DHL Group remains one of, if not the, largest logistics service provider. However, the market it competes in is quite different to that of 1995 when the company was first created. In 2024 DHL faces competition from enlarged container-shipping lines, as well as diversified freight forwarders. The rival Express carriers are still amongst its biggest rivals, yet Amazon is now a major provider of internet retail logistics services.
DHL’s strategy is having to adapt. In its latest articulation called “Strategy 2030 – Accelerate Sustainable Growth” it has outlined both how it will grow over the next five years and how fast it will grow.
One of the headline characteristics of DHL Group is that it continues to plan for share ‘buy-backs’ as well as a generous 5% dividend. This strongly implies that DHL is highly cash generative even as it sustains a reasonable level of capital investment. Indeed, DHL retains a sensitivity towards too much investment in capital assets. DHL indicates that it will continue with modest company acquisitions but there appears absolutely no appetite for transformative purchases of the type that DSV engaged in, most recently with the purchase of Schenker. Rather DHL underlines its commitment to ‘return on capital invested’ as a strategic metric.
DHL’s growth expectations for its individual businesses reflect this sense of the company being mature. DHL Express is probably the most valuable of the individual businesses, yet it only expects profit growth to be “ahead of volume growth”, which is projected to be 4-5%. However, it does aim for profit margins to be in the “mid-teens”.
Global Forwarding, Freight is expected to grow above the overall trend in the forwarding market which DHL expects will be “in line with global GDP” at 2.5-3%. The ‘Supply Chain’ contract logistics business anticipates a 4-6% average growth in global contract logistics market and hopes to better this, which would be impressive, especially as DHL Supply Chain is aiming at an “industry-leading profitability to EBIT margin of 6-7%”.
E-commerce is different. Here DHL is seeking to invest aggressively in a market that is seeing “strong growth of 6-8% across domestic and cross-border e-commerce markets – geographically quite heterogenous”. As regards profitability, DHL Ecommerce sees “EBIT margin stable at 4-5% in investment phase (until 2025); followed by margin expansion to >5%”. In contrast, at Post & Parcel Germany the talk is of “stabilisation” as the old German Post Office continues to struggle with change.
The headline for “Strategy 2030” is revenue 50% higher in 2030 than in 2023. However, scratch beneath the surface and DHL appears to be a group working for stability as much as profit growth. In today’s market the former might be harder than the latter.
Source: Ti Insight
Author: Thomas Cullen
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