DHL 2003 Annual Report Download - page 57
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Overview
Overview
Positive business developments more than offset imposed price cuts
In fiscal year 2003, Deutsche Post World Net made significant progress towards
becoming the global leader for logistics.
Our focus was on our STAR program, which integrates products, services, and
networks and aims to increase our enterprise value. In 2003, we implemented or
initiated extensive measures as part of this program. Our highest-priority task for
integration was to bundle all our express and logistics activities under the DHL
umbrella brand and to rebrand our presence globally. We achieved further synergies
and often substantial cost savings in horizontal functions, such as Group-wide
procurement. As STAR recorded very encouraging results in the course of the year,
we were able to announce an upward revision of our original goal during the year.
Instead of our previous goal of €350 million, we aimed to generate an earnings
contribution of at least €400 million. We exceeded that figure, too. Since the beginning
of the program in November 2002, STAR has contributed a total of €423 million to
our profit from operating activities before goodwill amortization (EBITA).
In the year under review, we agreed on an additional package of measures with
the German services union ver.di to safeguard the future. The employment pact,
which is the first of its kind in Germany, benefits the Company and its employees. It
allows Deutsche Post to improve cost structures in the long term, and gives our
employees job security for the coming years.
As announced in last year’s Annual Report, the environment in which we oper-
ate was impacted by two external decisions in 2003. On January 1, 2003, we reduced
the prices of our key national mail products as ordered by the Regulierungsbehörde für
Telekommunikation und Post (RegTP – Regulatory Authority for Telecommunications
and Posts). These price reductions depress our revenue and earnings by around
€300 million a year. In addition, competition on the German mail market intensified
after the German parliament amended the Postgesetz (German Postal Act). This
reduced the weight and price limits of the statutory exclusive license to 100g and three
times the standard rate, respectively, and competitors were granted access to the market
for outgoing cross-border mail services at the beginning of 2003. In a second step, the
weight limit will be lowered to 50g starting in 2006. Our exclusive license will expire
on December 31, 2007.
Although 2003 therefore began under a shadow, we made additional progress
on our way to becoming the leading global provider of logistics services.
We intensified our global presence and strengthened our position in selected
market segments thanks to strategically valuable acquisitions. Our DHL subsidiary
acquired the express service provider Airborne, Inc. and now has a close-knit ground
and air transport network at its disposal in the USA, the world’s largest express
market. Thanks to the acquisition of Mayne Logistics Loomis, the express and parcel
delivery service, DHL has also advanced to number three on the Canadian market.
Management Report