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Q2 2011 Earnings Call Transcript

Transcript Call Date 08/02/2011

Operator: Good day and welcome to the Deutsche Post DHL Second Quarter 2011 Conference Call. For information, today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Martin Ziegenbalg, please go ahead sir.

Martin Ziegenbalg - IR: Thanks operator, and warm welcome to anyone out there to our half year 2011 call. As you have seen in the invitation, we have our CFO, Lawrence Rosen today with us here to take you first through the presentation on the results which you can see either on the webcast or I see we have it in front of you and after that presentation, as always we will have sufficient time for question and answers.

With that, I would like to hand over to you Larry.

Lawrence A. Rosen - Finance, Global Business Services: Thanks, Martin and thanks to all of you for joining today. Good afternoon. I am pleased to report on another set of very good results for Q2. These results are a further indication of the success of our strategies and the dedication and hard work of our employees around the world.

In summary, Q2 was another important step on the path to achieving our 2011 and also our medium-term target. As a reminder, those mid-term targets are to stabilize the MAIL EBIT contribution at, at least €1 billion and to reach benchmark leading operating margins in each of the DHL divisions by 2015 by growing EBIT by an average of 13% to 15% per year.

For 2011, we're confident to reach our target range of €2.2 billion to €2.4 billion EBIT and today we improved outlook by indicating that we expect to achieve upper end of that range. Today, I would like to come back to two themes we discussed already in Q1 or after Q1, German Parcel business and DHL's position in Asia, because both represent unique strengths for Deutsche Post DHL and are cornerstones in our strategies to reach the mid-term targets I just mentioned. I'll then discuss our financial performance for the quarter, and finally come back to the details of our guidance for 2011.

Now, let's look at the parcel business in Germany. We believe the structural trend toward e-retailing will continue for the foreseeable future with more and more categories and products being available to order online. Both external forecasters and we believe the market will grow around 5% on average through 2020, somewhat lower even than recent experience, but still a very healthy rate.

Deutsche Post's depth and breadth of market presence together with advanced technologies provide unique advantages in the growing parcel business. Our about 2,500 packstations are a great example of this, and we believe that demographic trends favor even more demand for 24/7 simple and convenient products.

Indeed we've seen growth well in excess of 5% in the last quarters, due to the strong German economy, the addition of more categories and products and more and more people getting comfortable with eCommerce. Volumes increased in Q2 by 10% on revenues increased 8%. You've seen a shift toward B-to-C capturing a bigger share compared to the more traditional C-to-C. This mix shift results in slightly lower average pricing, but it still is a very attractive business overall.

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