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Deutsche Post trims 2018 outlook, seeks to cut costs

Published on June 08, 2018

German logistics giant and DHL owner Deutsche Post on Friday lowered its targets for 2018 as it announced sweeping cost cuts to make its post and parcels division more profitable.

The group said it now expects full-year operating profits before interest and tax to reach 3.2 billion euros ($3.7 billion), compared with an earlier estimate of 4.15 billion, after a disappointing first quarter.

Deutsche Post’s packages and ecommerce unit is predicted to contribute just some 600 million euros to the revised 2018 figure, well below the 1.5 billion it was originally forecast to add to earnings.

Deutsche Post said it would launch a series of measures “to counteract the decline in profitability in the post-ecommerce-parcel division”.

The announcement sent Deutsche Post shares plummeting 7.5 percent to 30.23 euros in afternoon trading, making it by far the worst performer on the Dax index of blue-chip German stocks.

Without providing details of the revamp, Deutsche Post said the measures would be aimed at improving productivity and slashing costs at the post and parcels unit — including through early retirement schemes.

Operating profits at the division dropped nine percent over the first three months of 2018, as it struggled to offset booming online shopping deliveries with an ongoing decline in letter volumes and investments in items like electric delivery vans.

“In order to deliver long-term sustainable growth, we are now consciously accepting short-term negative effects on our earnings,” CEO Frank Appel said in a statement.

Deutsche Post said it will book a one-off charge of 500 million euros this year because of the planned restructuring.

Projections for the company’s better performing DHL subsidiary, with its express, freight and supply chain services, remain unchanged for 2018.

Deutsche Post also left the overall group’s 2020 targets unchanged.