Deutsche Post-DHL Group reported mixed results for the first quarter of 2018, as net profit fell 6.2% year-over-year to €631 million and total revenue also edged lower by 0.9% to €14.75 billion. Operating profit (EBIT) for the quarter rose 2.3% to €905 million.
While CEO Frank Appel noted that the declines in revenue and net profit mean DP-DHL has “a lot of work ahead of us during the remainder of the year,” he is optimistic that global e-commerce growth – which Appel called “the most important growth driver for our businesses” – will bring more positive results to the group later in 2018.
Hardest hit during the first quarter was DP-DHL’s Supply Chain segment, which posted an 11.3% decline in revenue and a sharp 44.4% decline in EBIT to €55 million. DP-DHL attributed the weaker EBIT to “negative one-off effects of €50 million from customer contracts.” The Post-eCommerce-Parcel (PeP) division also contributed to the lower quarterly results, with EBIT declines in the division driven by higher costs for materials and labor, alongside additional investments in DHL’s parcel network.
However, among the bright spots in DP-DHL’s 1Q earnings are the Global Forwarding and Freight division, where better margins in air freight contributed to a 75% y-o-y improvement in EBIT to €70 million, and DHL Express, which recorded increases in international business.
To examine the results by division:
Post-eCommerce-Parcel: The PeP division posted a 1.7% increase in revenue and a 9.9% decrease in EBIT y-o-y, to €383 million. As has been the trend over many recent quarters, the Post business unit declined alongside widespread declines in traditional mail volumes, while the revenue growth was driven by the eCommerce-Parcel units. Most of the overall EBIT declines in the sector are attributable to higher costs and capital expenditures, with investments in DP-DHL’s StreetScooter program and international parcel business adding to costs.
DHL Express: The Express division posted gains in revenue and operating profit for the quarter, rising 4.9% and 16.4%, respectively. The more modest gains in revenue reflect higher fuel surcharges across all regions with rising oil prices, and the healthy EBIT growth is thanks to increases in DHL’s international Express business, especially in the Time Definite International product line, where revenues per day rose by 12.6% and per-day shipment volumes were up 9.6% y-o-y for the quarter.
DHL Global Forwarding, Freight: The Global Forwarding and Freight division reported revenue growth of only 1.3% y-o-y, but a substantial 75% y-o-y improvement in operating profit. The group noted the significant improvement in profit margins is due to improvements in air freight, and to cost measures taken by DP-DHL. Even though air freight volumes were down for the quarter by 3%, while fuel costs and freight rates rose, DP-DHL said, “we are now increasingly able to pass higher freight rates on to customers.” Air freight revenues for DP-DHL subsequently rose by 3.2% y-o-y.
DHL Supply Chain: As in DP-DHL’s 4Q 2017 earnings report, weakness in the Supply Chain division was again the main culprit behind DP-DHL’s mixed earnings for the first quarter. Revenue in the division fell 11.3% to €3.12 billion, while EBIT fell by 44.4%. The lower revenue for the quarter resulted mostly from DP-DHL’s sale of Williams Lea Tag Group during the fourth quarter of 2017. Negative effects from customer contracts were behind the sharp decline in operating profit, DP-DHL said. As a bright spot for the division, DP-DHL said it has secured new business worth about €175 million during the quarter, with customers in the automotive, consumer and retail sectors accounting for most of the new business.