Deutsche Post DHL Annual Report 2012

Annual Report 2012

Seal: DHL in China

MAIL division

Excerpts from Deutsche Post AG's 2012 Group Annual Report.

MAIL division

Business Units and Market Positions

The postal service for Germany

Deutsche Post DHL is Europe’s largest postal company. We deliver more than 64 million letters every working day in Germany alone. We offer all types of products and services to both private and business customers, ranging from physical, hybrid and electronic letters and merchandise to special services such as cash on delivery and registered mail. Availability for our customers is always our number one priority: today, our customers can purchase stamps at retail outlets, points of sale, stamp dispensers, online and via text message.

Our E-Postbrief product provides a secure, confidential and reliable platform for electronic communication. It can be used for everything from personalised customer communication to bulk mailing. E-Postbrief allows companies, public authorities and private individuals not only to meet high security standards but also to reduce processing costs.

Our mail business is focused on Germany, where the mail market has been fully liberalised since the beginning of 2008. Since July 2010, we have been required to apply value added tax to revenues generated from business customers. Competition has intensified considerably as a result, whilst at the same time the increasing use of electronic communication is resulting in a continuing shrinkage of the German mail market. In the year under review, the market for business communications was approximately €4.2 billion (previous year: €4.3 billion). In order to more precisely reflect actual market conditions, we report on the competitive business customer market. We therefore indicate those companies that are service providers to business customers, i. e., both competitors who offer end-to-end solutions as well as consolidators who offer partial services. Our market share declined slightly from 63.7% to 62.7%.

Domestic mail communication market, business customers, 2012

Targeted and cross-media advertising

Companies can use our solutions to design and print advertising mail themselves and send it at reasonable rates via our company. Dialogue marketing is only effective if addresses are updated constantly without breaching data protection regulations. We provide our customers with online tools and services to ensure the quality of their addresses and for the efficient identification of target groups. Companies may rent the addresses of these identified target groups from us for their own advertising campaigns as needed. We also offer customers a broad range of digital dialogue marketing solutions to use for cross-media and targeted advertising.

The German dialogue marketing market comprises advertising mail along with telephone and e-mail marketing. In the reporting year, this market shrank by 4.3% year-on-year to a volume of €17.7 billion (previous year: €18.5 billion). Some companies considerably reduced advertising expenditure, especially in the mail-order business – which included, for instance, the insolvency of Neckermann. We were able to maintain our share of this highly fragmented market at 13.5%, despite the difficult environment.

Domestic dialogue marketing market, 2012

Press distribution services

We deliver newspapers and magazines throughout Germany and on the day specified by the customer. Our Press Services business unit offers customers two main products in this context: preferred periodicals, which is the traditional method publishers use to post the publications to which their customers have subscribed, and standard periodicals, which companies primarily use to distribute customer or employee magazines via Deutsche Post DHL. We also partner with publishers to sell subscriptions to more than 500 press products both online and offline as part of our Deutsche Post Leserservice, a service that has seen much success. Our special services include electronic address updating as well as complaint and quality management. In addition, we offer publishers and journalists an online marketplace for journalistic content:

According to company estimates, the German press services market had a total volume of 15.1 billion items in 2012, a decline of 5.0% on the prior year. Some newspapers and magazines have been discontinued, or circulation figures or weights have decreased. Our competitors are mainly companies that deliver regional daily newspapers. In an overall shrinking market, we continued to maintain our share at 11.4%.

Domestic press services market, 2012

Value-added services support mail communications

Our customers entrust us with components of their mail communications value chain. For instance, we operate their mailrooms and provide them with printing, enveloping and scanning services.

Posting and collecting parcels anytime and anywhere

Our network comprises over 20,000 retail outlets and points of sale, around 2,500 Packstations and around 1,000 Paketboxes. On the whole we transport more than three million parcels and small packages within Germany every working day.

Private customers can go online to purchase shipping boxes from us, buy postage for parcels, place collection orders, track items and choose how they would like to receive them via the portal. For business customers we transport catalogues, goods and returns. We support both online buyers and sellers, a business that continues to boom, from the moment the order is placed and the purchase is made to shipping the product and hedging against non-payment. At our shopping portal,, we offer small and medium-sized retailers in particular an online platform to sell their products. We also offer our customers in Germany transport services for heavy shipments, such as furniture or large appliances.

As a strategic investor in All you need GmbH, we continue to develop the logistics infrastructure for delivering food in Germany.

The German parcel market volume totalled around €7.8 billion in 2012, nearly 6.3% more than the prior year. For years now, e-commerce has been the most important driver of growth. In 2012, business customer volumes again experienced double-digit growth and had a positive impact on growth in the mail-order and parcel services businesses. Overall, our market share in the reporting year was approximately 40.9%.

Domestic parcel market, 2012

Sending mail and parcels internationally

In addition to our core service market of Germany, we also carry mail and parcels across borders and offer international dialogue marketing services. In addition, we serve business customers in key domestic mail markets, including the United States and China. We meanwhile also offer return services to online retailers in 21 European countries.

We set ourselves apart from the competition by offering innovative products that respond to customer and market needs. Our portfolio includes international physical, hybrid and electronic written communications, giving customers the flexibility to decide what best suits their needs. Foreign customers tap into our expertise and experience in order to do business successfully in the German market. We are developing international parcel solutions for the growing e-commerce sector.

