Mixed fortunes for DP-DHL

The latest figures from Deutsche Post-DHL give the impression of a group with mixed fortunes for the last quarter and over the past nine months. Revenue for the period January-September fell slightly, although after currency effects the underlying trend was upwards by 3.4%. However, Earnings Before Interest and Tax (EBIT) rose by 7.5% at €1.976bn.

As usual, the Deutsche Post Mail business performed well with revenue up 3.8% and profits up 28.1%. The driver of this growth was the parcel business of Deutsche Post, as it benefitted from the growth of internet retailing, which delivered an underlying 7% growth in volumes year-on-year for the quarter.

Similar forces were behind the growth of DHL Express as well as its clever positioning in higher margin Express operations. Even though Q3 saw a 1.9% fall in revenues, EBIT year-on-year saw a 13.9% improvement; however the figures for the nine-months are less impressive with slight falls in both revenue and profitability. Despite DHL Express’ ability to grow its business, margins were still under pressure and it is therefore higher utilisation which is driving profit growth.

The situation in the two other parts of the business isn’t as positive. The underlying demand situation in freight forwarding has weakened with volumes down 5.3% year-on-year in airfreight and 2.4% in sea freight. The consequence was a 7.6% fall in revenue. However, better buying conditions in ocean freight enabled better gross profits resulting in a 4.1% improvement in EBIT; implying a willingness to trade market-share for profit. Meanwhile, conditions in the airfreight market remain tough.

In contrast, demand for contract logistics services in the Supply Chain business was robust although foreign exchange effects drove revenue for the quarter down by 3.8%. However, profit margins suffered as DHL Supply Chain competed for more business resulting in a 9.1% fall in EBIT; although this may be exaggerated by the impact of foreign exchange fluctuations.

The world’s largest logistics group is providing a good profile of the conditions experienced in global logistics markets. Although Frank Appel has been downbeat about the prospects for any wider macro-economic recovery, it is the secular expansion of e-commerce that is fuelling Deutsche Post-DHL’s growth. This phenomenon, combined with the buoyancy of contract logistics, contrasts with the harsh state of air and sea forwarding.