2024 was not a terrible year for DHL. Revenue increased but profits fell. For the whole year, compared to the previous year, revenue was 3% higher at €84.186bn whilst net profits fell by 9.3% to €3.332bn. The reasons for this were broadly spread across the Group, however, the freight-forwarding business was badly hit by market conditions.
At the DHL Express business, revenue edged up by 1.2% but Earnings Before Interest and Tax (EBIT) were down by 4.5% year-on-year. The reason for this in part appears to be the changing dynamics of the Express market, especially around e-retail activity, although the performance of DHL Express did perk up in the fourth quarter.
The biggest problems were at the DHL Forwarding and Freight freight-forwarding business. Here revenue grew by 1.8% year-on-year but EBIT fell by 24.5%. DHL pointed out that revenue had grown due to higher freight rates in both air and sea. What it did not elaborate on quite so much was the inability of forwarders to benefit from these higher rates. The market dynamics are changing in both sea and, to a lesser extent, air freight so it is a good question how DHL Forwarding will perform in the next year.
The ‘eCommerce’ business also suffered from unfriendly market dynamics. Revenue was up 10.2% as demand remained robust, but EBIT fell by 3.1% to €281m. DHL says that e-commerce is a “major growth driver for DHL Group” with ‘business-to-consumer’ volumes rising by 21% in the fourth quarter, yet it appears that the Group is struggling to position itself effectively to make profits in this market.
The ‘Supply Chain’ business seems to be on a different trajectory. Revenue grew by 4.3% year-on-year whilst EBIT was up 11.1% to €1.068bn. It is unclear why it delivered such a good result, although DHL cites “new contract wins” and healthcare business.
The ‘Post & Parcel’ business in Germany once again saw rising parcel deliveries and falling mail deliveries, resulting in a 5.6% in EBIT year-on-year.
Tobias Meyer commented that he expected a “persistently muted macroeconomic environment for 2025” and that may be a problem. However, the issues that much of DHL is presently facing go beyond the short-term, with real threats to profitability in areas such as express, e-commerce and freight forwarding from changing market dynamics.
Author: Thomas Cullen
Source: Ti Insight
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