The EXPRESS Corporate Division provides domestic and international parcel and express delivery services as well as cross-border mail transport. Deutsche Post World Net is one of the leading international providers in both of these areas. At the end of 2002, we increased our interest in DHL International Limited (DHL), the global market leader for express business, to 100%. We have now assumed full management control, and are increasingly leveraging market- and cost-side synergies. For the first time ever, the EXPRESS Corporate Division was responsible for the largest share of total revenue: around 30% in fiscal year 2002.

1) For a detailed explanation of the Corporate Division’s financial development, please see the “Business Developments” section of the Group Management Report.
2) EBITA / revenue
3) Restatement of prior-period amounts due to reallocation of the retail outlets (see item 9 in the Notes.)

Single umbrella brand for express services
In the year under review, the EXPRESS Corporate Division consisted of four Business Divisions: Express Germany and Express Europe offer high-performance products and perfect service for parcel and express transportation in Germany and more than 20 European countries. Global Mail provides cross-border mail services with direct links to more than 140 countries around the world. DHL’s global courier and express dispatch activities are grouped together in the Worldwide Express Business Division.

DHL was included in consolidation for the first time in the year under review. Its integration gives us the opportunity to leverage additional synergies. In order to achieve this, we will combine all of our express and logistics activities under the DHL brand name in fiscal year 2003. This decision reflects the brand’s extremely high profile, and adds the vital factor of internationalism to our traditional strengths of dependability, reliability and reputability. DHL has been active on the market for time-critical deliveries for more than 30 years and operates a global network of bases in more than 220 countries and territories.

We will harmonize our previously independent cross-border networks in Europe, firstly in individual countries and then, in a second phase, within Europe as a whole. Our goal is to establish an integrated distribution network which optimally combines overland and air transportation across the whole of Europe. We have already demonstrated the success of such integration with Euro Express, which is now the largest ground-based parcel distribution network in Europe.

Our reporting structure will remain largely unaffected by these integration measures. The most significant change affects the Eurocargo Business Unit, which will be transferred from the LOGISTICS Corporate Division to the EXPRESS Corporate Division as of January 1, 2003.

Concentration heightens competition
With revenues totaling €10.9 billion (2001), the German courier, express and parcel services (CEP) market is the largest in Europe. Our comprehensive service offering makes us the most important single provider on this market (see diagram below). Competition in the business customers segment remains more intensive than for private customers. In this segment, therefore, we are focusing on the strategic advantages of being a global player: our comprehensive service offering enables us to meet the requirements of international groups such as Bosch, HP or Philips.

In Europe, the CEP market is still highly concentrated (see diagram further below). Deutsche Post World Net has consolidated its position as the leading provider in this field, not least through the integration of DHL. In 2001, we once again occupied the top spot with a 16% share of a European market that is worth €34 billion overall.

The market volume for cross-border mail amounted to €12 billion in 2001 (see diagram further below). The market was impacted by two factors during the fiscal year. Firstly, it continued to suffer from the ongoing stagnation of the global economy. Secondly, the terrorist attacks on September 11, 2001 led to rising fuel prices and higher security premiums. This, in turn, resulted in rising transport costs, which could only partially be passed on to customers.

There has also been an increase in concentration on this market, which has led to a heightened level of competition. Alliances, mergers and acquisitions have created new players that can act globally and employ aggressive sales policies to shape the market. The customer side is also experiencing increasing concentration, with a smaller and smaller number of major customers controlling the press distribution market, for example. With our market share of 14%, we were able to expand our position as one of the leading global providers of cross-border mail services in 2001.

The market for air-based global courier and express business recorded below-average growth in the US and Europe in the year under review, whereas the Asia-Pacific region still has substantial growth potential.

Increase in revenue due to DHL consolidation
In fiscal year 2002, total revenue for the EXPRESS Corporate Division rose by 94.5% to €12,489 million. This growth was primarily due to the first-time consolidation of DHL. On a comparable basis, revenue approximately matched the previous year’s level.

In the Express Germany Business Division, we succeeded in increasing volumes, while revenue, at €2,796 million, remained stable as compared to the previous year (€2,795 million). The retail outlet customer segment profited among other things from the continuing growth of Internet auction houses, such as eBay.

