Deutsche Post on track to meet guidance after unveiling new strategy – update

Authors: Dominic Chopping and Christian Moess Laursen

Deutsche Post said it was on track to meet its full-year forecasts after unveiling a series of measures to boost revenue in the coming years.

The German logistics group, also known as DHL Group, has launched a new strategy that will focus on fast-growing sectors and simplify its legal structure. The goal is to increase revenue by 50% by 2030 compared to 2023.

The company’s shares were up 1.5% in afternoon trading.

Political uncertainty, geopolitical tensions and high interest rates have hit global trade and forced the company to cut costs and raise prices to protect profitability until the global economy recovers.

The company’s core business, express, saw pressure from lower volumes and profitability, while freight forwarding suffered from lower freight rates. Although its supply chain, e-commerce and German post and parcel units performed better, they accounted for a smaller share of the group’s total revenue.

As part of the plans announced late Monday, Deutsche Post said it intends to focus on trends that are most likely to define the future of the logistics industry, including the growing e-commerce market, delivery services for specialty pharmaceuticals and new energy products, and eco-friendly delivery options.

The announcement comes as the global e-commerce market is expected to grow by 7% annually through the end of the decade.

Digital sales and a focus on fast-growing regions will also be part of the new growth strategy, in addition to measures to simplify the legal structure and management of postal and parcel services in Germany and e-commerce by establishing independent corporate entities. The simplification work will take a year or two, it said.

The new IT system will further reduce the complexity of contacts between enterprises, it added.

“The group demonstrates ambition and confidence that it is agile and has the right organizational structure to resume and accelerate growth,” JPMorgan analysts said in a note to clients.

The company still plans to distribute between 40% and 60% of net profit back to shareholders and is on track to meet its full-year goals, although the ability to meet those goals for the full year is dependent on fourth-quarter results, the company said at a news conference on Tuesday.

The company’s forecasts call for group earnings before interest and tax to be between 6 billion and 6.6 billion euros ($6.67 billion and $7.33 billion) this year, and between 7.5 billion and 8.5 billion euros in 2026.

“The fact that management has not changed its short- and medium-term outlook should be seen as a sign of confidence in the group’s position and its ability to generate profits in an uncertain macroeconomic environment,” JPMorgan said.

The company said it had bought back €2.8 billion so far under its current share buyback program, after increasing the size of the program from €1 billion to €4 billion in March and extending it until 2025.

Write to Dominic Chopping at [email protected] and Christian Moess Laursen at [email protected]

(END) Dow Jones Newswires

September 24, 2024, 07:01 ET (11:01 GMT)