Financial position

Financial management is a centralized function in the Group

The Group’s financial management activities include managing liquidity along with hedging against fluctuations in interest rates, currencies and commodity prices, arranging Group financing, issuing guarantees and letters of comfort and liaising with rating agencies. Responsibility for these activities rests with Corporate Finance at Group headquarters in Bonn, which is supported by three Regional Treasury Centers in Bonn (Germany), Weston (Florida, USA) and Singapore. The regional centers act as interfaces between Group headquarters and the operating companies, advise the companies on financial management issues and ensure compliance with Group-wide requirements. Corporate Finance’s main task is to minimize financial risk and the cost of capital in addition to preserving the Group’s financial stability and flexibility over the long term.

Creating value through transparent and effective capital allocation

Building on the principles and objectives of financial management, and in light of Strategy 2030, the Group Board of Management updated the finance strategy. It takes into account the shareholders’ interests and the lenders’ requirements, focusing on value creation through a transparent and effective allocation of capital. It also aims to maintain financial flexibility and a low cost of capital for the Group with a high degree of continuity and predictability for investors, and to support the Group’s ESG Roadmap. One key component of the strategy is a stand-alone target rating between “Baa1” and “A3” and “BBB+” and “A–,” respectively. The strategy also sets clear priorities for the allocation of available liquidity and the strength of the balance sheet. Funding business operations, financing organic investments and making regular dividend payments are given precedence. Thereafter, additional dividend payments or share buybacks as well as inorganic growth will be considered.

Cash and liquidity managed centrally

The cash and liquidity of our globally operating subsidiaries is managed centrally by Corporate Treasury. Approximately 80% of the Group’s external revenue is consolidated in cash pools and used to balance internal liquidity needs. In countries where this practice is ruled out for legal reasons, internal and external borrowing and investment are managed centrally by Corporate Treasury. In this context, we observe a balanced banking policy in order to remain independent of individual banks. Our subsidiaries’ intra-Group revenue is also pooled and managed by our in-house bank (intercompany clearing) in order to avoid paying external bank charges and margins. Payment transactions are executed in accordance with uniform guidelines using standardized processes and IT systems. Many Group companies pool their external payment transactions in the intra-Group Payment Factory, which executes payments on behalf of the respective companies via Deutsche Post AG’s central bank accounts.

Limiting market risks

To limit market risks, the Group makes use of primary and derivative financial instruments. Interest rate swaps are used to hedge against interest rate risks, and forward transactions are used for currency risks. We pass on most of the risk arising from commodity price fluctuations to our customers and, to some extent, use commodity swaps to manage the remaining risk. The parameters, responsibilities and controls governing the use of derivatives are laid down in internal guidelines.

Flexible and stable financing

The Group covers its long-term financing requirements by means of equity and debt. This ensures our financial stability and also provides adequate flexibility. Our most important source of funds is net cash from operating activities.

We also have a syndicated credit facility that creates a secure, long-term liquidity reserve. This was renegotiated in March 2024 and its volume increased from €2 billion to €4 billion in light of the strong growth in Group revenue in recent years. The credit facility was agreed for a term of five years with two one-year extension options. It does not contain any further covenants concerning the Group’s financial indicators and, thanks to our solid liquidity situation, it was not drawn down during the reporting period.

As part of our banking policy, we spread our business volume widely and maintain long-term relationships with the financial institutions we entrust with our business. We meet our borrowing requirements primarily through independent sources of financing, such as bonds and leases. Most debt is taken out centrally in order to leverage economies of scale and specialization benefits and hence minimize borrowing costs.

In March 2024, we issued a bond with a volume of €1 billion and a term through 2036. Moreover, a bond in the amount of €700 million was redeemed in December 2024. Information on bonds is contained in note 39 to the consolidated financial statements.

Group’s credit rating improved

In February 2024, Moody’s Investor Service confirmed our credit rating at “A2” with a stable outlook. In July 2024, Fitch Ratings upgraded our credit rating from “BBB+” to “A-” with a stable outlook. The solid investment-grade ratings ensure unfettered access to the capital market. The following table shows the ratings as of the reporting date and the underlying factors. The complete and current analyses by the rating agencies and the rating categories can be found on our website.

Liquidity and sources of funds

As of the reporting date, the Group reported centrally available liquidity in the amount of €1.4 billion (previous year: €1.3 billion), which is comprised of cash and cash equivalents as well as current financial assets. Due to our solid liquidity situation, the syndicated credit line in the amount of €4 billion was not drawn. The following table gives a breakdown of the financial liabilities reported in the balance sheet. Further information on available liquidity and financial liabilities can be found in notes 44.1 and 39 to the consolidated financial statements.

Capital expenditure for assets acquired below prior-year level

Investments in property, plant and equipment and intangible assets acquired (excluding goodwill) amounted to €3,066 million in the year under review (previous year: €3,370 million). Please refer to notes 10, 22 and 23 to the consolidated financial statements for a breakdown of capex into asset classes and regions.

As before, capital expenditure in the Express division related to buildings and technical equipment. Continuous maintenance and renewal of our air fleet represented an additional focus of investment spending. Some of this capital expenditure was attributable to right-of-use assets. In the Global Forwarding, Freight division, we invested in warehouses, office buildings and IT. In the Supply Chain division, the majority of funds were invested to support customer implementations in all regions, primarily in the Americas and EMEA regions. In the eCommerce division, most of the capital expenditure was attributable to network expansion in the Netherlands, the United Kingdom and the United States. In the Post & Parcel Germany division, the largest capex portion was attributable to the expansion of our infrastructure and vehicle fleet. The acquisition and development of property were continued in the year under review. An additional key focus was expanding Pack- and Poststations. At Group Functions, investments in the reporting year were mainly made in IT solutions and the vehicle fleet.

Decline in net cash from operating activities

Net cash from operating activities fell from €9,258 million to €8,722 million. Higher depreciation, amortization and impairment losses, and additions to provisions, were among the factors reducing EBIT, but were eliminated as noncash components. The change in working capital resulted in a cash outflow of €205 million, compared with an inflow of €536 million in the previous year. Income tax payments declined from €1,625 million to €1,541 million.

Net cash used in investing activities rose from €2,181 million to €2,392 million. This was despite significantly lower investments in property, plant and equipment at €2,936 million (previous year: €3,381 million). Payments made for the acquisition of subsidiaries and other business units fell substantially from €424 million to €23 million. The prior-year figure primarily comprised payments for the acquisition of MNG Kargo and the increased shareholding in DHL Logistics. The change in current financial assets led to a cash outflow of €42 million. In the previous year, there was a cash inflow of €963 million, which resulted from the liquidation of short-term financial investments with banks.

At €2,944 million, free cash flow was level with the previous year (€2,942 million). Excluding the payments for acquisitions and divestitures, free cash flow decreased by €367 million.

Net cash used in financing activities decreased from €6,898 million to €6,347 million. The bond issued in March 2024 generated a cash inflow of €990 million. Payments for the acquisition of treasury shares in the amount of €1,234 million (previous year: €986 million) were incurred primarily from the current share buyback program. Cash and cash equivalents fell slightly from €3,649 million as of December 31, 2023, to €3,619 million.