The world economy will probably continue its solid growth to the end of the year and beyond, although at a lesser rate than we have been accustomed to in recent years. The ongoing tensions on the financial markets have also added to economic risk. Should crude oil prices remain at, or even exceed, the current record level, this could slightly dampen the global economy in the coming year.
There is as yet no lasting indication of the US economy reaching calmer waters. Due to the drop in construction spending, GDP growth for 2007, at about 2%, will be clearly down on preceding years. In 2008, however, the restraining effect of the weak property market is expected to gradually peter out and GDP growth should recover.
In Japan, the solid recovery continues and both business investment and private consumption are likely to continue rising. Additional growth stimulus ought to come from exports. GDP growth in 2007 and 2008 will probably be a good 2%. China’s dynamic growth trend remains unbroken. Its double-digit GDP growth is set to continue in 2008.
The economic outlook for the euro zone remains favourable and the upturn is likely to be sustained beyond year-end. At 2.7%, GDP growth for 2007 as a whole will match the previous year. In 2008, the strong euro can be expected to dampen export growth but not to threaten the upturn overall.
In Germany, exports and business investment are likely to increase to the end of the year, making for expected GDP growth of 2.6%. 2008 is likely to see a changeover in the main sectors driving the economy accompanied by only a slight drop in momentum: exports and investment will probably ease off whilst private consumption visibly recovers. This scenario is supported by rising employment and stronger income growth.
In 2007, Deutsche Post World Net is optimistic that business performance will be positive overall. We expect revenue to grow slightly. Profit from operating activities (EBIT) before non-recurring effects is likely to total around €3.7 billion.
In the MAIL Division, revenue is likely to be stable or to increase slightly. We expect the revenue generated by the other business units to more than offset the revenue losses in the mail business in Germany. EBIT for 2007 should remain stable at €2 billion.
We expect the EXPRESS Division’s EBIT for 2007 to amount to at least €400 million. This figure includes expenses for construction of the new air hub at Leipzig/Halle airport.
In the LOGISTICS Division, we anticipate a high single-figure percentage increase in revenue for 2007. EBIT growth should be around 15%, not including the non-recurring income of €59 million from the disposal of Vfw AG.
In the FINANCIAL SERVICES Division, income will rise thanks to the continual growth in contributions by BHW, amongst other things. The Group expects EBIT to increase by at least 5%.
For 2008, the Group expects EBIT to rise by around 14% to around €4.2 billion.
The Group is entering a new strategic phase, in which we will focus on profitability, cash generation and organic growth. We intend to use the Group’s strong market position as the leading logistics enterprise worldwide to generate more value for our shareholders. The raft of measures is to be accompanied by broadened reporting to the capital market.
With a comprehensive profit improvement programme affecting all units and divisions, Deutsche Post World Net plans to generate €1 billion to underpin EBIT growth through 2009. In order to boost cash, the Group aims to reduce net working capital by €700 million and raise at least €1 billion in proceeds from the disposal of realestate and other non-strategic assets over the next two years. In order to establish the value-based approach throughout the Group, with EBIT after asset charge we will introduce a new performance metric.
We would like our shareholders to benefit from our growth in value. For financial year 2007 the Board of Management will propose a dividend of €0.90 per share at the Annual General Meeting on 6 May 2008 — 20% more than in the previous year.
We describe the Group’s economic opportunities in the 2006 Annual Report. No other significant opportunities were identified in the reporting period.