Deutsche Post sees China volumes start to recover after coronavirus hit

By Emma Thomasson

BERLIN (Reuters) - German post and logistics group Deutsche Post DHL <DPWGn.DE> said on Tuesday that it had started to see volumes in China recover from the impact of the coronavirus outbreak, and announced a bigger than expected annual dividend.

The company also lifted its target for free cash flow and its shares jumped 6% in early trade, after losing more than a fifth in the last week as the virus spread globally.

"Our immune system is in great shape," Chief Executive Frank Appel told a conference call with analysts.

DHL's express volumes have started to recover in China and the company was putting planes back into the network, Finance chief Melanie Kreis said, noting that DHL's own fleet is a major asset given the grounding of many passenger planes.

Appel said Deutsche Post had not seen a slowdown in Europe yet and it had seen an improvement in its global business in the first week of March, including in Europe.

He said the company, which had released preliminary full year results last month, had decided to increase its dividend for 2020 to 1.25 euros ($1.42) from 1.15 euros last year, ahead of analyst average forecasts for 1.20 euros.

The company raised its forecast for free cash flow from 2020 to 2022 to 5-6 billion euros (£4-5 billion pounds) from a previous 4.5-5.5 billion.

U.S. package delivery companies United Parcel Service Inc <UPS.N> and FedEx Corp <FDX.N> warned last week the coronavirus outbreak could disrupt shipment of goods in affected countries and possibly weigh on their first-quarter results.

Deutsche Post had already warned last month that it would take a hit from the coronavirus, but Kreis said on Tuesday that the impact on operating profit in February would probably come in at the lower end of a 60-70 million euros range.

The company said it had excluded the impact of the epidemic from its 2020 forecast for operating profit of more than 5 billion euros and reiterated a 2022 target to reach an operating profit of at least 5.3 billion euros.

Deutsche Post said it expects to lose Amazon <AMZN.O> parcel volumes as the U.S. firm ramps up its own logistics operation in Germany, although it hopes to gain share with other customers, with volumes set to grow 0-5% in 2020, after 3.9% in 2019.

For 2019, operating profit rose more than 30% to 4.1 billion euros on sales of 63.3 billion euros, both slightly shy of analysts' average forecasts.

(Reporting by Emma Thomasson, editing by Thomas Escritt/Aditya Soni/Susan Fenton)