DHL’s first year under its new structure saw solid growth with all divisions contributing to a 2.9% annual rise in revenue to €63.3bn. The story was a successful one at the EBIT level too – at €4.1bn in 2019, operating profit was up 30.6% and at a record level for the German integrator.
Having struggled for several years with profitability issues, the results may be seen as a vindication of the group’s new structure. The newly formed Post & Parcel Germany and eCommerce Solutions divisions both offered decent contributions with revenues increasing year-on-year by 2.5% (€15.5bn) and 5.5% (€4.0bn), respectively. Profitability performance at the two divisions was more mixed, however. Post & Parcel Germany benefitted from a 5.9% volume boost year-on-year to record high volumes of 1.6bn parcels, as higher e-commerce related volumes offset expected declines in mail volumes. Underlying growth (excluding restructuring costs) of 14.2% took Post & Parcel Germany EBIT to €1.2bn. eCommerce Solutions, meanwhile, earnings were negatively impacted by restructuring costs of around €80m which saw EBIT of -€51m, although strong growth in North America, the Netherlands and Poland were partially behind what DHL describes as “a positive operating EBIT for the past financial year” in the division.
The continuing rise in e-commerce is again a driving force in the growth of Express. Volumes in the core Time Definite International (TDI) product were 5.7% higher year-on-year at more than 1m parcels per day in 2019, while Time Definite Domestic (TDD) volumes rose by 7.9%. The volume increases pushed revenue higher – up 5.9% to €17.1bn, the largest of all divisions – while network and efficiency gains saw EBIT rise 4.2% to €2bn.
In light of many forwarding businesses reporting lower revenues, DHL’s Global Forwarding, Freight division did not fare too badly. Revenue for the division increased by 1.0% to €15.1bn with EBIT increasing by a significant 17.9% to €521m, despite air freight volumes falling by -4.9% and ocean freight volumes declining -0.4% compared to 2018. DHL noticed the volume declines particularly in North America and Asia Pacific as a result of the trade tensions between the US and China.
Revenue for the Supply Chain division rose marginally year-on-year to €13.4bn. EBIT surged ahead seeing a 75.4% increase to €912m from €520m in 2018, although the majority of the growth was attributable to the transaction that saw S.F. Holdings take control of DHL Supply Chain’s Chinese operations. Underlying profitability grew as the division signed new and extended several lucrative contracts across various verticals including with Jaguar Land Rover, Avanos Medical and Tetra Pak.
After a strong year, DHL is bullish about the future. Frank Appel, CEO of Deutsche Post DHL Group, commented, “Thanks to our broad geographic set-up and our comprehensive portfolio we are in a very robust position and more resilient than other companies in our sector… Of course, we cannot disconnect completely from the global economy. We will not remain entirely unaffected by this worldwide crisis.” The release of a statement in early March 2020 appeared to be an attempt to reassure investors about performance in the wake of the coronavirus outbreak. Not all of DHL will be affected to the same degree with Post & Parcel Germany, DHL Supply Chain and DHL eCommerce Solutions likely to suffer less than the globally distributed Express and Forwarding operations. Indeed, in February alone, the impact of coronavirus was an estimated €60-70m. DHL is well positioned to deal with the storm, and its broad geographic set-up and our comprehensive portfolio make it a bellwether for understanding a volatile global trade and logistics sector performance in the coming months.
Source: Transport Intelligence, March 12, 2020
Author: Transport Intelligence