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MEMPHIS: Rating agency Standard & Poor's (S&P) has confirmed its 'BBB' rating for FedEx Corporation with a 'stable' outlook following the announcement of the integrator's proposed US$4.8 billion takeover of TNT Express.

Assuming the European Commission has no objection, FedEx said it expects to finalize the purchase with $1.5 billion in cash and new debt by the first half of next year.

TNT Express truck 2According to S&P credit analyst Betsy Snyder: "Standard & Poor's ratings on FedEx reflect the company's improved credit metrics, bolstered by its ongoing efforts to increase profitability, which should cushion the effect of the incremental debt associated with the proposed acquisition."

The agency said it expects FedEx's ratio of debt to ongoing operations' revenue to fall from 35 to 30 percent at acquisition and then recover within two years as the company benefits from an increased European presence, cost synergies related to the acquisition, and a shift in its discretionary cash flow from share repurchases to debt reduction.

At the time of the US$6.8 billion UPS bid to acquire TNT Express in 2012, the two companies estimated cost savings of €400-€550 million as a result of any merger. The following year the deal was denied by the European Commission (EC) on the grounds that customers would be subjected to higher prices from a subsequent de facto express parcel duopoly of DHL and UPS. The Commission concluded that because FedEx held the smallest market share in all 29 European Economic Area countries, it would have been unable to provide sufficient competition.

TNT Express truck 1However with TNT's European road network connecting 41 countries via 19 hubs and over 540 depots, FedEx has the opportunity to reach 70 percent of customers overnight by truck rather than air – thereby satisfying the Commission's requirement for an express market operator to provide shippers with an enhanced, integrated global network without raising prices.

Notwithstanding unanimous support from both companies' boards for the deal, should TNT Express fail to merge for a second time following a possible EC objection, FedEx has agreed to pay a termination fee of €200 million – similar to that paid by UPS. However should TNT accept another offer in the next eight weeks that is in excess of €5.2 billion, it has agreed to pay FedEx €45 million in compensation should the integrator decline to match it.

S&P said it could raise its current rating for FedEx following any successful merger if the company manages to increase its operations' revenue-to-debt ratio from 35 to 40 percent by 2018.

FedEx and TNT Express said they intend to file a request seeking approval of the deal from the Dutch financial regulator - which includes finding a new owner/operator for TNT's air fleet - in the next six weeks. They added that current TNT CEO Tex Gunning and CFO Maarten de Vries are expected to stay in any post-merger company.

MEMPHIS: In its latest quarterly filing with the U.S. Securities & Exchange Commission (SEC), FedEx has revealed it spent US$1.4 billion on the acquisition of 3PL reverse logistics specialist Genco and a further US$42 million to purchase e-trade facilitator Bongo International.

FedEx electricThe company said the acquisitions will allow it to enter new markets, as well as strengthen current service offerings to existing customers and added: "We expect the goodwill of US$40 million associated with our Bongo acquisition will be entirely attributable to our FedEx Express reporting unit [and] the goodwill of approximately US$1.1 billion associated with our Genco acquisition will be primarily attributable to our FedEx Ground and FedEx Express reporting units."

FedEx issued a US$2.5 billion note of senior unsecured debt to fund the purchase of Genco that completed at the end of January this year.

With US$1.6 billion in annual revenue, the Pittsburgh-based company is a self-described "forefather in reverse logistics – providing triage, test and repair, remarketing and product liquidation solutions" to technology, consumer, industrial, retail and healthcare customers.

FedEx said the purchase of St. Petersburg, FL-based Bongo International would enhance its portfolio of global e-commerce solutions. Bongo enables global consumers and businesses to purchase on-line using a U.S. address for delivery to more than 200 countries worldwide.

In its SEC filing the company said it expects revenue and earnings growth to continue into the fourth quarter of 2015, driven by ongoing improvements in the results of all its business units. "We expect continued moderate global economic growth to drive volume and yield improvements" and added that expectations for its fourth quarter will be dependent on fuel prices and the growth of the global economy.

In the latest three months ending February 28, FedEx reported revenues of US$11.71 billion and a net income before taxes of US$909 million.

dhl-planet-earth-lifeLONDON: The International Transport Workers Federation (ITF) says there is evidence of "widespread mistreatment" of DHL staff in India.

A report commissioned by the ITF and authored by John Logan, a professor and director of labor and employment studies at San Francisco State University and visiting research fellow, Institute for Research on Labor and Employment, University of California-Berkeley, claims the express company has victimized staff, conducted punitive transfers by moving them hundreds of miles away from their families and homes at almost no notice; and forced the re-grading of personnel to try and prevent them joining a trade union.

The news follows a similar event that culminated in 2014 after more than two years of struggle when Turkey's TUMTIS union won recognition for 1,600 DHL supply chain staff despite an allegedly confrontational company.

