DP-DHL breaks records but is still pessimistic

Deutsche Post-DHL is the latest major logistics service provider to announce record breaking results followed by a statement it is pessimistic about the future. Chief Analyst Thomas Cullen reports.

For whole Group, revenue was up 15% year-on-year at €94.436bn, whilst net profit was up 6.1% at €5.359bn. As Deutsche Post-DHL management expressed delicately, “the key driver was the positive earnings development in the internationally operating DHL divisions”. In other words, the previous reliance for profits on the German mail operations is long gone.

As usual DHL Express saw growing sales, with revenue up 13.9%, but as the e-commerce boom faded towards the end of 2022 profit margins softened. The consequence was that EBIT (Earnings Before Interest and Tax) fell back by -4.6. DP-DHL ascribe much of the fall to the weakness of the ‘B2B’ sector, as, “Global trade volumes remain in decline YTD 2023”. In contrast it remains optimistic about ‘B2C’, asserting that the number of ‘Time Definite’ B2C shipments at DHL Express may have fallen-back by 10% but volumes are still up by 29%.

DP-DHL expects “B2C to return to mid- to high-single digit volume growth once consumer spending re-accelerates”. This may not be enough for the mail business however, as ‘Post & Parcel Germany’ saw a 3.8% fall in revenue but a 27.2% fall in EBIT. In mitigation, the related ‘e-commerce solutions’ business does seem to be on a different trajectory.

Yet it was the Global Forwarding, Freight business that stood-out amongst these results. Revenue was up 32.3% at €30.212bn and EBIT was even more impressive, up 77.4% to €2.311bn. DP-DHL explained that, “this division achieved a significant jump in revenue and earnings in 2022 thanks to operational improvements and high freight rates”, with the latter being hardly surprising. The EBIT margin was exceptionally high at 7.6% despite volumes falling in single digit percentages. Probably more sustainable, however was the performance at DHL Supply Chain which saw an 18.5% increase in revenue and a 26.7% rise in EBIT. It is unclear what’s driving this growth, which is probably above the organic growth of the contract logistics market.

Despite these profit increases, the forecasts for the next twelve months seemed both uncertain and downbeat. Issuing three different scenarios for the dynamic of profits, all see results declining, with the companies most optimistic result being an EBIT of €7bn as compared to FY2022’s €8.4bn. Clearly DP-DHL thinks all of its businesses will be under pressure. Possibly not the most welcoming start for Tobias Meyer, the Group’s new CEO.

Author: Thomas Cullen

Source: Ti Insights

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