Reporting January to September 2012

At €10,121 million, revenue in the first nine months of 2012 was on par with the prior year (adjusted: €10,120 million), despite the period having one less working day. The previous trend for 2012 of strong growth in the parcel business and moderate declines in the mail business remained intact, although the volume development in the mail business weakened somewhat in the third quarter due to seasonal factors. Positive currency effects amounted to €43 million in the reporting period.

Fewer business customer letters delivered

In the Mail Communication business unit, we delivered fewer letters in the first nine months than in the previous year. Revenue was also slightly below the prior-year figure. Compared with the prior-year quarter, revenue was down 4.5% due to one less working day. Even though we retained and won back quality-conscious customers, some of our price-sensitive customers turned to competitors. Information on market volumes is collected each year; for the latest figures, please see the 2011 Annual Report.

Traditional mail-order businesses have held back on advertising expenditure since the beginning of the year, which particularly impacts revenue and sales in addressed advertising mail. One less working day in the third quarter also had an impact; revenue and volumes declined during this period more than the annual average. The decline in unaddressed advertising mail was particularly evident at the end of the quarter. In this business unit revenue decreased by 4.9% to €1,822 million (previous year: €1,915 million) during the first nine months.

Revenue in the Press Services business unit totalled €555 million in the first nine months of 2012, 4.5% below the prior-year figure of €581 million; quarter-on-quarter it was down by 7.5%. The German press services market, the volume of which is described in our 2011 Annual Report, continues to decline overall. Newspaper and magazine circulation is falling; item weights are also down slightly.

Value-added service business stable

Revenue in the Value-Added Services business unit was €172 million in the reporting period, on par with the adjusted prior-year figure.

Parcel business sees sustained strong growth

Revenue in the Parcel Germany business unit reached €2,439 million in the reporting period, improving on the previous year’s high figure of €2,207 million by 10.5%. The flourishing e-commerce business is the primary reason for this sustained strong growth. Our range of products and delivery services are playing a key role in this growth. In the third quarter, growth was slightly lower at 6.7% due to one less working day.

Revenue generated by our approximately 20,000 retail outlets and sales points amounted to €621 million in the first nine months of 2012, a 4.2% increase over the previous year’s level (€596 million).

Revenue in international mail business stabilises

The year-on-year decline in volumes in the Global Mail business unit was primarily the result of the sale of our bulk mail business in the Netherlands and the discontinuation of our domestic business in the UK. We were able to stabilise our operating business. Revenue was €1,216 million in the first nine months, only slightly below the prior year’s figure of €1,226 million. We saw encouraging growth in international mail from the Asia Pacific region and from our US business. However, at the same time import volumes to Germany declined slightly.

EBIT for the division was €678 million in the reporting period, significantly below the prior-year figure of €861 million. The figure was impacted by €151 million, due to the additional VAT payment. Return on sales was 6.7%.

At €–30 million, operating cash flow was also significantly below the previous year’s level of €437 million. The primary reason for this was the net outflow of working capital, the termination of a financial factoring agreement as well as the additional VAT payment. Working capital was €–489 million, above the prior-year level (€–690 million).

Revenue for the division increased by 9.8% in the first nine months of 2012 to €9,436 million (previous year, adjusted: €8,591 million). The figure for the prior year still included revenues of €186 million related to the divested domestic express businesses in China, Canada, Australia and New Zealand. Excluding these divestments and positive currency effects of €449 million, revenue grew by 6.8% in the reporting period, mainly because of the rise in Time Definite International (TDI) shipment volumes.

These changes in the domestic express business also explain the daily revenue and volume developments for the TDD product line shown below.

In the TDI product line, our customers sent 9.1% more shipments per day compared with the previous year and weight per shipment rose by 4.2%. In the Day Definite Domestic (DDD) product line, however, daily shipment volumes declined by 17.3% due to the disposals mentioned above.

We continued to grow in the third quarter as well, despite the volatile economic environment. Daily shipment volumes in the TDI product line increased by 8.7% versus the third quarter of 2011.

In the Europe region, revenue increased by 4.7% in the reporting period to €4,132 million (previous year, adjusted: €3,947 million). This figure includes positive currency effects of €51 million related mainly to our business activities in Switzerland, the UK, Scandinavia, Russia and Eastern Europe. Excluding these effects, revenue growth was 3.4%. Daily shipment volumes grew by 9.0% in the TDI product line.

