From CEP Research:

    Deutsche Post World Net (DPWN) today announced a drop in Q3 operating profits due to a declining express business and slower growth in other divisions because of the worsening world economy, reduced its full-year profit outlook and withdrew its previous profit forecast for 2009.
     
    In a preview of its June-September results, which will be released on November 10, DPWN said group EBIT before non-recurring effects dropped around 8% on last year’s €468 million as the global economic environment deteriorated markedly. Third-quarter reported EBIT rose 26% from last year’s €1.68 billion, reflecting a one-off €572 million government repayment. In the first nine months, underlying EBIT rose 1.3%.
     
    “The third quarter was a challenging quarter and we expect the overall environment to remain so in the near future. Given the uncertain growth prospects as a result of the global financial crisis and weakening world economy, we prefer to be cautious with our outlook,” Chief Financial Officer John Allan said.
     
    DHL Express saw its Q3 underlying EBIT drop by €30 million due to the general express market slowdown and the ongoing deterioration in the US express business. Allan said in a conference call with analysts and media representatives that DHL Express has been “accelerating and increasing” its restructuring measures in the USA in view of the “clearly deteriorating market”, and was determined to “meet or beat” the financial targets presented on May 28 this year. DHL was losing US market share, partly due to terminating some unprofitable contracts but also due to very aggressive competition from the two main rivals, he noted.
     
    Asked about the status of negotiations with UPS over the North America airlift outsourcing agreement, Allan said they were making “good progress” and stressed both parties were determined to reach an agreement. But he noted that the agreement would have to reflect a “different volume picture” based on DHL’s cutbacks. DHL Express would retain a US presence to support its global network and there was “no question” of totally exiting the US business, he reiterated. DPWN would present a “full update” on the US express restructuring and the next steps on November 10, Allan promised.
     
    Outside the USA, DHL Express EBIT for the first nine months was 11% above last year’s figure with a high single-digit growth rate in the third quarter. But non-US express volumes grew only about 3% in Q3 compared to about 6% in Q2, with slower growth in nearly all regions, Allan said. Europe volumes were up just 1.5%, and only the Europe Europe/Middle East/Africa region was still showing strong volume growth with a 12% rise, he noted.
     
    Allan stressed that the economic slowdown was now a “worldwide phenomenon” affecting virtually all regions, including China. DHL Global Forwarding saw a slight drop in Q3 air freight volumes and the double-digit rise in ocean freight volumes was also lower than previously. But DHL Forwarding/Freight continued to generate double-digit earnings growth in the third quarter.
     
    The supply chain division maintained profit growth in its core activities and has generated new business worth an annual €1 billion during the year to date compared with €885 million in the year-earlier period. The mail division saw Q3 EBIT developing broadly in line with the first half of the year and somewhat down compared to the year-earlier period.
     
    For the full 2008 year, DPWN now expects underlying EBIT of around €2.4 billion, some 10% below last year’s result and 17% below the previous guidance of €2.9 billion (excluding Postbank). The main shortfall will be seen at DHL Express while other divisions are likely to be slightly below previous guidance.
     
    Looking ahead to 2009, DPWN now expects world economic growth to continue to slow or even turn into a recession in some developed markets, which is likely to materially impact business prospects. Although it still expects higher profits, DPWN said it has withdrawn its previous 2009 guidance of around €3.4 billion in underlying EBIT (excluding Postbank), and will issue fresh guidance when the economic prospects are sufficiently clear.
     

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