The consolidated cash flow statement is prepared in accordance with IAS 7 (Cash Flow Statements) and discloses the cash flows in order to present the source and application of cash and cash equivalents. It distinguishes between cash flows from operating, investing and financing activities. Cash and cash equivalents are composed of cash, cheques and bank balances with a maturity of not more than three months, and correspond to the cash and cash equivalents reported on the balance sheet. The effects of currency translation and changes in the consolidated group are adjusted when calculating cash and cash equivalents.

To enhance the clarity of the cash flow statement, changes in other assets and liabilities were added to the cash flows from operating activities before changes in working capital. These reflect changes in non-current assets and liabilities which are not part of the working capital. The previous year’s amounts were adjusted accordingly.

47.1 Net cash from operating activities

Cash flows from operating activities are calculated by adjusting net profit before taxes for net financial income/net finance costs and non-cash factors, as well as taxes paid, changes in provisions and in other assets and liabilities (net profit before changes in working capital). Adjustments for changes in working capital (excluding financial liabilities) result in net cash from or used in operating activities. Net cash from operating activities can be broken down into net cash from operating activities before changes in working capital and net inflows from changes in working capital.

Net cash from operating activities before changes in working capital amounts to €4,424 million, thus being largely on the previous year’s level (€4,409 million). EBIT was reduced amongst other things by the non-cash write-down for the Americas region, which was added back in the depreciation/amortisation of non-current assets account. Other than in the previous year, EBIT includes fewer gains on the disposal of non-current assets. Resulting cash flows are transferred to cash flows from investing activities. The increase in cash payments for other assets and liabilities reduced liquidity. At €340 million, tax payments are roughly on a level with the previous year (€343 million). €62 million of this amount relates to Deutsche Postbank Group and €278 million to other Group companies.

Whereas the previous year saw an outflow of working capital, cash from changes in working capital was received in the amount of €727 million in 2007. The main reason for this change are receivables and/or liabilities from financial services which reflected a cash outflow in the previous year in the amount of €–368 million, whereas cash in the amount of €707 million was provided from this account in the year under review.

Overall, net cash from operating activities increased year-on-year by an aggregate of €1,229 million to €5,151 million.

47.2 Net cash used in investing activities

Cash flows from investing activities mainly result from cash received from disposals of non-current assets and cash paid for investments in non-current assets. Net cash in the amount of €753 million was used in investing activities in the year under review, thus falling by €1,944 million below the previous year’s amount (previous year: €2,697 million).

The disposal of non-current assets generated cash and cash equivalents in the amount of €1,381 million (previous year: €1,274 million). Divestitures of operations brought cash inflows of €622 million, mainly from the sale of the insurance equity investments of Deutsche Postbank Group (€550 million) and from the sale of Vfw AG (€75 million). €759 million of cash was received from the sale of other non-current assets.

Cash paid to acquire non-current assets totalled €2,656 million compared with €4,066 million in the previous year. Of this amount, €347 million was attributable to the acquisition of companies, such as the acquisition of TSO (€156 million), Astar (€68 million), Polar Air Cargo (€73 million), and to an increase in the share in Lemuir India (€34 million). The total cash and cash equivalents acquired with these acquisitions amounted to €23 million (previous year: €127 million).

The following assets and liabilities were acquired on the acquisition of companies (see also Note 2):

Net cash used for the acquisition of other non-current assets amounted to €2,309 million, a year-on-year increase of €337 million. This increase relates to capital expenditure (€2,210 million compared with €1,931 million in the previous year) and to cash paid for other non-current financial assets (€99 million compared with €41 million in the previous year). In addition, interest received increased cash flows from investing activities by €520 million (previous year: €100 million). This increase is mainly accounted for by the fact that financial derivatives have been presented in gross amounts since the beginning of the year. No data were available to determine the previous year’s amounts.

Free cash flows are a combination of net cash provided by operating activities and net cash used in investing activities. Free cash flows are deemed an indicator to show how much cash is available to the company for dividend payments or the repayment of debt. Free cash flows amounted to €4,398 million in the year under review and improved by €3,173 million year-on-year.

47.3 Net cash used in financing activities

Cash flows from financing activities result from the issue and repayment of financial liabilities and from distributions. In addition, interest paid in the amount of €659 million (previous year: €393 million) is included in net cash used in financing activities, which increased mainly due to the change in the gross recognition of financial derivatives since the beginning of the year.

Net cash used in financing activities rose from €865 million in the previous year to €2,087 million in the year under review. This increase, in addition to the gross recognition of interest payments mentioned above, mainly reflects a reduction in financial liabilities. The changes in financial liabilities resulted in cash inflows amounting to €345 million in the previous year, whereas the year under review saw cash outflows of €439 million, reflecting the repayment of current and non-current liabilities. Amongst other items, the Group repaid a fixed-income bond in the principal amount of €636 million in October and issued a municipal bond amounting to US$270 million in April. In addition, increased dividends paid to shareholders of Deutsche Post AG (€903 million) and minority shareholders (€159 million) resulted in a cash outflow from financing activities.

47.4 Cash and cash equivalents

The cash inflows and outflows described above produced cash and cash equivalents of €4,683 million (see Note 33). This is a year-on-year increase of €2,292 million. Currency translation differences reduced cash and cash equivalents by €46 million, changes in the consolidated group, by contrast, brought an increase of €27 million.