DP-DHL boosted by Express depressed by Forwarding

Deutsche Post DHL’s annual results, issued on the 11/3/15, saw a modest rise in in revenue and profits at the group level that disguised significant contrasts in performance between the different constituent businesses. Post-eCommerce-Parcel (PeP) put in respectable numbers but Express performed above expectations. Supply Chain saw its profitability continuing to recover but Forwarding results crashed.

The PeP business, which in its previous identity of ‘Mail’ was the cash-cow of the group, has continued to feel the effects e-commerce. Mail volumes drifted lower but parcel volumes were up by 7%, edging revenue higher by 2.6% year-on-year at €15.7bn and an EBIT up 0.9% at €1.29bn.

Express reaped the rewards of e-commerce more successfully, hitting its target of a 10% margin a year early. Before currency effects, revenue was up by 5.7% at €12.5bn on volume increases of core products in high single figure percentages. Profits benefitted from this better utilization of capacity with a 16.3% increase in EBIT to €1.3bn.

The ‘Supply Chain’ business also continued its recovery, with a focus on better quality business delivering a 5.4% rise in EBIT over a 3.6% increase in revenue. However ‘Global Forwarding- Freight’ was ugly. In what DP-DHL described as “a challenging industry environment” revenue before currency effects was up 0.9% year-on-year, at €14.9bn, but EBIT crashed by 38.7% to €293m. DP-DHL blamed much of this on the “result of significant resources being directly involved in the transformation programme New Forwarding Environment as well as the detailed management and workforce attention that the project entails”.

For DP-DHL as whole, revenues rose by 3.1% and EBIT was up by 3.5%. However consolidated profits were depressed by tax and financial issues. Although there was much talk by DP-DHL about the opportunities in e-commerce and emerging markets, the company’s big challenge appears to be executing the sort of turnaround seen at DHL Express in the Global Freight and Forwarding division.