Consultant’s Insight: Weak express, forwarding financials drag down DHL’s Q1

DHL Group yesterday reported first-quarter 2024 revenue of 20.3 billion euros ($21.8 billion), a 2.9% decline from Q1 2023, and operating profit of $1.4 billion, an 18.3% year-over-year decline, but an improvement from Q1 2019’s $1.3 billion pre-pandemic. [caption id="attachment_69752" align="alignright" width="265"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] The company’s Supply Chain, eCommerce, and Post & Parcel Germany divisions reported positive revenue and operating profit, but Express and Global Forwarding continued to battle a weak international market. “What is different about this freight cycle is the prolonged length of the downturn,” DHL Group Chief Financial Officer Melanie Kreis told analysts on May 7. Express Express revenue declined 4.4% YoY to $6.8 billion and operating profit was down 30% YoY to $679.3 million. Express volumes were down 1.2% YoY for Time Definite International cargo and 7.8% for Time Definite Domestic cargo. Like UPS , which reported Q1 earnings in April , lower fuel surcharges and weaker demand, particularly in business-to-business (B2B), were attributed to lower volumes and revenue. “We have significantly reduced our air capacity, but we also want to maintain a premium quality transit time in our network and that is why we don’t flex down even more on the aviation side,” Kreis said. “We could, but that would then have a detrimental effect on service quality. “We are currently making the conscious decision to run at these low weight load factors in both the intercontinental and the regional air networks,” she said. B2B volumes were weaker out of Europe during the quarter but DHL Group expects improvements during the second half of 2024. DHL Express experienced eased capacity constraints in Q1 compared with Q4 when e-commerce out of China caused a surge in volumes. “We are constantly reviewing pricing and conditions for those more volatile customers, and we have implemented some price measures here, which will come into effect in the second quarter,” Kreis said. She described the pricing as “co-op pricing.” “We know from other e-commerce customers … you just have to be very agile on pricing for these customers,” she said. “That’s very different to a steadily growing, more predictable B2B customer.” Global Forwarding Despite positive gains in volumes, the Global Forwarding, Freight division, fared worse financially due to lower market rates. Revenue was down almost 16% YoY to $5 billion and operating profit was down 32.4% YoY to $282.7 million. Airfreight volumes rose 5.1% YoY, improving primarily due to trade routes between Asia and Europe . In comparison, ocean freight volumes increased 6.6% YoY, which DHL attributed to growth in trade routes from Asia. Asia continues to be a region of opportunity for DHL, with Kreis citing “nice chunks” of e-commerce business out of Asia that are attractive to the forwarding group. The group is focusing on the business-to-consumer segment and on smaller customers now that it has made the onboarding process easier. This focus on smaller customers is a tactic similar to what UPS and FedEx are using in their international express groups. Outlook DHL’s outlook for growth for the Express and Global Forwarding groups is not expected to improve until the second half of the year when the company will likely begin to lap easier year-over-year comparisons. “As expected, a broad and dynamic economic upturn failed to materialize in the year’s first three months,” the May 7 earnings report stated. “DHL Group continues to expect more positive global economic momentum in the second half of 2024.” Editor’s note: All amounts have been converted to U.S. dollars. Air Cargo Next has launched a business directory listing cargo carriers, service providers and technology companies. Each category has sub-categories, allowing users to find the right business to meet their needs. Users can also add their businesses to the directory and claim existing entries. Visit the Air Cargo Next Directory here.

Consultant’s Insight: Weak express, forwarding financials drag down DHL’s Q1

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