Operating profits rise for DP-DHL Group’s Q1, but airfreight volumes drop

While Deutsche Post-DHL Group (DP-DHL) saw revenues and operating profits rise in the first quarter of 2019, compared with Q1 the year prior, the Global Forwarding, Freight (GFF), division reported airfreight volumes down by 3.9% for the period ending March 31, the fifth-straight quarter that saw volume reduction in the division.

For the quarter, DP-DHL said the GFF division “sustained the previous quarter’s upward trend in a weaker market environment,” adding that revenues rose by 4.8%, year-over-year, to €3.8 billion. By “concentrating primarily on high-margin business,” GFF reported that operating profits increased by 42.9% to €100 million.

With the rollout of GFF’s new  IT infrastructure, the German company said the GFF division is “well on the way to closing the profitability gap to its leading competitors in the medium-term.”

DP-DHL Group’s revenue, meanwhile, rose by 4.1%, y-o-y, to €15.4 billion in Q1 and reported “organic topline growth” in all five of its divisions. Operating profit for the Group was up 28.1%, y-o-y, to €1.2 billion.

“The first quarter played out as we expected. We achieved growth in all five divisions,” said Frank Appel, CEO of Deutsche Post DHL Group. “This shows that we are very well positioned in attractive markets and that our fundamental growth drivers are intact. E-commerce continues to boom all over the world and although some momentum has been lost, global trade is still on the rise, just as we expected for 2019.”

Appel added that DP-DHL Group is “on track” towards its target of generating more than €5 billion in earnings before interest and taxes (EBIT) this year.

In DP-DHL’s Supply Chain division, operating profit rose to €486 million, due to non-recurring income, and reported 4.6% growth in revenue, y-o-y, to €3.3 billion for the quarter. As a result of the Supply Chain division’s agreement entered into with S.F. Holding in China at the end of 2018, the division reported a “one-time positive EBIT effect” of €426 million. Adjusted for one-off effects, the division saw EBIT increase by 12.4%, y-o-y.

At the beginning of this year, DP-DHL’s Post – eCommerce – Parcel (PeP) division was split into two separate divisions – one for the Group’s German operations, called Post & Parcel Germany (P&P), and one for its international and e-commerce activities, called DHL eCommerce Solutions.

Despite a decline in letter mail and dialogue marketing revenues, the P&P division reported slight y-o-y revenue growth of 0.7% to €3.8 billion in Q1.  Operating profit for the division was down by €178 million, however, the previous year’s Q1 figure for operating profit “was boosted by non-recurring income of €108 million from the reassessment of pension obligations.”

In the new DHL eCommerce Solutions unit, revenue improved by 8.9%, y-o-y, to €1.0 billion in Q1, while operating profit fell to -€28 million, “mainly due to non-recurring restructuring expenses of €23 million incurred” by the realignment of the Group’s international parcel activities.

For the rest of 2019, DP-DHL Group said it is “maintaining its projection of an increase in operating profit to between €3.9 and €4.3 billion,” with help from “structural and operating improvements” in all divisions. The P&P division, the company said, should contribute between €1.0 and €1.3 billion to the group’s projected EBIT for the current year.

“In the DHL divisions, the Group anticipates total EBIT growth of between €3.4 and €3.5 billion,” said DP-DHL. “Group EBIT is projected to rise to more than €5.0 billion in 2020,” with P&P division adding more than €1.6 billion and the other DHL divisions contributing more than €3.7 billion for that year.