Deutsche Post DHL Profit Plunges 71 Percent

Lower revenue and bad debts pushed profit in the second quarter down 71 percent for Deutsche Post DHL. The world's biggest logistics company warned of tough market conditions ahead.

Profit fell to $93.7 million from $328 million a year ago. Mail, express, freight forwarding and contract logistics revenue shrunk by 18 percent to $15.8 billion.

Operating income fell by a lower-than-expected 38 percent to $392 million, helped by cost cutting that impacted mainly on the performance of the corporate express delivery business.

First half earnings before interest and tax fell 85 percent to $198 million on revenue down 15 percent at $32 billion.

The Bonn-based company, which ceased domestic express deliveries in the United States in January after mounting losses, forecast full year profit of $1.7 billion compared with $3.42 billion in 2008.

It expects to post a net profit in 2009 thanks to cash proceeds from the sale of its banking unit, Deutsche Postbank.

The earnings forecast "is built on the assumption we won't see a substantial improvement of global trade in coming months," said CEO Frank Appel.

"We've also taken into account that individual customers may file for insolvency or that we will see extended factory closures in individual sectors," he added.

The express division cut costs faster than targeted, offsetting lower volume and leaving second quarter profit unchanged from a year ago at $93.7 million. Revenue tumbled 28.6 percent to $3.6 billion.

Deutsche Post said it is confident that deeper cost cuts in the United States would help reduce express losses on an annual basis to below $400 million in 2009.

The global freight forwarding unit won new business worth $355 million a year in the life science, fashion, high tech, automotive and industrial project sectors during the quarter. But weaker demand in the technology and engineering sectors as well as lower freight rates and fuel surcharges depressed earnings to $112 million from $146 million a year ago. Revenue dived 27 percent to $3.7 billion.

The supply chain division booked new business worth $355 million a year in the quarter and reported a contract renewal rate of around 90 percent. But earnings fell to $22.7 million from $91 million due to the bankruptcy of a major customer, the German department store and mail order company Arcandor. Supply chain revenue was off 9 percent at $4.4 billion.

Contact Bruce Barnard at brucebarnard47@hotmail.com.