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Deutsche Post eyes options as UPS talks drag on

  Deutsche Post could sound out possible cooperation with other companies in the United States if talks with United Parcel Service fail, Deutsche Post CEO Frank Appel said late on Thursday.

 

Earlier this year, Europe’s largest mail and express delivery company and UPS agreed to cooperate on air freight in the United States, but now talks have stalled. Deutsche Post on Monday said it planned to shut down its domestic US express delivery business and cut a total 14,900 jobs there. That move would cut its air capacity there to less than 100,000 shipments per day, from 1.2 million previously.

UPS Chief Executive Scott Davis last month said the planned size and scope of the agreement may change, arguing that customers may not be happy about Deutsche Post’s plans to scale down its business in the United States. “We would like to come to an agreement,” Appel said in remarks released on Friday. He did not say whether Deutsche Post already had alternative partners in mind, but he said it should become clear in coming weeks whether a deal would be struck with UPS.

Following the cut in business there, the volume of the cooperation would involve only about 100 million shipments per year, he said. Sluggish consumer spending and shrinking investments by businesses are hurting shippers around the world, with the United States being hit the hardest. Deutsche Post has lost more than $1 billion a year there for the past two years. Deutsche Post shares rose 1.7% to €9.925 by 0810 GMT, lagging a 3% gain by the German blue-chip index.

The company trades at about 6.7 times estimated 2009 earnings, a discount to both UPS and rival FedEx as investors worry it is losing ground against its biggest rivals in the United States. Its stock has lost more than half its value in the past six months.

Deutsche Post will likely post a 2008 net loss as costs to restructure in the United States and write-downs on some assets drag down its bottom line. If it books the bulk of write-downs this year, it would at least break even in 2009, Appel said. Despite the expected loss this year, Deutsche Post still planned to pay a dividend at last year’s level of €0.90 ($1.12) per share, which could be paid out of cash flow.

In addition, Appel said the company would decide next year whether to pay out to shareholders part of the proceeds from the sale of Deutsche Postbank as a special dividend. Deutsche Post agreed in September to sell its Postbank stake to Deutsche Bank. Under the agreement, it will sell an initial 29.75% stake for €2.79 billion in cash. (Reuters)