Reporting January to June 2012

In the first half of 2012, which had the same number of working days, revenue was €6,845 million and therefore slightly above the prior year’s figure of €6,779 million. The trend in the first three months – strong growth in the parcel business and moderate declines in the mail business – continued in the second quarter, although there was one less working day in comparison with the previous year. We encountered positive currency effects of €25 million in the reporting period.

Slightly fewer business customer letters year-on-year

In the Mail Communication business unit, we delivered slightly fewer letters on behalf of our business customers than in the first half of 2011. Revenue generated from this business was just below the prior year’s figure. Compared with the prior-year quarter, revenue was down 3.4% due, in particular, 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.

Since the beginning of the year, traditional mail-order businesses have held back on advertising expenditure, which is evidenced by revenue and sales in addressed advertising mail. In the second quarter sales recovered slightly compared with the previous quarter, whilst revenue was below the previous year’s level. Sales volumes of the other products in the Dialogue Marketing business unit exceeded prior-year levels; Einkaufaktuell recorded encouraging growth in volume. Revenue in the business unit decreased by 3.4% to €1,244 million (previous year: €1,288 million).

Revenue in the Press Services business unit totalled €382 million in the reporting period, 3.0% below the prior-year figure of €394 million. The German press services market, the volume of which is described in our 2011 Annual Report, continues to decline. Newspaper and magazine circulation is falling, although item weights remain stable.

Value-added service business stable

Revenue in the Value-Added Services business unit reached €115 million, equalling the previous year’s figure.

Parcel business sees sustained strong growth

Revenue in the Parcel Germany business unit reached €1,641 million in the reporting period, improving on the previous year’s high figure of €1,459 million by 12.5%. 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.

Revenue generated by our approximately 20,000 retail outlets and sales points amounted to €414 million in the reporting period, a 4.3% increase over the previous year’s level (€397 million).

Revenue in international mail business stabilises

In the Global Mail business unit, volumes declined year-on-year primarily because we discontinued parts of our business, these being the bulk mail business in the Netherlands during the previous year and the domestic business in the UK during the reporting period. We were able to stabilise our operating business. Revenue was €813 million in the first half of the year, only slightly below the prior year’s figure of €815 million. In the second quarter, revenue exceeded the previous year’s level by 1.8%. We saw encouraging growth in our traditional export business, in international mail from the Asia Pacific region and from the USA.

EBIT in the MAIL division was €431 million in the reporting period, significantly below the prior-year figure of €559 million. The figure was impacted by the additional VAT payment of €151 million. Return on sales was 6.3%.

Operating cash flow was €26 million (previous year: €30 million). This figure is impacted in the first half of each year by the annual payments made in January to Bundes-Pensions-Service für Post und Telekommunikation. Working capital was €–774 million, below the level of the prior year (€–586 million).

In the EXPRESS division, revenue increased by 10.3% in the first half of 2012 to €6,264 million (previous year: €5,681 million). The figure for the prior year still included revenues of €141 million related to the sold domestic express business in China, Canada, Australia and New Zealand. Excluding these divestments and positive currency effects of €268 million, revenue grew by 8.0% in the first half of the year, mainly because of the increase in Time Definite International (TDI) shipment volumes.

In the TDI product line, our customers sent 9.2% more shipments per day compared with the previous year and weight per shipment rose by 4.6%. The daily shipment volumes also rose in the Time Definite Domestic (TDD) business, increasing by 7.1% compared with the first half of 2011. In the Day Definite Domestic (DDD) product line, however, shipments declined by 21.5% due to the disposal of the domestic businesses mentioned above.

Although economic output in the euro zone remained weak and the recovery of the global economy lacked momentum, we continued our positive trend in the second quarter as well. Shipment volumes in the TDI product line increased again, by 9.1%.

Both the domestic business in New Zealand and the rest of the domestic express business in Australia were sold during the reporting period.

