The first quarter of 2019 marks the beginning of a new phase for DP-DHL. It has divided up what was its consistently most profitable division- ‘PeP’- into two parts; the ‘Post & Parcel’ operation, which is essentially the German post office, and ‘DHL eCommerce solutions’ which is the all new internet-retailing logistics business.
For its first outing ‘DHL eCommerce solutions’ did not have perfect results. Revenues were up a useful 8.9% year-on-year just short of a billion at €999m. Yet the division still saw losses roughly double at €28m. These losses were “incurred in the course of realigning the Group’s international parcel activities”. Post & Parcel Germany saw less growth in revenue at €3.8bn a rise of a mere 0.7%, whilst it too was hit by restructuring costs leading to profits falling by 44% to €227m.
Normally this would be quite serious for DP-DHL, however the rest of the company has come to the rescue. In particular the forwarding and contract logistics business did very well over the past quarter. At ‘Global Forwarding & Freight’ revenue edged up 4.8%, whilst gross profit rose by 4.3% but Earnings Before Interest and Tax jumped 42.9% to €100m. This was despite volumes handled in air freight and sea freight falling by 3.9% and 1.8% respectively. What appears to be happening in this business is that the management is getting hold of both their cost base and margins, thus driving up operational profits.
Similarly, DHL Supply Chain saw revenue rise by 4.6% to €3.3bn and Earnings Before Interest and Tax explode from €55m in Q1 2018 to €486m in Q1 2019. The reason for the profit increase was a one-off payment for the sale of part of its China business to SF Express for €426m; suggesting an underlying profit of €60m for the quarter.
The DHL Express business saw a moderate increase in revenue at 5.9% to €4.0bn but profits were flat at €453m, the slight fall of 1.7% influenced by currency. Overall profit margins fell year-on-year from 12.2% to 11.4% in Q1. Interestingly DHL Express said that one of factors underlying this quarters numbers was the decision to “focus on lighter-weight, higher-margin shipments in order to take even better advantage of its unique, global Express infrastructure and further increase profitability in the course of the year.” So, the company will no longer air freight Bentleys to China, possibly leaving this to Global Forwarding & Freight.
Overall Deutsche Post-DHL saw revenue up year-on-year 4.1% to €15.4 billion. Top line operating profit rose 28% year-on-year to €1.2bn, but this increase is due to the deal with SF Express in China. The underlying good news is that the Forwarding business seems to be recovering well and Express and Supply Chain are stable if not exactly exciting. The concern is that both Post & Parcel and ecommerce solutions need to start making serious money if the Group is to sustain forward momentum.
Source: Transport Intelligence, May 14, 2019
Author: Thomas Cullen
The world's largest collection of global supply chain intelligence