Deutsche Post on Track to Meet Guidance After Unveiling New Strategy — Update

By Dominic Chopping and Christian Moess Laursen

Deutsche Post said it remains on track to meet its full-year forecasts after unveiling a series of measures targeting revenue growth in the coming years.

The German logistics group, also known as DHL Group, launched a new strategy that will see it focus on fast-growing sectors while simplifying its legal structure as it aims for 50% revenue growth by 2030, compared with 2023.

Shares in the company were 1.5% higher in afternoon trade.

Political uncertainty, geopolitical tensions and high interest rates have all weighed on global trade and have seen the company both contain costs and lift prices to protect profitability until the global economy picks up.

Its key express delivery business has been under pressure from lower volumes and profitability, while its freight forwarding business has suffered from lower freight rates, and although its supply chain, e-commerce and post & parcel Germany units have all fared better, they represent a smaller portion of overall group revenue.

As part of plans announced late Monday, Deutsche Post said it would now focus on trends that are expected to define the logistics industry moving forward, including the surging e-commerce market, delivery services for specialized pharmaceutical and new energy products and green delivery options.

The announcement comes as the global e-commerce market is expected to grow 7% a year until the end of the decade.

Digital sales and a focus on fast-growing regions will also form part of its new growth strategy on top of a move to simplify the legal and management structure of its post and parcel services in Germany and the e-commerce activities by setting up standalone corporate entities. The simplification work will take one or two years, it said.

A new IT system will further reduce complexity between the businesses, it added.

"The group shows ambition and confidence in ensuring the group is agile and its organizational structure fit for purpose as it positions itself for resumption and acceleration of growth," analysts at JPMorgan said in a note to clients.

The company still plans to distribute between 40% and 60% of net profit back to shareholders and it remains on track to meet its full-year targets, although its ability to meet its full-year targets depends on its fourth-quarter performance, it said at a press conference Tuesday.

The company's guidance includes group earnings before interest and taxes of 6 billion euros to 6.6 billion euros ($6.67 billion-$7.33 billion) this year, and between 7.5 billion and 8.5 billion euros expected for 2026.

"The fact that management has not changed its near or medium term guidance should be seen as a sign of confidence in the group's position and ability to generate earnings in an uncertain macro environment," JPMorgan said.

Under the current buyback program, the company said it has bought back 2.8 billion euros so far, after it increased the program to 4 billion euros in March from 1 billion euros and extended it to 2025.

Write to Dominic Chopping at dominic.chopping@wsj.com and Christian Moess Laursen at christian.moess@wsj.com

Corrections & Amplifications

This article was corrected at 1139 GMT because it misstated the currency. Deutsche Post is guiding for group earnings before interest and taxes of 6 billion euros to 6.6 billion euros ($6.67 billion-$7.33 billion) this year.

(END) Dow Jones Newswires

September 24, 2024 07:01 ET (11:01 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.