DHL Global Forwarding, Freight almost triples EBIT, revenue soars

DHL Global Forwarding, Freight (DGFF) recorded the highest revenue of Deutsche Post DHL's (DPDHL) divisions, including Express, for the first time during the first quarter of 2022, increasing by almost 55% year over year to €7.4 billion (US$7.8 billion), despite the increasing scarcity of air cargo capacity. [caption id="attachment_95760" align="alignright" width="450"] Photo/Deutsche Post DHL Group[/caption] The DGFF division “developed outstandingly” during the first three months of 2022, Group Chief Financial Officer Melanie Kreis said during today’s earnings call. In the Global Forwarding business unit, revenue was up 70.3 % to $6.4 billion. Excluding positive currency effects of $195 million, the increase was 65.1 %. Gross profit was up from the previous year by 66.1 % to €1,161 million. First-quarter airfreight revenues rose by 55.2 %, and gross profit improved by 70 %. DGFF handled 509,000 tonnes of airfreight in Q1, up 3% YoY, due mainly to trade lanes between the U.S. and Europe. “Renewed lockdowns in parts of China and the war in Ukraine have further fueled competition for freight capacity,” Kreis said. “Accordingly, prices and margins are increasing rapidly. In this volatile environment, the division nearly tripled EBIT and even slightly increased the transport volumes in air and ocean freight year on year.” Transport markets remain tight, with new disruptions driving freight rates even further up in Q1, the company noted. Strong gross profit (GP) growth at DGFF, coupled with ongoing internal process improvements, led to “an exceptionally strong EBIT” of above $631 million and a gross profit to EBIT conversion of 50%. “Demand continues to exceed tight capacity and the situation is exacerbated by the war in Ukraine and lockdowns in China,” a company statement. “We don't see any quick or sudden rate normalization.” DPDHL noted the Group’s direct exposure to the war in Ukraine has been limited and that reduced business expectations in Russia have led to an aggregate $32 million asset impairment. Network reshuffling Kreis revealed that DHL had to “rejig the network” during Q1 in response to the closure of Russian airspace. “We also had to replace some of the aircraft we used which were Russian carriers,” Kreis noted. “This led to an increase in costs in our air network.” The company had been able to compensate by selling off excess capacity to the forwarding market. DHL Express also increased its emergency surcharge to help offset aviation costs. Current lockdown measures in China are having an even bigger and more direct impact than the war in Ukraine, DPDHL said. The company expects to see reduced Express and DGFF volume on the associated trade lanes in the short term. Longer term, DPDHL forecasts that pent-up demand will support its business “if and when lockdowns will be scaled back again.” The company is also keeping a watchful eye on inflation acceleration and “implementing all usual countermeasures, mainly price increases,” according to a company statement. Looking ahead, DPDHL noted that disruption has worsened to an extent that normalization isn’t expected until Q4 at the earliest. Express volumes lag For the Express division, B2C volumes were down 10% versus the unusually high levels of the previous year. Growth in B2B continued to materialize in bigger and heavier shipments rather than in higher volumes. As a result, even though Time Definite International shipments per day were down in Q1, the Express network remained very highly utilized. Revenue per day was up by double-digits, driven by higher weight and continued yield management. Overall, Express’ Q1 EBIT of $1 billion was in line with last year’s strong performance, despite the $25 million asset impairment in Russia. Revenue grew by almost 16% to $6.7 billion with growth distributed evenly across all regions. “Volumes fell moderately, as expected, but we were able to achieve higher revenue per shipment,” Kreis said. While costs also increased, particularly for fuel, DPDHL was able to offset costs with adjusted fuel surcharges, Kreis added. “In the first quarter, we continued to invest in the expansion of our networks and intensified our partnerships with Singapore Airlines and Cargojet,” Kreis added. “Through these partnerships, we are once again significantly increasing capacity on intercontinental routes. At the same time, we are focusing on growing our own Express fleet of more than 320 aircraft by ordering six additional Boeing 777Fs.” Quizzed on the prospect of further mergers and acquisitions following the acquisition of ocean freight forwarder Hillebrand earlier this year, Kreis noted the company remains focused on organic growth. “If opportunities come up that fulfill our criteria, we would be open to it,” she added. “There are not many fantastic opportunities coming up on a weekly basis, but Hillebrand shows what we are interested in.” The Air Cargo Tech Summit, the new airfreight logistics event presented by Air Cargo World , will take place live in Miami from June 6-7. Learn more and register here.

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