Commenting on the DHL India situation, Ingo Marowsky, ITF global head, supply chain and logistics said: "The widespread accusations of persistent victimization are extremely serious and heartrending. They are so grave that we asked Professor Logan to investigate. Sadly, he has found them to be well founded. This substantiates the testimonies I have heard this week in India, including that the company has taken out over 20 injunctions in an attempt to muzzle workers and their union."

In his report Logan says workers from DHL terminals in Delhi, Kolkata, Chennai and Mumbai have been threatened, intimidated and discriminated against by local and national DHL India managers who are now "fighting efforts by couriers to join their union of choice".

Logan notes that the DHL India management has pursued a legal strategy that is intended to tie the labor dispute up in the courts and is contrary to Deutsche Post DHL (DPDHL) behavior in Germany where it employs 205,000 people – or 42 percent of its global workforce.

The news coincides with the release of the latest DPDHL corporate responsibility (CR) report accompanied by a press statement that declared in its first line: "Responsible business practice is the foundation for the long-term growth and success of Deutsche Post DHL Group." According to Christof Ehrhart, EVP Corporate Communications and Corporate Responsibility: "We connect people and make their lives easier."

From its CR report the company notes: "Our corporate culture is characterized by openness, trust and mutual respect. We want our employees, each and every one, to be able to tap their talents and potential in an environment decidedly free from prejudice, discrimination and stereotyping."

In the section entitled Co-workers and co-creators winning and developing talent DPDHL adds: "As an international company, our priority is to ensure that our high ethical standards are being met in all of the regions in which we operate. With our code of conduct and group policies, we make sure our executives and employees around the world are able to uphold and apply our standards. This includes our commitment to workers' rights and our constructive working relationships with employee representatives and labor unions."

Except, apparently, in India. Download the ITF report: john_logan_report_dhl_india.pdf



BONN: Deutsche Post DHL (DPDHL) has reported a 3.1 percent increased in 2014 revenue to €56.6 billion and a net profit of €2.07 billion, a one percent decline from the previous year. Operating profit (EBIT) rose 3.5 percent year-on-year to €2.96 billion.

The group's express division showed the greatest gains with a 5.7 percent rise in revenue to €12.49 billion and a 16.3 percent increase in EBIT to €1.26 billion compared to the previous year.

Post-eCommerce-Parcel (PeP) revenue remained the largest business sector for DPDHL producing revenue of €15.68 billion in 2014 – a year-on-year rise of 2.6 percent. The EBIT figure was less than one percent higher than the previous 12 months at €1.3 billion.

DHL logistics"Despite a still challenging environment we delivered a solid performance in 2014 by building on our strong market position in e-Commerce and emerging markets," said group CEO Frank Appel.

Global forwarding revenue rose less than one percent to €14.92 billion while the EBIT result fell 38.7 percent year-on-year to €293 million. Commenting on the drop, Appel said rate and margin pressure remained high throughout the forwarding industry and the company's transformation program 'New Forwarding Environment' (NFE) not only required a lot of money but also management time to implement. While he expected the result to give DHL a competitive edge in the mid-term, the continued cost of NFE change "will again weight on earnings in 2015".

DPDHL is forecasting operating profits in the €3.05-€3.2 billion range in 2015, with PeP contributing at least €1.3 billion and DHL an additional €2.1-€2.25 billion during the year. By the end of 2016, the group expects an operating profit of €3.4-€3.7 billion.

Looking to prospects in 2015 Appel added: "Our overall business environment is unlikely to change very much this year. The political uncertainties we face seem to be increasing, and the global economy will only see moderate growth...The leading growth drivers in our business are - and will remain - the booming e-Commerce business and the dynamic growth of emerging markets. We are better positioned to take advantage of both megatrends than any other company in our industry."

MEMPHIS: Following calls by Delta, American and United to revise the U.S. Open Skies policy because they claim unfair competition from Gulf carriers, FedEx has responded by saying the U.S. government "should not capitulate to the interests of a few carriers who stand ready to put their narrow, protectionist interests ahead of the economic benefit that Open Skies provides to the people of the United States."

The three passenger airlines say they have compiled a report outlining US$40 billion in government subsidies provided to Qatar Airlines, Emirates Airline and Etihad since 2004. The Gulf carriers, who ordered aircraft worth US$100 billion from Boeing in 2013 alone, refute the allegations.

FedEx-Jafza-warehouseAfter public comments by Delta CEO Richard Anderson, Qatar CEO Akbar Al Baker was prompted to say: "Quite frankly, I think Mr. Richard Anderson needs to go and study in a university to find out what the difference is between equity and subsidy. We don't receive any subsidy. What the government has given us is equity into an airline which they own."

