DHL shares rise after plan to hike German post and parcel prices

Deutsche Post DHL shares have risen after saying that it expects restructuring measures and increases in German postage and parcel prices to lift earnings in the second half of 2019, despite rising global trade tensions.

DHL shares rise after plan to hike German post and parcel prices

By Emma Thomasson

Deutsche Post DHL shares have risen after saying that it expects restructuring measures and increases in German postage and parcel prices to lift earnings in the second half of 2019, despite rising global trade tensions.

The partly state-owned German post and logistics group said full-year operating profit should rise to between €4bn and €4.3bn, up from a previous estimate of €3.9bn to €4.3bn, due to higher expectations for its German Post and Parcel division.

It also confirmed its guidance for full-year operating profit to reach more than €5bn in 2020, something finance chief Melanie Kreis said the company wants to reach without one-off effects.

Shares in Deutsche Post rose over 4% atone stage.

“We expect (Deutsche Post) to profit further from the ongoing e-commerce boom, price increases, and internal optimisation,” said Christian Obst, an analyst at Baader bank, who rates the stock a buy.

The company said steps taken to improve productivity and an increase in the German postage rate for letters from July 1 would help in the second half of the year, despite trade conflicts denting global economic growth.

Deutsche Post is not immune to slowing momentum in global trade.

It reported a 5.8% fall in air freight volumes in the second quarter but it is shielded by a broad portfolio, Ms Kreis told journalists yesterday.

US rival FedEx warned in June that US-China trade tensions and the non-renewal of its contract with Amazon.com would hurt its fiscal 2020 performance.

While letter shipments are in long-term decline, Deutsche Post has had a boom in parcel volumes thanks to the rapid growth of e-commerce.

However, costs have risen as low unemployment makes it harder to find drivers and Germany has increased a toll on trucks, prompting the company to say last month it will raise parcel prices for business customers.

“We are not as dependent on one or two customers as it may sometimes seem,” she told analysts.

Of course, we love working with the big e-commerce players but you also have a very broad customer portfolio below the big players.

German regulators agreed that Deutsche Post could increase letter prices by 10.63% in return for the company pledging to hire an extra 5,000 delivery workers.

The company reported a 3% rise in second-quarter sales to €15.5bn, while operating profit rose by 2.9% to €769m.

- Reuters

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