Express and e-Commerce drive DP-DHL’s fourth quarter

Deutsche Post-DHL reported fourth-quarter 2017 net profit down slightly (0.5% y-o-y) to €837 million as total revenue rose 4.5% to €16.11 billion. Operating profit (EBIT) for the quarter was up 6.3% to €1.18 billion. Revenue was up in all four of the company’s operating divisions, despite the negative foreign exchange impact of a strong euro.

The DHL Express division performed particularly strongly, in both the fourth quarter and the full year, as did the Post-eCommerce-Parcel (PeP) division. These two divisions generate just over half the company’s total revenue, but account for 85% of the operating profit. They also reported relatively high operating margins: 11.5% for DHL Express, and 10.4% for PeP.

The other two divisions, DHL Global Forwarding, Freight and DHL Supply Chain were both profitable, and the company noted that “the turnaround measures implemented within Global Forwarding, Freight and Supply Chain are proving effective.”

Looking at the results by division:

DHL Express: As mentioned above, DP-DHL’s Express division reported a very strong fourth quarter. Revenue rose 8.0% y-o-y to €4.06 billion, with the growth particularly strong in Europe and the Americas. As mentioned above, operating profit grew well ahead of revenue, up 15.0% to €499 million. Average daily shipment volumes increased 11.9% for Time Definite International, and 6.4% for Time Definite Domestic, and revenue grew even more strongly – up 15.1% for the International product and 9.1% for the Domestic product.

DHL Global Forwarding, Freight: The most interesting thing about DP-DHL’s forwarding division is the difference between performance early in the year versus the fourth quarter. As is well documented, cargo yields rose strongly for airlines, beginning in late 2016 and continuing through 2017. But rising air freight prices can put a squeeze on forwarders. Here’s what the company had to say: “Although increased demand raised freight rates, higher air freight prices can only be passed on to customers with a delay due to contract structures. As a result, revenue [in 2017] only rose by 4.9% and air freight gross profit fell by 1.4% despite increased volumes. In the fourth quarter of 2017 we were able to pass higher prices on to customers; air freight revenue rose by 4.0%, whilst gross profit improved by 11.0% amidst volume growth of 2.3%.”

Post-eCommerce-Parcel: As might be expected, DP-DHL’s PeP division was facing two opposing trends: traditional mail volume is continuing to fall, but demand for parcel shipments – driven by the growth of e-commerce – is booming. The company said 2017 revenue in the Post business unit was flat with the previous year at 9.74 billion, while revenue in the eCommerce-Parcel unit jumped by 14.9% to €8.43 billion.

DHL Supply Chain: As can be seen in the chart, Supply Chain revenue was up only slightly for both the fourth quarter and full year, and EBIT fell 10.7% in the quarter and 3.0% for the year. The company said 2017 EBIT was negatively influenced by a “one-time write down of customer relationship assets,” while being positively influenced by several one-time effects in 2016. DP-DHL said that, adjusting for these impacts, “EBIT improved due to business growth and the impact of strategic initiatives,” but did not provide a percentage.

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