DHL’s difficult normal year

Superficially, 2023 was a painful year for DHL. The Group’s just published results show that revenue fell by 13.4% to €81,758m and ‘consolidated net profit’ fell by 31.4% to €3,677m when compared to 2022. The two largest businesses within the Group saw significant falls in both revenue and profit, although Post & Parcel Germany revenue was flat. 

Of course, the predominant reason for this comparative downturn was the strength of the results in the exceptional market conditions of 2022. 

At DHL Express, which has boomed over the past couple of years, results fell to earth with a 10% fall in revenue and a 19.8% fall in Earnings Before Interest and Tax (EBIT). Whilst profits are still markedly higher than those of 2020, profit margins are now lower at 13% as compared to 14.4% in 2020. It appears that the falls in profits have been driven by weakness in the ‘business-to-business’ segment of the market whilst e-commerce has continued to grow aggressively. This is odd as the US Express carriers are experiencing an opposite trend, something that may reflect DHL’s exposure to markets such as continental Europe. 

Results at the ‘Global Forwarding and Freight’ business experienced a similar trajectory, with revenue falling year-on-year by 36.1% and EBIT by 38.4%. Bearing in-mind the conditions in the sea and air freight markets this is not surprising, yet the underlying performance of DHL Global Forwarding and Freight is still better than seen in 2020, with the EBIT margin double that of 2020. Interestingly the results of the fourth quarter 2023 saw little improvement although there might have been some hope than the forwarding division would have benefited for the Red Sea crisis. 

Results at the ‘Post and Parcel Germany’ business continued to deteriorate, with revenue up by 0.7% year-on-year at €16,892m but EBIT down by 31.5% at €870m. In contrast to the other divisions, Post and Parcel Germany is seeing a sustained decline in its business. The company appears to be continuing to struggle with the shift to parcels and the decline in traditional mail. The ‘e-commerce’ business, which was spun-out of the Post and Parcel business several years ago, saw revenue grow by 2.8% year-on-year but operational profits fell by 24.9% in the face of less demand for e-commerce services. 

Other parts of the Group saw increases in revenue and profits, notably the ‘Supply Chain’ contract logistics business which saw a 7.6% rise in EBIT to €961m. DHL Supply Chain said that there had been an underlying growth rate of 4% and EBIT margins have hardened from 5.4% in 2022 to 5.7% 2023. 

It is difficult to know what to make of these results. The challenge for DHL has been to manage the ‘return to normal’, but measuring the success of that is difficult. If the benchmark is the relative performance compared to 2019-2020 much of DHL seems to be doing quite well.

Author: Thomas Cullen

Source: Ti Insight

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