6% Capex spending in line with last year, mainly supporting new contract start-ups
FURTHER IMPORTANT STEPS TAKEN IN LINE WITH STRATEGY 2020
PAGE 20DPDHL GROUP | Q2 2015 RESULTS | 06 AUGUST 2015
Strategic ambitions and priorities clearly defined in the divisions
PeP
Continued profitable mix shift towards Parcel growth needs to be based on sustainable, competitive wage structure in Germany
Tariff negotiations successfully concluded
Express
Maintain successful TDI focus while cementing global competitive advantage through ongoing targeted investments
Continuous network renewal & expansion
DGFF
Transform internal process and IT platform to establish efficient cost structure and improve customer service
Short-term operating actions initiated, IT decision to follow soon
Supply Chain
DSC Strategy 2020 addressing the key levers of Earnings Growth Model along Focus – Connect –Grow pillars
Execution based on an actionable, prioritized plan
2009 2015 2020