In the Europe region, revenue increased by 5.6% in the first half of 2012 to €2,778 million (previous year, adjusted: €2,631 million). This figure included positive currency effects of €24 million related mainly to our business activities in Switzerland, the UK and Scandinavia. Excluding these effects, revenue growth was 4.7%. Daily shipment volumes for the TDI product line increased by 9.2% in the second quarter compared with the prior-year period; the increase was even stronger than in the previous quarter.

Revenue up sharply in the Americas region

In the Americas region, revenue rose by 15.4% to €1,086 million in the reporting period (previous year: €941 million). This figure includes the sale of our domestic express business in Canada in the amount of €97 million and positive currency effects of €86 million. Excluding these effects, revenue increased by a notable 16.6% in the Americas region due to the sustained positive business trend in the United States. Daily shipments in the TDI product line in the United States rose by a considerable 14.6% compared with the first six months of the previous year.

Strong business growth in the Asia Pacific region continues

In the Asia Pacific region, the positive business trend in the second quarter of 2012 became even more pronounced. Revenue for the first half increased sharply, rising by 18.4% to €2,091 million (previous year: €1,766 million). In the prior year, this figure still included revenues related to the sold domestic express business in China, New Zealand and Australia in the amount of €43 million. Excluding this effect and positive currency effects, which have now risen to €147 million, revenue growth in the reporting period was 12.5% year-on-year. Daily shipment volumes grew significantly in the TDI product line, with a rise of 9.8% in the first half of the year. The increase for the second quarter was even higher at 10.1%.

Ongoing positive revenue and volume trend in the MEA region

Although the political situation in the Middle East remains tense, our positive trend continued in the MEA region (Middle East and Africa). Revenue increased by 16.7% in the reporting period to €482 million (previous year, adjusted: €413 million). This figure includes positive currency effects of €25 million. Excluding these effects, revenue growth was still in double figures at 10.7%. Daily shipment volumes grew in the TDI product line by 7.4%. The increase in the TDD product line was even more substantial at 16.6%.

Profitability continues to improve

EBIT in the EXPRESS division increased by 31.1% in the first half of 2012 to €598 million (previous year: €456 million). This significant improvement was attributable to strong growth in revenues and volumes, although EBIT for the reporting period also benefited from one-time effects. For instance, restructuring provisions were partially reassessed and reversed in the United States, with a positive impact on EBIT of €99 million. Earnings were also positively impacted by deconsolidation income of €44 million resulting from the sale of our domestic business 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 improved from 8.0% in the previous year to 9.5%. In the second quarter of 2012, EBIT increased significantly to €367 million (previous year: €242 million).

Operating cash flow for the first half of the year was €275 million, 12.1% below the prior-year period (€313 million) but it improved significantly in the second quarter to €320 million (previous year: €180 million). Our strict working capital management made a significant contribution to the improvement.

In the GLOBAL FORWARDING, FREIGHT division, revenue increased in the first half of 2012 by 4.1% to €7,659 million (previous year: €7,357 million). This figure includes positive currency effects of €250 million. The moderate revenue growth seen in the first quarter continued in the second quarter of 2012, driven primarily by reduced prices, the sluggish airfreight market and the macroeconomic situation. Despite this, our business overall grew profitably.

In the Global Forwarding business unit, revenue increased by 4.7% year-on-year from €5,381 million to €5,635 million. Excluding positive currency effects of €243 million, revenue remained on par with the prior year. Gross profit improved by 9.3% to €1,287 million (previous year: €1,177 million).

In addition, in the Global Forwarding business unit, the strategic project “New Forwarding Environment” (NFE), which is aimed at developing a forward-looking operating model based on efficient processes and state-of-the-art IT systems, has gained significant traction. We intend to further strengthen our position as the industry leader through this business transformation.

