DP-DHL reports robust Q3 in all divisions

A year after Deutsche Post DHL Group (DP-DHL) suffered the ignominious setback of pulling the plug on its comprehensive IT system, much has gone right for the express mail and logistics company, leading to what is being described as the strongest third quarter in the company’s history.

For the quarter, the Group increased operating profit significantly. Earnings before interest and taxes (EBIT) rose to €755 million, year-over-year, representing the company’s best-ever performance for Q3. DP-DHL attributed the spike to “sustained organic growth in operating profit” across all divisions, in addition to the non-recurrence of substantial one-time effects.

Group revenue fell by 3.9 percent to €13.9 billion in Q3, ending Sept. 30, compared to the same period last year, due to a combination of negative currency effects, lower fuel surcharges due to falling oil prices, and “a change in the recognition of revenue generated from a key customer contract in the Supply Chain division, which took effect in the fourth quarter of 2015.”

Notably, the Post – eCommerce – Parcel (PeP) division was a significant contributor to tjhe €558 million increase in third-quarter Group EBIT.  Operating profit at PeP more than doubled to €295 million, year-over-year, primarily as a consequence of the postal strike in Germany. “Even after adjusting for this effect, the increase in EBIT was significant,” the company said in its Q3 2016 statement. “The improvement was primarily fueled by the revenue growth, the increase in postage prices, disciplined cost management and sustained growth at eCommerce – Parcel.”

The DHL divisions reported a combined Q3 increase in EBIT to €536 million, compared to €127 million reported in Q3 2015. The Global Forwarding, Freight, division led all others, rising from a loss of €337 million last year to €63 million in the most recent Q3. “The negative figure reported in the previous year was due to one-time charges of €384 million, primarily associated with the renewal of the division’s IT systems,” the company said.

Meanwhile, the Supply Chain division increased EBIT by 35.6 percent, y-o-y, €137 million, DP-DHL said.  The Express division, however, suffered a y-o-y decline to €336 million, compared to €364 million last year, based on “non-recurring income posted in the previous year.” After adjusting for this, divisional EBIT improved by 19 percent, the company stated.

“The strong trend in operating profit in all four divisions shows that we have set the right priorities with our Strategy 2020,” said Frank Appel, CEO of Deutsche Post DHL Group. “We are taking an increasingly active role in the dynamic development of e-commerce all over the world and are continuing to invest in this segment. Thanks to the targeted investments and strategic initiatives we implemented in prior years, we are now enjoying success despite weak economic tailwind. We are well on track to reaching the ambitious goals we have set for 2016 and beyond.”

DP-DHL said it anticipates only “moderate growth in the world economy” for the rest of 2016. “Despite the continuing lack of economic tailwind,” the company said, “Deutsche Post DHL Group still expects to reach its objective of significantly increasing EBIT for full-year 2016 to between €3.4 billion and €3.7 billion, based on the Group’s very positive operating performance in the first nine months.”

The Group has also confirmed its previous forecast of an average increase in operating profit of more than 8 percent annually during the period from 2013 to 2020, based on a compound annual growth rate.