DP-DHL continued investment dampens profits

DHL revenue six months

Deutsche Post DHL (DP-DHL) revenue and profits edged higher over the past six months as the company continues to stabilise its problematic divisions.

What is now called ‘Post & Parcel’ – which is essentially the German post business – saw H1 revenue rise by 1.1% year-on-year to €7.48bn but EBIT (Earnings Before Interest and Tax) fall by 21.2% to €404m, with sharp declines in traditional mail volumes and rises in parcel volumes. It is not clear why from DP-DHL’s statements, however the losses appear driven by restructuring charges.

Certainly, the related eCommerce Solutions business also continues to restructure, with the second quarter seeing a loss of €18m also due to “investment” charges. Over the first half of 2019 eCommerce Solutions saw revenue rise 7.6% but the newly created division remains loss making over the period.  

In the first half of the year DHL Express did reasonably, with a 5% growth in revenue despite mediocre demand. A focus on profitability and yield management still led EBIT (Earnings Before Interest & Tax) to be essentially flat with adjusted results edging down by 0.4%. Why this has happened is unclear as DHL Express report that operational margins remain strong at 12.3%.  

‘Global Forwarding and Freight’ (GFF) continued its violent recovery seen earlier in the year. Despite a modest 3.6% year-on-year rise in revenue, profits for the first half of 2019 leapt to €573m from €183m in the first half of 2018. It appears that GFF used soft air freight rates to improve margins despite depressed demand.

The ‘DHL Supply Chain’ business continued to face problems, with second quarter profits down by 32%. Overall the first half of 2019 saw results complicated by the sale of the Chinese business. The funds from this are being used to restructure the contract logistics business, although DHL SC say that the underlying business is grew EBIT at 9.4% and margins remain at 4.3%.

Overall the whole of Deutsche Post-DHL saw revenue for the first half of the year rise 3.6% and EBIT up 16.7 year-on-year, however in the second half revenue was 3% higher and EBIT up just 2.9%.This underlying picture is, as ever with DP-DHL, complex but key parts of the group are struggling and this is costing capital.

Source: Transport Intelligence, August 8, 2019

Author: Thomas Cullen