DHL hit by freight rates slide but not all is bad

DHL Supply Chain has announced the beginning of construction of its 'London Thames Gateway’, which will be operational in spring 2023.

In the present market for global logistics, performance is relative. This is illustrated by DHL Group’s half-year results, which saw predictable declines in revenue and profits (but declines that could have been worse).

For the whole of the DHL Group, half-year revenue fell by 12% and EBIT (Earnings Before Interest and Tax) was down by 25.7% year-on-year, a falling trend that appeared to worsen in the second quarter. The DHL Express business was not that badly hit, with a fall in revenue of 7.2% and a fall in EBIT of 12.9% year-on-year, although these numbers were depressed by currency fluctuations. DHL Express’ exposure to e-retail is different to that of FedEx or UPS, with much greater proportion of its business being global traffic. It was in Asia-Pacific that saw the biggest hit to sales rather than Europe or North America.

Unsurprisingly, DHL Forwarding Freight has continued to be badly hit. Revenue was down 40.3% and EBIT 41.8% for half-year year-on-year. The ocean freight forwarding segment of the business saw revenue down by 45.6% on 7.1% lower volumes. Not all of the Group’s businesses have suffered. DHL Supply Chain contract logistics business saw revenue up by 5.8% year-on-year and EBIT 11.1% higher. Oddly, bearing in-mind the DHL Express numbers, sales in Asia Pacific were up 11.1% in the first half of the year.

However, Post & Parcel Germany had a horrible half-year, with revenue down 0.2% but EBIT crashing by 56.3% year-on-year to €261m. This was driven by a jumble of different factors, including strikes and higher costs as well a changing mail market. It is noticeable that the e-commerce business, which serves similar geographies, saw EBIT fall by ‘just’ 24.6% year-on-year.

DHL Group has defensive properties than means that difficult conditions in air and sea freight markets are mitigated. Both DHL Supply Chain, and to a lesser extent DHL Express have done not-too-badly over the past half-year. However, DHL Forwarding Freight has done slightly worse than some of its large competitors and Post and Parcel Germany is in an ugly situation. DHL Group’s management was upbeat, posting slightly higher profit expectations, yet the market backdrop is uncertain as it is for all of its major rivals.

Author: Thomas Cullen

Source: Ti Insights

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