Writing to U.S. secretary of State John Kerry, secretary of Transport Anthony Foxx and secretary of Commerce Penny Pritzker, FedEx president and CEO David Bronczek said because Delta and its peers do not fly to as many foreign points as FedEx, they think have little to lose by limiting foreign carrier access to U.S. markets: "What they want is for the U.S. government to protect them from competition from able, attractive new entrants," he declared.

FedEx says the "very valuable" Open Skies agreement with Middle East countries has allowed it to operate a Dubai hub (right) linking flights from North America with those from India and Asia as well as providing a gateway to Africa: "Presently FedEx alone operates almost two-thirds more flights to the Middle East than all the other U.S. carriers combined," claimed Bronczek.

With U.S. Open Skies agreements with 110 countries, FedEx argues that a return to the restrictive, inefficient, expensive regime of the past would jeopardize the benefits air cargo provides U.S. shippers while compensating a very few: "Our industry is an essential component of a rebounding American economy. The connectivity we provide for U.S. business both small and large is critical for their global expansion," Bronczek added.

dhl-sahSINGAPORE/ISTANBUL: DHL Express has announced plans to build new hubs in Singapore and Istanbul at a cost of US$161 million.

The 26,000 sq.mt facility at Changi airport (right), scheduled to open in the first quarter of 2016, will feature a fully automated express parcel sorting and processing system to handle 14,000 shipments an hour and over 620 tonnes of cargo a day.

Jerry Hsu, CEO, DHL Express Asia Pacific, said the new facility will reinforce the company's multi-hub Asia strategy that includes terminals in Shanghai, Hong Kong, Bangkok and Singapore.

"DHL has pioneered the logistics sector in Singapore for over 42 years, building market leadership through innovation, service excellence and commitment. The South Asia hub is a strong statement of DHL's long term growth plan for Singapore to continue to be one of DHL's strategic air cargo hubs in Asia," added Herbert Vongpusanachai, senior vice president and managing director, DHL Express Singapore.

Meanwhile in Turkey, the express company has signed an MoU with the operator of Istanbul's new airport İGA Havalimanı İşletmesi to construct a new 20,000 sq.mt. logistics hub. The airport, planned to replace Atatürk airport, is set to open on October 29, 2017, the 94th anniversary of the Turkish Republic.

In making the announcement DHL Express Turkey managing director Markus Reckling said the new terminal would be the foundation for transforming Turkey into a regional hub for the company.

BONN: Deutsche Post DHL has joined the Ellen MacArthur Foundation to develop logistics models for the expanding Circular Economy.

The move follows the December purchase by FedEx of reverse logistics 3PL Genco. With US$1.6 billion in annual revenue, the Pittsburgh-based company is a self-described "forefather in reverse logistics – providing triage, test and repair, remarketing and product liquidation solutions" to technology, consumer, industrial, retail and healthcare customers.

DHL innovation centreEllen MacArthur says moving to a circular economic model - where products are returned, remanufactured and reused by design - would save US$1 trillion in materials by 2025 "while reconciling the outlook for growth and economic participation with that of environmental prudence and equity."

In January last year, the World Economic Forum (WEF) launched 'Project Mainstream', a collaborative project which could help businesses shift towards a circular business process and save US$ 500 million in materials and prevent 100 million tonnes of waste globally.

Last month the WEF followed up by announcing three programs covering plastic packaging, paper and paperboard production, and electronic goods asset tracking as a next step in the process. Involving 30 global companies, the project is driven by the CEOs of Brambles, Brightstar, BT, Desso, Royal DSM, Ecolab, Indorama Ventures, Kingfisher, Royal Philips, Suez Environnement and Veolia.

Sir Ian Cheshire, recently retired CEO of Kingfisher, says adopting a circular economic model is an opportunity too good to miss: "It can drive our next generation of innovation and business growth, cushion our business from price volatility, provide us with competitive advantage, and help us build better relationships with customers and suppliers."

Commenting on the DHL move, Ellen MacArthur Foundation CEO and former McKinsey partner Andrew Morlet said: "Reverse logistics is an important enabler in the transition to a circular economy and Deutsche Post DHL will play a key role in providing new insights and collaborative opportunities within the program."

McKinsey calculates that US$390 billion worth of consumer electronics and household appliances reach end of life every year. The company says the industrial Internet and the 'Internet of Things' can be used to extend the life and value of these products by addressing the information gaps that prevent better decision-making on what to do with a product when a (first) user is finished with it.

Christof Ehrhart, EVP Corporate Communications and Responsibility at Deutsche Post DHL added: "We all know that resources are limited, that our climate is being affected by carbon emissions, and that our consumer behavior may lead to greater problems in the future. Joining ideas and forces to tackle these challenges is an important step for coming generations."

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