Revenue in the Express Europe Business Division fell year-on-year from €2,054 million to €1,941 million. This reflects a one-time effect that arose in 2001 due to a change in the Securicor group’s fiscal year. In 2001, the end of the group’s fiscal year was changed from September 30 to December 31, which meant that the results for 2001 contained revenue generated over 15 months instead of 12. In fiscal year 2002, the companies included in consolidation changed: the Spanish company Guipuzcoana Euro Express was fully consolidated for the first time as from October after we increased our holding from 49% to 51%. At the same time, however, several smaller business units that were transferred to the LOGISTICS Corporate Division at the beginning of the year are no longer included in consolidation. Positive revenue effects from operations resulted from the increase in dispatch volumes at Euro Express in Italy, Spain and Portugal.

Our Global Mail Business Division recorded a year-on-year drop in revenue of 5.8% to €1,239 million. While cross-border mail bound for Germany continues to fall, we succeeded in increasing Infopost (addressed advertising mailings) dispatch volumes and revenue from foreign customers. To help us better meet the requirements of this target group, we bundled our international mail business activities at the beginning of the year: Deutsche Post Global Mail took over the previous DHL product WorldMail and has since been responsible for processing these deliveries using its own network. This has significantly boosted our international market position in this area.

In 2002, the Worldwide Express Business Division contributed €6,162 million to consolidated revenue. Thanks to our global network, we were able to offset poor market conditions, especially in the United States, with positive developments in the Asia-Pacific region in particular.

Increase in earnings
In fiscal year 2002, the EXPRESS Corporate Division generated a profit from operating activities (EBITA) of €243 million, representing a return on sales of 1.9%. For detailed information on earnings development, please see the “Business Developments” section of the Group Management Report.

Strengthening our global market position
In the year under review, investments totaling €3,759 million were made in the EXPRESS Corporate Division. In the Express Germany Business Division, we pressed ahead with the replacement of our vehicle fleet. Investments in the Express Europe Business Division focused on renewing automatic sorting systems in individual hubs and depots, as well as building new terminals in the Benelux countries and Spain. We expect to complete four new terminals in Spain and replace current leasing arrangements by the end of 2004. In the year under review, DHL took further steps toward renewing its aircraft fleet by ordering 34 Boeing 757 aircraft. In addition, a major single investment in the Worldwide Express Business Division related to our new express logistics center in Tokyo, which opened in October 2002. Total space of around 18,000m² and cuttingedge technology make this center the largest and most modern of its kind in Japan. With it, DHL can now further enhance the quality of its services for customers in the Asia-Pacific region and strengthen its position in this growing market.

As of January 31, 2003, DHL acquired the Canadian logistics arm of Mayne Group, Ltd., Australia, Mayne Group Canada, thereby systematically strengthening its position in the North American market for ground-based express delivery.

Quality and flexibility for our customers
In globalized markets, the winners are those players who can act quickly and reliably. Deutsche Post World Net again had among the fastest mail transit times within Europe according to a study of international companies carried out by UNEX: over the last few years, we have reduced the average transit time for letters by around one day to 2.2 days.

Our PACKSTATION delivery service enables us to meet our customers’ demands for a flexible system for collecting deliveries; recipients of parcels can now decide for themselves where they would like to have them delivered. Business customers making use of this service now include Deutsche Telekom, Profectis – Germany’s largest electrical customer service operation for the retail trade – and Roche-Diagnostic. In addition, we have expanded our mail order services to include specific industry solutions and bundled them in our own competence center.

Outlook
Our aim is to generate both volume growth and above-average profitability on the German and European CEP markets on the strength of our superior quality and services. Structural improvements within the Group will contribute to this significantly: by merging networks in Europe that previously operated in parallel to one another, we will substantially improve our performance in the express and logistics business.

To achieve this, we will be taking the following measures: we will harmonize and concentrate our product portfolio under the DHL brand name. This will serve to simplify our internal processes, give our marketing and sales activities greater focus, and increase the transparency of our offerings for customers. On the cost side, we will bundle our purchasing power, relocate the Deutsche Post Euro Express and Danzas administrative centers to the DHL site in Brussels, and merge our 18 existing regional data centers to create three or four global ones. In this way, we will put the DHL brand at the heart of our global express and logistics business.

In addition, we intend to open further sales offices for cross-border mail in Europe, a segment where we want to be the number one global player.