Deutsche Post sees international courier business up in 2014

By Marilyn Gerlach

BONN, Germany (Reuters) - Deutsche Post expects its Express international courier business to grow this year after a strong finish to 2013, which saw demand returning amid a cautious recovery in Europe and a boom in online shopping in Germany.

Peers such as United Parcel Service Inc have forecast a stronger year ahead, while European logistics competitors like Kuehne & Nagel as well as Panalpina estimate modest growth on the back of an uptick in Asian shipping traffic from Europe.

"The economy may improve a bit. But we think that a strong global recovery will take more time to materialise. Nonetheless we intend to continue our positive earnings momentum," Chief Executive Frank Appel said on Wednesday after the company published 2013 operating profit that beat forecasts.

Appel declined to provide specifics on where growth would come from but board member Ken Allen told reporters DHL was growing faster than UPS, FedEx and TNT in the so-called Time Definite International product, which delivers urgent documents and goods door-to-door the next day.

Allen said growth was strong both in Europe and Asia while it was also starting to regain some of its market share in the Americas.

He said there was "very, very strong" growth in countries like Spain, Italy and Greece, where small firms have difficulty doing business domestically and were looking to export.

Deutsche Post reported fourth-quarter earnings before interest and tax (EBIT) of 885 million euros ($1.23 billion), up 7 percent, but revenues fell 0.6 percent to 14.5 billion, hit by a strong euro.

It forecast this year's group EBIT to rise to between 2.9 billion and 3.1 billion euros, compared with 2.06 billion last year, with the DHL logistics division generating 2.1-2.3 billion.

Deutsche Post, which has grown into a global logistics corporation under the DHL brand after the former postal company went public in 2000, generates some 45 percent of its Express revenues in Europe, where it grew revenue by 4.9 percent to 5.9 billion euros for the whole of last year.

DHL - comprising Express, Global Forwarding and Supply Chain divisions - reported operating profit of 2.1 billion euros last year, posting its strongest growth - at 13.3 percent - in the final quarter. Profit at Express in the quarter alone grew 14.3 percent to 320 million euros.

"The key driver of the underlying EBIT growth was Express," analyst Damian Brewer of RBC Capital Markets said.

Forwarders buy cargo space from airlines, shippers and truckers and bundle shipments of its customers, such as carmakers and high-tech firms. They also offer warehousing, warranty processing, returns management as well as customs and insurance brokerage.

SOME HEADWINDS

Appel said DHL was still facing an economic headwind in certain areas, adding cost controls and its customer selection strategy had limited the impact of weakening demand in the air and ocean-freight business on the profitability of Forwarding.

He said Express - which delivers urgent documents and goods door to door within 24-hours - and supply chain - whose carmaking and high-tech clients benefit from its warehousing and distribution facilities - reported a slight dip in revenues but excluding exchange rate effects and disposals, revenues rose.

Deutsche Post said the international Express business benefited last year mainly from the overall stabilisation of the economy, the increase in e-commerce and growing importance of small and medium-sized companies in international trade.

Like peers FedEX , UPS and Royal Mail, Deutsche Post benefited from a surge in online shopping just before Christmas, boosting the number of parcels delivered.

Deutsche Post said on Wednesday its parcels business holds a 42.3 percent share of Germany's 8.2 billion euros parcels market and grew revenues last year by 7.9 percent to 3.75 billion euros by clearing the 1 billion parcel barrier for the first time last year.

The Mail division, which includes the domestic parcels business, has been hit by a growing trend in email and social media messaging and accounts for about a quarter of group revenues. It posted a 3 percent rise in revenues, but operating profit fell 3.2 percent, dragged down by higher wage costs.

(This corrected version of the story fixes figures in penultimate paragraph)

(Reporting by Marilyn Gerlach; editing by Jason Neely and Keiron Henderson)