DP-DHL reports modest gains, operating profit up 2.9% in Q1

Deutsche Post DHL continues to announce improvements in its financial performance with moderate increases in revenue and profits across much of its business in the first quarter, despite less than inspiring market conditions.

At the group level in the first quarter of 2013, revenue inched-up by 0.6%, but operating profits grew by 2.9% at €711m.

The Mail business saw an increase in revenue of 1.5%, but slightly unexpectedly a fall in operating profits of 2.6% to €389m. Deutsche Post ascribed the fall in profits to higher wage costs and fewer working days in the quarter. This was despite what it described as “booming online retailing” fuelling an 11% increase in daily parcel volumes. In contrast, conventional mail volumes continued to decline.

The DHL Express business appeared to keep pace with the market with a 1.5% increase in revenue, but a 9.5% jump in operating profits. This was on the back of a 10% rise in volumes led by its core ‘time definite international’ service. DHL Express claims that it has permanently improved its margins through better productivity and tactical positioning.

The position in the freight forwarding and contract logistics business was more complex. For DHL Forwarding, revenues were down 1.9% year-on-year, but operating profit in terms of EBIT was up 1.1%. In turn, this hid a divergence between air freight forwarding which fell heavily and sea freight that grew, powered by “north-south trades”.

Similarly, the contract logistics business at DHL Supply Chain saw a 2% rise in revenue fuelled by automotive, airline and retail contracts, particularly in Asia-Pacific. DHL Supply Chain said that profits were depressed by the effects of an insolvent customer in the US, which disguised an underlying increase in EBIT (Earnings Before Interest and Tax).

Deutsche Post DHL described the market as a “business environment characterised by persistent economic challenges” and certainly these results show less than rapid growth. However, the ability to return even low single-digit percentage increases in profits in such conditions suggests that the Deutsche Post DHL business model is more robust than it used to be.