Deutsche Post DHL’s 2015 profits fall despite success in e-Commerce

It was Deutsche Post DHL’s (DPDHL) internet facing businesses that did all the work over the past financial year whilst much of the rest of the Group struggled. The result was flattish revenue and a sharp decline in profits.

Revenue for the financial year 2015 was €59,230m, up 4.6% on 2014, yet this was flattered by currency effects although the falling price of fuel played an important part in pushing revenues down. Earnings Before Interest and Tax (EBIT) fell by 18.7% whilst Net Profit fell by 25.6% to €1,540m.

The ‘Post eCommerce and Parcel’ (PeP) Division had a mixed year with revenues up 2.8% at €16.1bn but EBIT down -15% at €1,103m. On the one hand, the eCommerce related parcel business saw revenue growth of 11.9%, at €6.3bn. However, the traditional mail business declined 2.3% to €9.8bn. The latter, combined with strikes and heavy investment in international parcel operations, resulted in the fall in profits.

Express was the best performer with revenue up 9.4% to €13.7bn, although slightly flattered by currency effects, whilst EBIT climbed to 10.4% at €1.4bn. The performance was driven by rising volumes particularly in premium international services, which saw an 8.7% increase.

The problems at DPDHL were particularly acute at Global Forwarding & Freight (GFF) where EBIT was negative to the tune of €181m for the full year as compared to a profit of €293m in Financial Year 2014. This was on a revenue of €14.89m, effectively 0.5% down on last year’s numbers after accounting for the effects of declining fuel costs. Obviously the disastrous IT project at Global Forwarding had a major impact however, the intimation is that GFF found the market tough going, attempting to improve profitability through a “selective” approach to business. That said, DPDHL was quick to point-out that the Division saw a €99m positive EBIT in the 4th Quarter, implying a substantial rebound in profits next year.

Supply Chain saw higher revenues yet lower profits, with revenue up 7.2% year-on-year to €15.8bn but EBIT was down 3.4% to €449m, a dichotomy due to a mix of one-off effects on revenue and restructuring costs on profits.

Any fall of a quarter in a company’s profits cannot be a good thing. DPDHL has had another one of its bumpy years characterised by a mix of growing sales and write-offs. However, the 4th quarter performance imply that underlying performance is better than the headline numbers suggest. E-commerce offers increases in underlying demand in both Express and PeP whose market strategy does appear effective. What DPDHL has to reduce is its habit for occasional large-scale mismanagement. Frank Appel has been vigorous in his assertion that Global Forwarding is not being sold-off, however bearing in mind the performance of the Forwarding business he has to demonstrate why this should not be so.

Source: Transport Intelligence, 10th March 2016

Author: Thomas Cullen