Strong growth in the Americas region

Revenue growth in the Americas region has risen each quarter in the current financial year. In the first nine months of 2012, revenue climbed by 19.7% to €1,674 million (previous year: €1,398 million). This figure includes the sale of our domestic express business in Canada in the amount of €97 million and positive currency effects of €148 million. Excluding these effects, the revenue increase was 16.1% in the region due to the positive business trend in the United States as well as significantly higher revenues in Mexico and South America. Daily shipment volumes in the TDI product line rose compared with the prior year. The increase was 8.6% in the Americas region and in the United States it was even higher at 12.7%.

High momentum in the Asia Pacific region continues

The business trend in the Asia Pacific region remains dynamic. Revenue in the reporting period increased by 16.8% to €3,180 million (previous year: €2,722 million). In the prior year, this figure still included revenues related to the divested domestic express businesses in China, New Zealand and Australia in the amount of €89 million. Excluding these disposals and the positive currency effects, which increased to €231 million, revenue growth in the reporting period nonetheless reached 11.6% year-on-year. In the TDI product line, daily shipment volumes grew by 9.7%.

Stable business trend still continues in the MEA region

In the MEA region (Middle East and Africa), revenue rose by 15.7% in the reporting period to €722 million (previous year, adjusted: €624 million). This figure includes positive currency effects of €41 million. Excluding these effects, revenue growth was 9.1%. Daily shipment volumes grew by 7.2% in the TDI product line and by an impressive 16.7% in the TDD product line.

Earnings continue to improve

EBIT for the division increased by 23.4% to €829 million in the first nine months of 2012 (previous year: €672 million). The rise was driven by overall strong revenue growth as well as one-time effects in the second quarter: a portion of the restructuring provisions in the United States was reassessed and reversed, resulting in a positive impact on EBIT of €99 million. Earnings were also positively impacted by deconsolidation income of €44 million from the sale of our domestic businesses in New Zealand and Australia. The additional VAT payment in Germany for past financial years had a negative effect of €30 million on EBIT for the division. Return on sales rose from 7.8% in the previous year to 8.8%.

In the third quarter, EBIT improved by 6.9% to €231 million; return on sales was at the prior-year level.

Operating cash flow decreased to €607 million in the first nine months of 2012, 10.7% below the prior-year figure of €680 million. This figure was affected in the reporting period by the additional VAT payment in Germany as well as a one-time payment related to early termination of the co-operation agreement with ASTAR Air Cargo in the United States. Even as revenues rise, we continue to pursue our strict working capital management.

In the division, revenue increased in the first nine months of 2012 by 4.6% to €11,677 million (previous year, adjusted: €11,161 million). This figure includes positive currency effects of €440 million. The moderate revenue growth seen in the previous quarters continued in the third quarter. Overall our business grew profitably, although prices remained low and the air freight market was sluggish. Uncertainties persist due to the macroeconomic environment.

In the Global Forwarding business unit, revenue rose by 5.8% to €8,662 million in the reporting period (previous year: €8,187 million). Excluding positive currency effects of €414 million, revenue remained on par with the prior year. Gross profit improved by 9.7% to €1,970 million (previous year: €1,796 million).

The strategic project New Forwarding Environment (NFE) progressed encouragingly. NFE aims at developing a forward-looking operating model based on efficient processes and state-of-the-art IT systems.

Gross profits increase in all business units

In the reporting period, revenue declined slightly year-on-year in the air freight business but grew noticeably in the ocean freight business. Shipping volumes mirrored this development, with air freight volumes decreasing whilst ocean freight volumes increased and outperformed the market. Air freight rates remained nearly unchanged in the third quarter, although fuel prices were up slightly. Continued surplus capacities created opportunities in the short-term spot market. These resulted from the relatively strong increase in passenger plane capacities compared with a relatively weak decrease in cargo plane capacities. Ocean freight rates remained largely stable in the third quarter.

Our air freight volumes were down by 6.0% in the first nine months compared with the previous year, resulting mainly from the decline in demand in the technology sector. Revenue declined by 0.4%; gross profit increased by 6.2%.

