Annual Report 2012 pdf (5 MB) - Deutsche Post DHL

Financial position
Financial management is a centralised function in the Group
The Group’s financial management activities include managing cash and liquidity;
hedging interest rate, currency and commodity price risk; ensuring Group financing;
issuing guarantees and letters of comfort and liaising with rating agencies. We steer
processes centrally, allowing us to work efficiently and successfully manage risk.
Responsibility for these activities rests with Corporate Finance at Group headquarters
in Bonn, which is supported by three Regional Treasury Centres in Bonn (Germany),
Weston (USA) and Singapore. These act as interfaces between headquarters and the
operating companies, advise the companies on all financial management issues and
ensure compliance with Group-wide requirements.
Corporate Finance’s main task is to minimise financial risk and the cost of capital,
whilst preserving the Group’s lasting financial stability and flexibility. In order to maintain
its unrestricted access to the capital markets, the Group continues to aim for a credit
rating appropriate to the sector. We therefore monitor particularly closely the ratio of
our operating cash flow to our adjusted debt. Adjusted debt refers to the Group’s net
debt, allowing for unfunded pension obligations and liabilities under operating leases.
Maintaining financial flexibility and low cost of capital
The Group’s finance strategy builds on the principles and aims of financial management.
In addition to the interests of shareholders, the strategy also takes lender requirements
into account. The goal is for the Group to maintain its financial flexibility and low
cost of capital by ensuring a high degree of continuity and predictability for investors.
A key component of this strategy is a target rating of “BBB+”, which is managed
via a dynamic performance metric known as funds from operations to debt (FFO to
debt). Our strategy additionally includes a sustained dividend policy and clear priorities
regarding the use of excess liquidity, part of which was to be used to gradually increase
plan assets of our German pension plans. However, due to the favourable capital market
conditions for companies with a high credit quality, at the end of 2012 the Group
decided to increase plan assets via debt financing. In the future, excess liquidity will
therefore be used for the continued gradual funding of pension liabilities, special dividends
and share buy-backs.
To increase plan assets, the Group placed a convertible bond with a volume of
€1 billion and two conventional bonds with a total volume of likewise €1 billion on the
market. Further information on the bonds issued is contained in the Notes. The funds
obtained were transferred directly to an external pension vehicle managed by the Group.
The plan assets covering pension obligations to German employees nearly doubled due
to the transfer. The Group expects this move to improve its operating cash flow in future
years and to also have a small positive impact on its financial result and net income. The
transaction has no impact on our creditworthiness since the rating agencies already take
unfunded pension liabilities into account in their analyses.
Deutsche Post DHL Annual Report 2012
note 43.1
Group Management Report
Economic Position
Financial position
39