Deutsche Post DHL (DPSTF.PK) on Tuesday said it will make a one-time payment of 516 million euros in the third quarter as the additional value added tax or VAT payment as decided by the German financial authorities. The German postal and logistics firm expects the payment to reduce its third-quarter net profit by 265 million euros as it had already formed reserves in previous years. Despite this impact, the company confirmed its previous guidance for the full year.
Deutsche Post noted that the financial authorities' decision is the result of a comprehensive review of complex tax issues. It covers the period from 1998 until when the revised VAT law for postal services came into force on 01/07/2010.
Of this additional payment, a large part relates to tax issues, for which the company had already partially formed reserves. The financial authorities had also retrospectively examined several postal services for tax liability, which were previously exempt from VAT.
Deutsche Post said in a statement, "Although many facts allow different interpretations in the application of EU and German VAT law on postal services, the Group will accept the decision taken to establish legal certainty and avoid years of legal battles with uncertain outcomes."
Group earnings before interest and tax or EBIT in the third quarter of 2012 will be impacted by 180 million euros due to the one-time payment, the company said.
While announcing a 64 percent increase in first-quarter profit in early May, Deutsche Post said it continues to expect earnings growth in 2012 and beyond, driven by its DHL divisions. The company then said it still expects full-year Group EBIT to range between 2.5 billion and 2.6 billion euros, and that consolidated net profit adjusted for effects related to the Postbank sale will increase in line with the operating business.
In another Government-related matter, Deutsche Post on May 29 said the German government has demanded that the company repay state aid in the amount of 298 million euros, including interest. The company noted that the move by the government was in order to comply with an EU ruling from January 2012.
Deutsche Post then said, "Since it is the company's opinion that the state aid ruling from January cannot withstand legal review, the payment that is to be made will be recorded only in the balance sheet for 2012. As a consequence, company earnings both in the past fiscal year and in the years to come remain unaffected by the decision."
Deutsche Post shares are currently trading at 12.88 euros, up 0.07 euros or 0.59 percent on Frankfurt's Xetra.
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