DP DHL improves Q1 revenue whilst profitability declines everywhere but Express and e-commerce

Deutsche Post DHL Group has announced its financial results for the first quarter of 2015. It reported that revenue grew by 8.8% over the prior-year quarter to €14.8bn. Adjusted for positive currency effects, revenue also grew, with improvements in all four divisions contributing to an organic increase of 2.1%. This development reflects sustained growth in revenues and volumes in the international express business as well as in the German parcel business. DP DHL’s operating profit slightly decreased by 1.0% in the first quarter to €720m, primarily due to the weak performance registered by the Global Forwarding, Freight business and planned, non-recurring restructuring costs in the Supply Chain division. Accordingly the company’s operating margin stood at 4.86%.

“We saw a moderate start to the year, as we expected,” said Frank Appel, CEO of Deutsche Post DHL. “Our strategy, aimed at growth in e-commerce and the emerging markets, in particular, is progressing. At the same time, as we transition from Strategy 2015 to our new Strategy 2020, we are now consciously undertaking a number of specific measures. These measures will allow us to build a strong base to bring our strategic priorities forward. We are investing significantly to ensure that our four divisions are optimally positioned, even though this is having a temporary impact on our performance, as we previously discussed. Our overarching focus today is on the sustainable, profitable growth of our business.”

Revenue in the Post – eCommerce – Parcel (PeP) division increased by 3.6% in the first quarter to €4.1bn. €1.5bn of that figure was attributable to the eCommerce – Parcel business, which continued to register growth to achieve an improvement of 13.7% over the prior year. The increase, including positive currency effects, reflects revenue growth of 25.8% in eCommerce, 12.1% in Parcel Germany and 4.8% in Parcel Europe. This trend demonstrates that DP DHL Group continues to benefit from its positioning in the high-growth e-commerce, parcel market.

In contrast to eCommerce – Parcel, revenue in the Post business decreased by 1.7% in the first quarter to €2.6bn, illustrating the impact of structural change as the mail market shrinks. The above figure includes revenue declines in both mail communication (-0.6%) and dialogue marketing (-2.8%). Price increases for postal products in Germany helped to mitigate the effects of the volume decline.

Operating profit in the PeP division rose by 0.8% to €399m. This reflects the higher revenues in eCommerce – Parcel, which were partially offset, however, by lower Post volumes, higher staff and purchased goods and services costs as well as expenses especially related to the international expansion of the Parcel business.

The Express division significantly increased both revenue and earnings in the first three months of the year. Revenue climbed by 12.5% in the first quarter to €3.2bn. Adjusted for currency effects, the increase amounted to 2.3%, held back by lower fuel surcharges. The main driver of the sustained positive trend in the Express division was further growth in the time definite international business, where first-quarter volumes rose by 7.1% compared with the prior-year period.

The division’s EBIT rose by 20.3% year-on-year to €332m, demonstrating the positive effects of volume growth. The EBIT margin increased to 10.2% in the first quarter compared with the prior-year figure of 9.6%.

Reported revenues in the Global Forwarding, Freight division increased by 7.6% to €3.8bn. Adjusted for currency effects, revenue increased by 2.7%. Ocean freight volumes rose by 2.3% in the first three months of 2015, while air freight volumes rose by a modest 0.3%.

In contrast, the division’s operating profit experienced a sharp decline of 65.31% to €17m in the first quarter. This is due to ongoing margin pressure in the overall market, as well as direct and indirect costs related to the transformation programme.

Revenue in the Supply Chain division increased by 12.4% in the first quarter of 2015 to €3.9bn. Adjusted for currency effects, revenues rose by 0.8% over the prior-year period. The division was able to conclude new business contracts with a volume of €260m, particularly in the automotive, consumer and life science & healthcare sectors. EBIT declined by 37.65% to €53m in the first quarter. Planned, non-recurring costs for the Supply Chain optimization programme were chiefly responsible for the decrease.