DP-DHL 2Q results point to ongoing post, parcel pains

While Deutsche Post-DHL Group posted operating profit (EBIT) gains in the Express, Global Forwarding and Freight, and Supply Chain segments, a year-over-year decrease of 58.5% in second quarter EBIT for the Post-eCommerce-Parcel (PeP) division weighed on the Group’s overall EBIT for the quarter, which declined by 11.2% y-o-y to €747 million. The Group’s revenue increased 1.4% y-o-y to €15.03 billion, and net profit declined 14.3% to €516 million.

DP-DHL’s first quarter results for the year also suffered from challenges in the PeP division from higher costs and capital expenditures. The past quarter was also marked by a 44.4% y-o-y decline in EBIT for the Group’s Supply Chain division, which has since turned around, with the division posting a 3.2% y-o-y increase to €128 million during the second quarter.

The Group’s CEO, Frank Appel, acknowledged the challenges facing the PeP segment and said DP-DHL is “implementing the measures for aligning the division toward long-term profitable growth.” DP-DHL said the main factors impacting PeP are higher transport and staff costs, and that it has initiated a program to increase the segment’s productivity and improve costs. However, during the quarter, the implementation of the program has increased expenses and contributed to the significant decline in EBIT for the division.

To examine the results by division:

Post-eCommerce-Parcel: Revenues for PeP increased 3.4% y-o-y to €4.41 billion, while EBIT declined 58.5% to €108 million. Despite the overall increase in revenue, within the division, the Post business unit’s revenue declined 1.2%, due to ongoing volume declines in mail. As noted above, higher transport and staff costs contributed to the substantial decline in EBIT for the quarter, and DP-DHL plans to address the costs with a series of initiatives. One such initiative includes an early retirement program focused on “civil servants working in overhead areas,” as well as larger restructuring in the division.

DHL Express: The Express division posted a revenue increase of 7.9% for the quarter, to €4.05 billion. EBIT during the quarter rose 10.2% to €517 million, driven by continuous growth in the Time Definite International delivery business, which increased daily volumes by 8.4% y-o-y.

DHL Global Forwarding, Freight: Revenues in Global Forwarding and Freight were up 2.5% for the quarter to €3.70 billion, and EBIT rose by an impressive 56.7% to €105 million to only slightly trail the PeP division. DP-DHL attributed the division’s success during the quarter to better cost-efficiency measures, as well as the segment’s improved ability to pass on higher freight market rates to its customers compared to the first quarter.

DHL Supply Chain: Supply Chain revenue fell 8.6% during the second quarter, to €3.21 billion, but EBIT increased 3.2% to €128 million. The Group attributed the lower revenue to negative currency and portfolio effects, resulting mostly from the sale of DP-DHL’s UK subsidiary Williams Lea Tag during 4Q 2017. After adjusting for those effects, the division reported a slight 2.7% increase in revenue. The Supply Chain division also concluded contracts totaling €283 million with new and existing customers during the quarter.