The global market volume for outbound international mail was approximately €6.8 billion in 2012 (previous year: €6.9 billion). The decline in simple letters and press products could only be compensated for in part by the increase in heavy items. Despite the difficult environment, we were able to slightly increase our market share from 15.7% to 15.8%.

International mail market (outbound), 2012

Revenue and Earnings Performance

Revenue at prior-year level on fewer working days

Despite three fewer working days, revenue in the year under review was €13,972 million and thus on par with the prior year’s figure of €13,973 million. The fourth quarter contained two fewer working days than the same period in the prior year. Overall, we recorded positive currency effects of €48 million in 2012.

Reductions in volumes also due to fewer working days

In the Mail Communication business unit, the volume of letters we delivered declined overall by 3.0% year-on-year. Private customer volumes were down much more than business customer volumes. In addition to the trend towards electronic communication, the fewer working days, above all, had a noticeably negative impact. Revenue in the reporting year decreased from €5,430 million to €5,236 million; in the fourth quarter revenue was 5.3% below the prior year. Even though we retained and acquired quality-conscious customers, some of our price-sensitive customers turned to competitors. In the regulated mail sector, we kept prices stable as dictated by the price-cap procedure. The first postal rate increase in 15 years was approved for 2013.

Mail Communication: volumes
mail items (millions)
2011 2012 +/– % Q4 2011 Q4 2012 +/– %
Business customer letters 6,564 6,403 –2.5 1,697 1,643 –3.2
Private customer letters 1,245 1,175 –5.6 362 341 –5.8
Total 7,809 7,578 –3.0 2,059 1,984 –3.6

Unaddressed advertising mail up slightly

In the Dialogue Marketing business unit, total sales volumes declined slightly over the course of the year. Unaddressed advertising mail was up year-on-year, whilst addressed advertising mail declined. The mail-order business continued to hold back on advertising expenditures. Moreover, the insolvency of our customer Neckermann and three fewer working days had a clearly noticeable impact. As a result, revenue in this business unit decreased by 4.1% in the reporting year to €2,497 million (previous year: €2,605 million). The quarter-on-quarter decline was less pronounced.

Dialogue Marketing: volumes
mail items (millions)
2011 2012 +/– % Q4 2011 Q4 2012 +/– %
advertising mail






advertising mail






Total 10,228 10,066 –1.6 2,809 2,765 –1.6

Press services revenue down

Revenue in the Press Services business unit totalled €744 million in the reporting year, 4.9% below the prior-year figure of €782 million. Circulation figures continued their downwards trend in the German press services market and some publications were discontinued. Average publication weights were also down.

Value-added service business stable

Revenue in the Value-Added Services business unit was €236 million in the reporting year, 0.8% less than the revenue generated in the prior year (€238 million). The decline is mainly attributable to the effect of fewer working days in the fourth quarter.

Parcel business growth consistently strong

In our Parcel Germany business unit, revenue in the reporting year was €3,477 million, exceeding the prior-year figure of €3,179 million by a substantial 9.4%. Fourth-quarter growth was 6.8% to €1,038 million and therefore slightly lower on account of the fewer working days. The flourishing e-commerce business is the primary reason for this consistently strong growth. Our range of products and delivery services is playing a key role in this.

Parcel Germany: volumes
parcels (millions)
2011 2012 +/– % Q4 2011 Q4 2012 +/– %
Business customer parcels 1 755 835 10.6 226 244 8.0
Private customer parcels 115 120 4.3 39 40 2.6
Total 870 955 9.8 265 284 7.2
  1. 1 Including intra-group revenue.

Retail outlets generate increased revenue

Revenue generated by the more than 20,000 retail outlets and sales points amounted to €850 million in the reporting year, a 3.4% increase over the prior year (€822 million). Growth in the fourth quarter amounted to 1.3% despite fewer working days. Amongst other things, pleasing parcel growth positively impacted revenue development.

Positive performance in international mail business

In the Global Mail business unit, volumes declined year-on-year because we discontinued the bulk mail business in the Netherlands and the domestic business in the UK. Full-year revenue increased by 1.1% to €1,712 million, in the fourth quarter by 6.2% to €496 million. Positive currency effects increased revenue in the reporting year by €48 million. The domestic business in the United States saw an especially encouraging development.

Mail International: volumes
mail items (millions)
2011 2012 +/– % Q4 2011 Q4 2012 +/– %
Global Mail 2,987 1,900 –36.4 638 515 –19.3

Earnings below prior year due to additional VAT payment

EBIT in the MAIL division was €1,051 million in financial year 2012, 5.1% below the prior-year figure of €1,107 million. It was reduced by €151 million as a result of the additional VAT payment. Through strict cost management, we were able to compensate for most of the other impacts on earnings resulting from increased wages, market trends and the insolvency of Neckermann. Return on sales was 7.5%. EBIT amounted to €373 million in the fourth quarter of 2012. This was 51.6% more than in the prior year (€246 million), which had included a one-time salary payment to our employees.

Operating cash flow was €−1,445 million and therefore significantly below the prior year (€924 million). This includes the effects from the additional VAT payment (€−290 million) as well as funding of our pension obligations (€−1,897 million). Working capital in the reporting year was €−616 million.