DHL GF reconsiders IT system amid first-half losses

The troubles for forwarding giant DHL Global Forwarding continued this week as is its parent company said it is reconsidering the full deployment of it much-talked-about New Forwarding Environment (NFE) IT system, which has been suspended since May. The news came as DHL GF released its second quarter results that showed a 7.2 percent decline in airfreight exports (530,000 tonnes), compared to Q2 2014, and first-half airfreight exports down by 3.6 percent, to about 1 million tonnes.

The NFE enterprise resource planning system, which has cost about €300 million so far, was described as a major part of the “2020 strategy” touted by parent company Deutsche Post DHL. However, the rollout of the platform proved to be problematic and more rigid that expected, and was thus causing delays.

According to Deutsche Post DHL’s CFO Larry Rosen, the company is now conducting a review of the IT project and will have to decide by the next quarter whether move forward with a scaled-down version of the current program or continue to work through the problems and continue with NFE as originally planned, albeit with a delayed timeline. Rosen left open a third possibility of ending the NFE program altogether and starting from scratch, but said that would be an unlikely scenario.

Part of Deutsche Post’s 2020 strategy was to make logistics its core business and ensure that 85 percent of its revenues came from logistics by 2020. In its second quarter of 2015, however, DHL Global Forwarding had to withdraw from some airfreight business in order to protect its first-half profitability and slow a decrease in margins, which contributed to the sharp downturn in volume.

Airfreight gross profit increased by 1.7 percent in Q2, year-over-year, to €246 million, while DHL GF revenues rose by 5.7 percent in the first half to €7.57 billion, most of the positive figures came from favorable exchange rate gains of €367 million. The division’s earnings before interest and tax declined by more than 62 percent in the first half to €57 million.

“Whilst the measures we implemented in the previous year to increase profitability are in fact showing success, margins are still low when compared with the historical average,” the company said.