Volumes in our ocean freight business in the first nine months were 4.8% higher than in the prior-year period. Some of our customers continue to be driven to shift parts of their business from air freight to the more economical ocean freight option as a result of cost pressure. Revenue rose by 6.3% and gross profit improved by 6.8%.

In our industrial project business (reported as part of Other in table "Global Forwarding: revenue"), we saw strong growth. The share of Other revenue accounted for by industrial projects increased to 38.4% (previous year: 34.2%). Our gross profit improved again compared with the previous year.

In the Freight business unit, revenue grew to €3,111 million (previous year, adjusted: €3,077 million) in the first nine months, a slight increase of 1.1%. Growth was seen largely in Germany and Eastern Europe. The business from Standard Forwarding in the United States contributed 1.8% to revenue in the Freight business unit in the reporting period. We acquired the company in June 2011 to develop our overland transport business outside our core market of Europe. Total revenue includes positive currency effects of €27 million. Although the pressure on margins remained, gross profit was €856 million, which exceeded the previous year by 6.6% (previous year: €803 million).

Effective 1 January 2012, responsibility for the national less-than-truckload and part-truckload business in the Czech Republic was transferred from the EXPRESS division to Freight. The previous year’s segment reporting figures were adjusted accordingly.

EBIT increases on the back of high gross profit margins

EBIT in the division improved by 11.6% to €346 million (previous year, adjusted: €310 million) thanks to high gross profit margins and constantly increasing efficiency. Return on sales amounted to 3.0% (previous year: 2.8%).

In the third quarter, EBIT was €122 million and on par with the prior-year period.

Net working capital in the first nine months declined. Operating cash flow remained at a constant level at €410 million (previous year: €408 million).

In the division, revenue for the first nine months increased by 9.6% from €9,675 million to €10,607 million. This figure includes positive currency effects of €591 million. Revenue was also impacted by the previous year’s acquisition of Eurodifarm and Tag as well as the sale of Exel Transportation Services (ETS). Excluding these effects, revenue growth was 3.8%, with the Automotive and Life Sciences & Healthcare sectors providing the largest increase. In the third quarter, we saw a rise of 10.4% to €3,670 million (previous year: €3,323 million). Revenue increased 2.7% excluding positive currency effects (€258 million).

In the Supply Chain business unit, revenue grew by 9.0% year-on-year to €9,609 million in the first nine months (previous year: €8,817 million). Excluding the positive currency effects, the ETS disposal and the Eurodifarm acquisition, growth was 4.4%. Revenue from our 18 key global customers increased by 8.3%.

In the Americas region, the Consumer, Life Sciences & Healthcare and Automotive sectors continued to perform well, aided by strong revenue growth in Brazil and Mexico.

In the Asia Pacific region, the largest increase in volumes and new business revenues came from Australia, Thailand and Indonesia.

In Europe, revenue in the Life Sciences & Healthcare sector grew from additional business with the UK National Health Service boosted by an optimised mix of higher-value products. Volumes and new business also increased in Eastern Europe, the Middle East and Africa.

Williams Lea revenue was €1 billion in the first nine months, an increase of 16.6% on the previous year (€858 million). Excluding the Tag acquisition and positive currency effects, revenue declined by 2.2%.

In the Supply Chain business unit, we concluded additional contracts worth around €810 million in annualised revenue with both new and existing customers. Major gains were achieved in the Life Sciences & Healthcare, Consumer, Retail and Technology sectors. The annualised contract renewal rate remained at a constantly high level.

EBIT margin remains stable

EBIT in the division was €301 million in the first nine months (previous year: €289 million). The prior-year figure included a €23 million net gain on the disposal of ETS. The increase in EBIT was driven by improved contract portfolio management along with continued cost efficiencies, which offset margin pressure and start-up costs. The EBIT margin remained stable at 2.8% despite the deterioration in the European economy. The previous year’s EBIT margin was 3.0% and included the ETS disposal, without which it was 2.7%. EBIT for the third quarter amounted to €109 million compared with €100 million in the previous year. Operating cash flow was €157 million in the first nine months (previous year: €211 million), with the decrease largely being due to increased working capital from delayed customer payments and higher receivables.