Higher gross profit in all business units

In the reporting period, revenue declined year-on-year in the air freight business but grew in the ocean freight business. Likewise, shipping volumes were down in the air freight business and up in the ocean freight business. Despite decreasing fuel prices, air freight rates remained largely unchanged. Existing surplus capacities are creating opportunities in the short-term spot market. The excess capacities result from a relatively strong increase in passenger plane capacities compared with a relatively weak decrease in cargo plane capacities. Ocean freight rates increased in the second quarter.

Our air freight volumes were down by 7.1% compared with the first half of 2011, resulting mainly from the decline in demand in the technology sector, which is a key sector for our business unit. Revenue declined by 1.0% in the first half of the year. As a result of the further surplus capacities in the market, we were able to purchase cargo space at better conditions and transfer cargo plane capacities to passenger planes. Thus we managed to improve gross profit by 6.0%.

Volumes in our ocean freight business in the first half of the year were 4.0% higher than in the prior-year period. Cost pressure continues to drive some of our customers to shift parts of their business from air freight to ocean freight, which is more economical. Revenue increased by 1.9% and gross profit improved by 6.7%.

In our industrial project business (reported as part of Other in table "Global Forwarding: revenue"), we saw strong growth continue, with gross profit again increasing considerably compared with the previous year.

In the Freight business unit, revenue rose by 2.2% to €2,087 million in the first half of 2012 (previous year: €2,043 million), which is largely attributable to growth in Germany and Eastern Europe. This revenue includes positive currency effects of €8 million as well as the business from Standard Forwarding in the United States, which we acquired in June 2011. We increased gross profit by 8.7% from €531 million to €577 million through strict cost management, despite the fact that pressure on margins remained high.

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 improves again

Thanks to high gross profit margins and constantly increasing efficiency, EBIT in the division improved by 20.4%, from €186 million to €224 million. Return on sales amounted to 2.9% (previous year: 2.5%).

Net working capital in the reporting period increased so that operating cash flow declined by €110 million to €164 million (previous year: €274 million).

In the SUPPLY CHAIN division, first-half revenue increased by 9.2% from €6,352 million to €6,937 million. This figure includes positive currency effects of €333 million. Revenue was 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 4.4%, with the Automotive and Life Sciences & Healthcare sectors providing the largest increase. In the second quarter, we saw a rise of 12.5% to €3,528 million. Revenue increased 3.0% without positive currency effects (€243 million) and acquisitions.

In the Supply Chain business unit, first-half revenue grew by 7.8% from €5,832 million to €6,284 million in the previous year. Excluding the positive currency effects, the ETS disposal and the Eurodifarm acquisition, growth was 4.7%. Revenue from our 18 key global customers increased by 9.5%.

In the Americas region, volumes in the Consumer, Life Sciences & Healthcare and Automotive sectors continued to perform well and we generated additional revenue from new business.

Revenue growth was strongest in the Asia Pacific region due to increased volumes and revenues from new business in Australia, Thailand and Indonesia.

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

Williams Lea revenue was €656 million in the first half, an increase of 25.7% on the previous year (€522 million). Excluding the Tag acquisition and positive currency effects, growth was 0.8%. Most of this growth came from the Marketing Solutions business in the Americas and was partially offset by a decline in the Financial Services sector.

In the Supply Chain business unit, we concluded additional contracts worth around €520 million in annualised revenue with both new and existing customers. Major gains were achieved in the Life Sciences & Healthcare, Retail, Consumer and Technology sectors. The high annualised contract renewal rate remained constant.

Prior-year gain impacts EBIT development

EBIT in the SUPPLY CHAIN division was €192 million in the first half (previous year: €189 million). The prior-year figure included a €23 million net gain on the disposal of ETS in the second quarter. The EBIT margin was 2.8% compared with 3.0% in the previous year. The rise in EBIT was driven by improved contract portfolio management along with continued cost efficiencies from operational and overhead leverage. EBIT for the second quarter amounted to €101 million compared with €111 million in the previous year. Operating cash flow was €–60 million in the first half (previous year: €125 million), largely due to increased working capital from delayed customer payments, higher receivables from additional revenue and an extended ramp-up of new contracts.