Deutsche Post DHL Group increases operating profit and confirms 2016 full-year guidance

Deutsche Post DHL Group (DPDHL) has reported a strong increase in EBIT to €755m in the third quarter of 2016, representing the strongest third quarter in its history. The rise of EBIT over the prior year (2015: €197m) is attributable to sustained organic growth in operating profit in all divisions in addition to the non-recurrence of substantial one-time effects.

Revenue in the Post – eCommerce – Parcel (PeP) division increased by 4.0% to €4.0bn in the third quarter. Operating profit at PeP more than doubled to €295m, with the prior-year EBIT figure (2015: €142m) impacted primarily by the consequences of the postal strike in Germany. The improvement was primarily fuelled by the revenue growth, the increase in postage prices, cost management and sustained growth at eCommerce – Parcel.

Revenue in the eCommerce – Parcel business units increased by 11.6% to €1.7bn. The Group has been expanding its parcel network via partnerships with postal companies in Hungary and Slovenia. DPDHL announced that it will continue to advance its expansion in the UK through the planned acquisition of UK Mail. Revenue in the Post business unit declined by 0.9% to €2.296bn.

The sustained upward revenue trend enjoyed by the Express division for a number of years continued in the third quarter. Revenue rose by 2.9% to €3.4bn. This performance was once again driven by solid growth in the international time-definite delivery business, where daily volumes rose by 6.8% in the third quarter compared with the prior-year period. The 7.7% decline in EBIT to €336m in the Express division is attributable to non-recurring income of €82m recognized in the prior-year period, which was largely the result of an asset write-up in the Americas region.

The Global Forwarding, Freight division contributed to the increase with an improvement from €-337m to €63m. The negative figure reported in the previous year was due to one-time charges of €384m, primarily associated with the renewal of the division’s IT systems. Global Forwarding Freight registered a significant rise in EBIT of 34.0%.

The Supply Chain division increased EBIT by 35.6% to €137m. Revenue in the Supply Chain division decreased by 14.7% to €3.4bn in the third quarter. After adjusting for negative currency effects, lower fuel surcharges and the effect of the change in revenue recognition announced in 2015, due to revised terms in the contract with the UK’s NHS, revenue increased by 2.3% over the previous year. Supply Chain continued to generate additional new business. In the third quarter, the division concluded additional contracts worth €306m with both new and existing customers.

In addition to lower restructuring costs, the Supply Chain division’s EBIT growth reflected the positive impact of the division’s optimization initiative which began last year. The initiative aims to increase the operating margin in the Supply Chain division to between 4% and 5% by 2020 by increasing standardization, improving efficiency and better leveraging economies of scale in the global business.

In terms of capital expenditures, the Group invested €498m in the third quarter of 2016. For example, DPDHL made further progress in extending its national and international parcel infrastructures and invested in the production of its StreetScooter electric vehicle, in addition to expanding global and regional hubs in the Express division and modernizing and expanding the aircraft fleet.

The company anticipates moderate growth in the world economy for the remainder of 2016. Despite the continuing lack of economic tailwind, DPDHL still expects to reach its objective of increasing EBIT for full-year 2016 to between €3.4bn and €3.7bn.

The Group has also confirmed its targets for the coming years: DPDHL continues to forecast an average increase in operating profit of more than 8% annually during the period from 2013 to 2020 (CAGR).

Source: DPDHL