Ad hoc: Deutsche Post AG introduces guidance for 2020 and 2022 based on preliminary Q2 2020 results. AGM will be conducted on August 27th, 2020. Dividend proposal of EUR 1.15 per share
Based on preliminary group results for the month of June and hence Q2 2020 management today has assessed the outlook for the remainder of the year.
At the beginning of Q2 2020, business development was still dominated by the pandemic protection measures in place in Europe and North America as well as a sharp initial decline in volumes. During this period, the group took measures to adjust to the effects of the pandemic and to maintain and secure capacity for its networks. During the course of Q2 2020, volumes began to recover. In addition, the company has recorded a positive development of shipment volumes driven by e-commerce, both internationally and in the German parcel business.
Q2 2020 results developed as follows:
Preliminary group EBIT reached around EUR 890 million in Q2 2020 (Q2 2019: EUR 769 million). This includes the already expected negative impact of around EUR 100 million to realign the group's StreetScooter activities and an additional around EUR 100 million asset impairments which were triggered by the lockdown and primarily relate to the Supply Chain and eCommerce Solutions divisions. The group does not differentiate anymore between operating result before and after effects related to Covid-19 as in the course of Q2 2020 this distinction has become increasingly artificial and meaningless.
Operating profit in Post & Parcel Germany was around EUR 260 million (Q2 2019: EUR 177 million). The Express division managed to increase its EBIT in the second quarter to around EUR 560 million compared to previous year's Q2 of EUR 521 million. Operating profit in Global Forwarding, Freight stood at around EUR 190 million, also above previous year's Q2 of EUR 124 million. Operating profit in DHL Supply Chain suffered from the above-mentioned impairments in Q2 with around EUR 60 million. EBIT at Supply Chain was at around EUR 30 million in the first quarter 2020 (Q2 2019: EUR 87 million). Despite impairments of around EUR 30 million DHL eCommerce Solutions was able to achieve break-even EBIT slightly ahead of previous year's EBIT (Q2 2019: EUR -18 million).
The overall positive business development is underpinned by a strong development of cash flow; free cash flow has significantly increased in the second quarter to more than EUR 500 million (2019: EUR -547 million), resulting in a positive free cash flow of more than EUR 100 million for the first half of 2020.
Management decided today to pay a one-time bonus of EUR 300 to each of the more than 500,000 employees (FTE) in appreciation for the tireless efforts under the pandemic situation.
This one-time bonus payments totaling around EUR 200 million will be paid out and accounted for as personnel expenses in the third quarter 2020.
In light of the recent earnings momentum, management has decided to provide the following outlook for the full year 2020:
The reported group-EBIT is expected between EUR 3.5 billion and EUR 3.8 billion. This includes the communicated expenses to realign StreetScooter activities of around EUR 400 million, the one-time bonus payment of around EUR 200 million as well as the above mentioned asset impairments of around EUR 100 million.
The group expects an EBIT of EUR 1.5 billion for Post & Parcel Germany, which includes about one third of the one-time bonus payment. For its DHL divisions Deutsche Post DHL Group forecasts an EBIT between EUR 2.8 billion and EUR 3.1 billion including the above mentioned one-off effects. Operating profit in Corporate Functions including StreetScooter-effects is expected at around EUR -750 million.
Gross capex (excluding leases) for the full year 2020 is expected to be in total at around EUR 2.9 billion, free cash flow is expected to be at around EUR 1.4 billion. This includes all mentioned one-off effects and also around EUR 300 million for the 777 renewal program in the Express intercontinental fleet.
As uncertainty about the course of an economic recovery over the next 30 months is still considerable, the group's medium-term earnings outlook for 2022 is given as follows:
- In the favorable case of a swift recovery of the global economy without broad setbacks in the pandemic development ('V-shape' recovery) the group expects EBIT of more than EUR 5.3 billion.
- In case of a slower recovery, e.g. with at least some local setbacks in the pandemic development ('U-shape' recovery), the group expects EBIT of around EUR 5.1billion.
- In the least favorable case of a lack of a broad-based recovery, e.g. due to setbacks in the pandemic development ('L-shape' recovery) the group expects EBIT of around EUR 4.7 billion.
The investment plans (gross capex excluding leases) for the years 2020-2022 remain unchanged between EUR 8.5 billion and EUR 9.5 billion. Additionally, the cumulative free cash flows guidance of EUR 5.0 to 6.0 billion for 2020 to 2022 is confirmed.
In their meetings today Corporate Board and Supervisory Board decided to hold the Annual General Meeting on August 27th, 2020 in a virtual online format.
Management and Supervisory Board propose to pay a dividend of EUR1.15 per share, unchanged versus last year.
The comprehensive disclosure for the first half 2020 will be released on August 5th as planned.
Financial indicators: Explanations on these financial indicators are available in the 2019 Deutsche Post DHL Group Annual Report (see page 14f), which is published on the company's website at the link below: