FREE BRIEF: DP-DHL’s 2018 spoilt by PeP

The problems of Deutsche Post-DHL’s ‘PeP’ division has spoiled the rest of the company’s 2018. The annual results release at the end of last week saw the company’s revenue inch up by 1.8% to €61.5bn but Earnings Before Interest and Tax (EBIT) fell by 15.5% to €3.16bn and consolidated net profit fell by 23.5%.  

Generally, the rest of DP-DHL did quite well, however it was the 56.4% fall in profits at ‘Post eCommerce and Parcel’ (PeP) that drove the final results down.

The problematic PeP business has been re-organised in order to refocus on managing the cost base of the parcel operation, however the past years losses remain. For the division, underlying volumes were reasonable with mail volumes drifting downwards but parcel volumes in Germany rising 5.4%. E-commerce revenues rose strongly by 10.7%. The underlying suggestion from DP-DHL is that the re-organisation of PeP has delivered improved profitability by focussing on yield, yet the year-on-year profits for the fourth quarter were still down 28.4%. Revenues were up 1.7%. 

In contrast the DHL Express business delivered another consistent performance. Shipment volumes continued to be quite strong through the year whilst the 9.6% per-day shipment revenue growth is higher than the long term trend. Overall the division saw 7.3% growth in revenue at €16.1bn and an EBIT growth of 12.7% to €1.95bn.

Even better were the numbers from Global Forwarding and Freight. Here EBIT leapt by 48.8% year-on-year to €442m despite revenue only rising by 3.4% to €14.9bn. Volumes in ocean freight forwarding were up only 0.5% and in air freight forwarding they fell by 4.8%, which is strongly against market trend. Clearly Global Forwarding and Freight is looking to improve margins.

Things were not quite as healthy at the Supply Chain contract logistics business. Here revenue fell by 5.7% although the company said that this was influenced partly by the sale of the Williams Lea business and accounting changes in East Asia. EBIT fell by 6.3% for the year to €520m. The company said that 2019 results would improve by around 8% as the effects exceptional items depressing this year’s results fell away.

Much of DP-DHL continues to do well but the condition of its mail, parcel and local e-commerce operation cannot be ignored. This has to be seen to be fixed before anyone can have full confidence in the future of the company. Fortunately, the former head of DHL Express, Ken Allen, is now in charge of much of this business and his record suggests that he is capable of fixing difficult problems.

Source: Transport Intelligence, March 12, 2019

Author: Thomas Cullen


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