Consultant Insight: DHL reports strong preliminary Q3 financials

DHL’s third-quarter earnings will be strong based on preliminary figures the company published on Oct. 7. All divisions are expected to contribute a combined 1.765 billion euros (US$2.04 billion) to the Group EBIT for a 28% year-over-year increase. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] As a result, the company will raise guidance for FY 2021 Group EBIT and free cash flow, driven by the strong development in the DHL divisions. DHL’s Global Freight Forwarding division led the way in terms of YoY growth with an expected Q3 EBIT of $428 million compared to $179 million for the same period last year. This should not come as a surprise to industry observers, given the state of supply chains. The limited supply of ocean containers and tight capacity in airfreight resulted in higher rates and surcharges, benefitting the DHL division as it worked to secure available capacity, book and deliver cargo on behalf of its customers. For the first half of the year, DHL’s Global Freight Forwarding division posted a 34.5% revenue increase. Ocean freight revenues increased 61.4% while airfreight revenues increased 28.5% YoY. Volume-wise, airfreight increased 26.5% and ocean freight volumes increased 14.5%. The trans-Pacific and Asia-Europe lanes were the busiest as shippers replenished low inventories and tried to stock up ahead of the end-of-year holiday season. The Express division will likely finish Q3 with an expected 28.8% YoY increase in EBIT to $1.1 billion, compared to $872 million last year. Like the Global Freight Forwarding division, Express has benefited from an extremely tight airfreight market and shippers needing to replenish inventories quickly. The time-definite international (TDI) Express product recorded strong growth during the first half of the year with items per day up 23.2% and revenue up 38.1% YoY for the period compared to the time-definite domestic (TDD) product, which recorded a 15.7% increase in items per day and 25.5% YoY increase in revenue. There is a strong possibility that both will continue their growth, particularly TDI, with stronger growth anticipated during Q3 and likely through Q4 due to demand in inventories. The Supply Chain and eCommerce Solutions divisions are also expected to report strong YoY EBIT growth of 25% and 18.4%, respectively, for Q3.This follows a strong first half for both divisions. Supply Chain reported a 10% increase in revenue and an more than doubled its EBIT during the first half of the year. The strong growth was attributed to new business gains, with Life Sciences & Healthcare, Auto-mobility and Retail sectors reporting the highest growth, and the continued growth in e-commerce business. Meanwhile, eCommerce Solutions recorded a 33.8% increase in revenue and more than 100% increase in EBIT for the first half of the year. Led by the Americas, where the division was up 40% in terms of revenue, the growth was due to higher volumes in its B2C business. DHL announced investments in its networks in Q3 to ensure it continues its increases in revenue and EBIT. For example, DHL Supply Chain is building a 32,000-square-meter logistics center in Florstadt, Germany, which is scheduled to open in late 2021. The facility will focus on the pharmaceutical and medical products sector and provide warehouse space in temperature zones of 15 to 25 C, 2 to 8 C and -24 C. There will also be 1,750 square meters of space for storing hazardous materials. DHL eCommerce announced it would invest $300 million over five years to open five new distribution centers, upgrade its information technology network and make other infrastructure improvements in the U.S. With the investment, DHL says it will increase the square footage of its U.S. distribution centers by 70%. Not to be outdone, DHL Express will invest $360 million to build new and expand existing facilities in the U.S., Canada, Brazil and Mexico. “With an ever-increasing number of consumers shifting their shopping activities online, and the sharp rise in businesses selling their goods in the global marketplace, we need to continue the critical investments in our network infrastructure to meet the growth demands in international ecommerce and global trade,” DHL Express Americas CEO Mike Parra said in a statement. DHL will report earnings for Q3 and the first 9 months of the year on Nov. 4, 2021.

Consultant Insight: DHL reports strong preliminary Q3 financials

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