Deutsche Post Forecasts Annual Earnings Growth Through 2020

Apr 02, 2014 6:00 am ET

(Updates shares in third, fifth paragraphs.)

April 2 (Bloomberg) -- Deutsche Post AG, Europe’s largest mail service, forecast operating profit may exceed 5 billion euros ($6.9 billion) by 2020 on Internet shipments and expansion in emerging economies. The shares rose to a record.

Earnings before interest and taxes will grow more than an average 8 percent a year and reach 4.92 billion euros to 5.22 billion euros in 2020, the Bonn-based company said in a presentation today.

Deutsche Post said it plans to get 30 percent of revenue from developing countries in 2020, compared with 22 percent last year, and will expand electronic commerce and parcel shipments abroad. The shares rose as much as 4.3 percent to 28.27 euros, the highest since they started trading in 2000.

The company presented “very bullish long-term targets,” Frank Skodzik, an analyst at Commerzbank, said in a note to clients. “Visibility on profitability post 2015 was limited so far, so the new details given today should give better guidance, and the upside looks very strong.”

The stock traded 4 percent higher at 28.28 euros at 11:53 a.m. in Frankfurt.

Deutsche Post has been implementing an efficiency program that helped the company avoid much of the fallout of the longest recession in Europe since the region introduced a common currency. Chief Executive Officer Frank Appel focused on tapping growth in the parcel business to counter declining letter volume and fortified the company’s position in shipments in Asia.

Mid-Term Targets

Operating profit will amount to 3.35 billion euros to 3.55 billion euros in 2015, up from a forecast range of 2.9 billion euros to 3.1 billion euros this year, the postal operator reiterated today.

Analysts expect the measure to climb to 3.09 billion euros this year and 3.47 billion euros next, according to estimates collected by Bloomberg.

Sales generated by domestic parcel shipments will grow an average 8 percent each year through 2020, Deutsche Post said, with China expanding at 15 percent per year.

The mail unit, to be renamed post, e-commerce, parcel, will see operating profit growing at 3 percent per year through 2020, while the DHL units, which are involved in express delivery and freight forwarding, will grow at 10 percent per year, the company forecast.

“Bolt-on” acquisitions will support the company’s strategy and growth as well as further “small” disposals, though there will be “no significant increase” in spending on acquisitions, Deutsche Post said today.