DHL optimistic despite declining Q1 forwarding, airfreight results

While parent company Deutsche Post-DHL Group increased its first quarter earnings before interest and tax (EBIT) by 21.3 percent to €873 million, compared with the same period last year, its airfreight volumes slipped by 8.8 percent and its forwarding revenues fell by 12.2 percent in a challenging first quarter for the year.

Despite the disappointing figures, however, DHL put a positive spin on its airfreight operations, saying that the drop in volumes came about by adopting a “more selective market strategy” and eliminated certain low-margin business activities. In its Q1 2016 statement, DHL said it had “secured additional new business during the reporting period, which will be implemented as the year progresses and is expected to have a positive impact on volume development.”

In addition, during the Q1 results call, DHL Group CEO Frank Appel said he was unconcerned with the recent announcement that chief rival Amazon will be leasing twenty 767-300 freighters from Atlas Air Worldwide’s subsidiaries, Atlas Air and Titan Aviation, which also leases aircraft to DHL. “Atlas can work with other customers and [the deal] has, to our knowledge, no impact on our operations,” Appel said. “It is normal that airlines work with other customers.”

DHL’s Global Forwarding arm reported Q1 revenues of €3.3 billion for 2016. Adjusted for negative currency effects, revenue declined by 9.3 percent, the company said. Airfreight volumes fell to 476,000 tonnes, representing the fourth consecutive quarter in which the forwarding arm experienced airfreight volume declines, year-over-year. These comparisons, DHL added, were also affected by last year’s U.S. West Coast port strike, which provided a temporary demand boost during the first quarter of 2015.

Airfreight revenues declined by 18.4 percent, y-o-y, to €1 billion, thanks mostly to currency effects and lower fuel surcharges. Gross profit for airfreight fell to €210 million, a 4.5 percent decline, y-o-y.

Nevertheless, operating earnings for the forwarding division did show improvement, rising from €17 million in the previous Q1 to €51 million in Q1 2016. The company called these results “a clear indication of the positive effects of measures introduced in the past year to improve operating performance at Global Forwarding, Freight.”

Meanwhile, the EBIT for DHL’s Supply Chain division increased from €53 million to €127 million, y-o-y. Also, the Express arm saw an increase in EBIT of 7.5 percent, y-o-y, to €357 million, while the Post – eCommerce – Parcel division saw its operating profit rise 3.3 percent, y-o-y, to €412 million.

For the rest of 2016, the DHL Group said it is expecting only “moderate growth” in the global economy but is optimistic about its recent strategic measures it has enacted. “We’ve had a good start to the current year,” Appel said. “We have registered the strongest first quarter in our company history. The efforts we made in 2015 to position ourselves for profitable growth in all divisions are paying off. Last year was a year of transition, and we are now firmly on track to achieve our targets for 2016.”