Deutsche Post DHL Profit Plunged 95 Percent

Germany's Deutsche Post DHL reported first quarter operating profit crashed 95 percent from a year ago mainly due to the cost of shuttering its U.S. domestic express delivery service.

Earnings before interest and taxes tumbled to $35.9 million in the three months to March 31 from $716.9 million in the same period in 2008. One-off restructuring costs in the United States totaled $323 million.

Underlying earnings fell 42 percent to $415 million on revenue 12.9 percent lower at $15.3 billion.

Deutsche Post CEO Frank Appel said declines in air and ocean freight volumes caused by the global economic recession may be bottoming out.

"Our international express shipments stabilized in March, and April's figures seem to point in a similar direction," Appel said. "In terms of air freight volumes, we have been seeing a monthly improvement since January, and we even experienced an increase in March compared with last year in ocean freight."

"However, momentary developments should not hide the fact that shipping volume still remains far below the previous year's level in most areas," he cautioned.

Deutsche Post said it will likely reach its target of cutting non-operating costs by $1.33 billion by the end of 2010, sooner than planned. It is re-organizing its express and mail divisions to further cut costs, and shifting mail shipments from air to ground transportation. It may postpone salary increases and extend working hours.

Express revenue fell by 25.9 percent to $3.3 billion in the first quarter as time-definite shipments declined by 13.3 percent.

Due to restructuring costs in the United States, the express division swung to an operating loss of $521 million from a year-earlier profit of $10.6 million.

Outside the U.S., underlying express earnings fell to $88 million from $305 million in the first three months of 2008.

Global freight forwarding revenue slumped 18.2 percent to $2.55 billion, due largely to a 26.2 percent drop in air freight volumes. Ocean container shipments fell ten percent compared with a market decline of 16 percent. Forwarding and corporate freight earnings slipped to $59.8 million from $103.7 million.

Deutsche Post said declines in overall operating earnings excluding one off items should be "significantly lower" in the next three quarters.

Contact Bruce Barnard at brucebarnard47@hotmail.com .