Deutsche Post Predicts Slower Growth Than Analysts

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Deutsche Post AG, Europe’s largest mail carrier, forecast slower earnings growth in 2010 than analysts estimated as reorganization costs and the loss of a tax privilege in Germany partly offset an economic recovery.

Earnings before interest and taxes, excluding one-time gains or costs, will total 1.6 billion euros ($2.17 billion) to 1.9 billion euros, Bonn-based Deutsche Post said today. That compares with an underlying-Ebit estimate of 2 billion euros by Frank Skodzik, an analyst at Frankfurt-based Commerzbank AG.

Deutsche Post sold U.K. corporate-parcel operations this year and aims to dispose of its French domestic-package unit. The company may be able to eliminate restructuring costs next year after reducing the charges by 70 percent in 2010, Chief Financial Officer Lawrence Rosen said today in an interview. Deutsche Post said it’s forecasting a “moderate recovery” for the global mail and freight industry.

“Investors know that they aren’t going overboard with their outlook, and it will likely end up quite a bit better in the end,” said Nils Machemehl, and analyst at BHF-Bank AG in Frankfurt with a “buy” recommendation on the stock. “The world market for express and freight forwarding will pick up tremendously this year and the company stands to profit from that.”

Deutsche Post rose 29 cents, or 2.2 percent, to 13.09 euros in Frankfurt trading. The stock has declined 2.9 percent this year.

“They really seem to have priced in all negative risks in their outlook,” said Skodzik, who’s retaining his “buy” recommendation on Deutsche Post.

Arcandor’s Role

Germany’s economy contracted last year, while Deutsche Post’s earnings were reduced when freight customer Arcandor AG, owner of the country’s Karstadt department-store chain, filed for protection from creditors in the middle of last year. Deutsche Post’s DHL Express division closed its unprofitable U.S. domestic business in 2008, which cost the mail carrier a restated 3.9 billion euros over the last two years.

Group reorganization costs will amount to 350 million euros in 2010 following spending of 1.2 billion euros in 2009, Rosen said.

“The limitation on operating earnings is going to be dramatically less than in the past two years,” Rosen said.

Net income in 2009 was 644 million euros compared with a loss of 1.69 billion euros a year earlier, Deutsche Post said. Profit missed the 959 million-euro average analyst estimate. Sales fell 15 percent to 46.2 billion euros. Underlying Ebit fell 27 percent to 1.47 billion euros.

Unchanged Dividend

Deutsche Post said today it will propose keeping the dividend unchanged at 60 cents a share for 2009 earnings under a policy of paying out 40 percent to 60 percent of net income to shareholders in coming years.

The company achieved 1.1 billion euros in cost savings by the end of 2009, exceeding a 1 billion-euro target that was set for a year later, Rosen said at a news conference in Bonn. Deutsche Post aims to retain at least a BBB+ debt rating and may use surplus cash to lift the grade to A-, “but not higher,” in the medium term, the CFO said.

The company may arrange a syndicated loan for more than 1 billion euros to replace privately negotiated credit lines, and plans to sell new bonds to repay debt due from 2012 to 2014, Rosen said. Operating cash flow will be reduced this year by about 1 billion euros in payments related to reorganizing operations in the last two years, he said.

The company has sold its U.K. business-to-business and business-to-consumer domestic parcel operations to Liverpool, England-based Home Delivery Network Ltd., Ken Allen, head of DHL Express, said at the news conference. The French disposal will be completed in the first half, Allen added.

Deutsche Post is considering appealing the elimination of Germany’s value-added tax exemption on mail, Chief Executive Officer Frank Appel told journalists, adding that it’s impossible to calculate how much the exemption’s end would cost the company.

The mail carrier doesn’t plan to make larger acquisitions this year, aiming instead to invest in current businesses, Appel said.