Consultant’s Insight: DHL Express benefits from higher rates, surcharges

Despite stronger revenue growth, weak global trade was cited as the reason for no year-over-year change in DHL Group’s profitability in the third quarter. [caption id="attachment_57145807" align="alignright" width="212"] Cathy Roberson, Cargo Facts Consulting senior consultant and Cargo Facts columnist[/caption] DHL Group reported a 6.2% increase in consolidated revenue, totaling 20.6 billion euros ($22.1 billion) for the quarter ending Sept. 30, and EBIT remained flat compared to the previous year at $1.5 billion, according to its Nov. 5 earnings report. “The weak momentum of world trade runs like a red thread through the first nine months of 2024,” DHL Group Chief Executive Tobias Meyer said on a Nov. 5 earnings call. “Nevertheless, we were able to significantly increase revenue in the third quarter and initiate a turnaround in EBIT compared to the previous year.” The revenue increase was led by DHL’s Global Forwarding unit, which saw revenue rise 14% due to higher air volumes from Asia and higher ocean freight rates. However, Global Forwarding’s EBIT declined 9.5%. Meanwhile, the DHL Express unit reported revenue of $6.5 billion, up 3% YoY, and an EBIT of $736.4 million, up 2.8% YoY despite daily time-definite international shipment volumes declining 5.9% YoY. Like UPS and FedEx, DHL Express offset its volume decline with higher rates and surcharges and network capacity optimization. Volume growth Express B2B volumes continued a slow rebound, as first observed in Q2 , by growing 0.2% YoY. DHL Group attributed the weak B2B growth to a muted economic environment, particularly in Europe. In comparison, UPS reported a 0.8% increase in B2B volumes during Q3. However, like FedEx and UPS, DHL expects seasonal increases in B2C shipment volumes until the end of the year. As such, DHL Express plans to deploy an additional 777F on routes between Asia and Europe to capitalize on potential capacity shortages. Security concerns Heightened security measures are in effect as well. Western security officials suspect Russian intelligence was behind a plot to put incendiary devices in packages on DHL planes destined for North America, including one that caught fire at a DHL hub in Germany and another that ignited in a DHL facility in England. Both incidents occurred in July. The shipments are reportedly one component of a larger series of Russian attacks. These include: Arson in the U.K. and Czech Republic in July and last week, respectively; Pipeline and data cable attacks in the Baltic region in September; and Water supply tampering in Sweden and Finland this summer. According to the New York Times, the operation is an effort by Russian president Vladimir Putin to inflict damage on the West for its support of Ukraine’s military. As a result of the July incidents, U.S. Customs and Border Protection implemented enhanced Air Cargo Advanced Screening security filing requirements for air shipments from other countries arriving to, or transiting through, the United States, effective Sept. 3. The new guidelines are an attempt to better identify the parties involved in the air cargo supply chain before cargo is loaded on board a U.S.-bound aircraft. Outlook DHL Group’s current and previous quarterly earnings follow a similar pattern as those of FedEx and UPS: They are dependent on B2B volumes for profitability. However, B2B volumes will not significantly grow until manufacturing demand picks up. The global manufacturing downturn continued in October, according to the latest J.P. Morgan Global Manufacturing report. New export orders declined globally for a fifth consecutive month while global goods exports have fallen almost continually since early 2022. Until we see manufacturing improvements, integrators will continue to raise rates and surcharges and focus on niche and industry-specific services. Editor’s note: All amounts have been converted to U.S. dollars. Cargo Facts LATAM 2025, the essential event for stakeholders in Latin America, will take place Feb. 10-11 at the Pullman Sao Paulo Guarulhos Airport. Learn more and register by Dec. 29 to take advantage of early-bird pricing.

Consultant’s Insight: DHL Express benefits from higher rates, surcharges

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