Express drives DP-DHL’s first quarter

A strengthening Euro weighed on an otherwise strong quarter for Deutsche Post-DHL.

The company reported first-quarter net income up 0.8% y-o-y to €502 million as total revenue increased 1.2% to €13.57 billion. Operating profit (EBIT) for the quarter was up 2.3% to €726 million.

DP-DHL reports its operational and financial performance in four divisions, including the new Post – eCommerce – Parcel Division (PeP), an amalgamation of the old Mail division and the company’s parcel shipping activities in India and Europe. As-reported financial results are shown in the top portion of the chart at right, but as DP-DHL emphasized in its quarterly report, these results were heavily impacted by the strengthening of the Euro in relation to most of the rest of the world’s currencies. As discussed in the divisional results below, all four divisions showed fairly strong organic growth, and absent the negative currency impact DP-DHL had a very strong quarter.

DHL Express: The DHL Express division reported revenue up 2.3% in the quarter to €3.07 billion (excluding consolidation). Express revenue growth was impacted by negative currency effects of €157 million in the current quarter,  and by a gain from the sale of the domestic express business in Romania in the first quarter of 2013. The company said that adjusting for these impacts, organic revenue growth “was an encouraging 8.1%.” On a reported basis, DHL Express revenue was up in Europe and the Asia-Pacific regions, flat in the Americas, and down in the Middle East and Africa. However, after adjusting for negative currency effects in all four regions, DP-DHL said organic revenue growth was 5.4% in Europe, 10.1% in the Americas, 13.0% in the Asia-Pacific, and 1.3% in the Middle East & Africa.

As can be seen in bottom portion of the chart, average daily shipment volume was up strongly (7.6%) for the company’s core Time Definite International (TDI) product, and the volume growth did not come at the expense of yield, as TDI revenue grew even more strongly, up 9.2%, driven by increase in weight and higher average yield.

Operating income for the Express segment was up 14.1% to €275 million, “as a result as result of TDI volume growth, increased efficiency in aviation and ground operations as well as indirect costs management.”

DHL Global Forwarding, Freight: Things were less rosy in the company’s DHL Global Forwarding, Freight division, as total revenue declined 2.2% to €3.53 billion. Adjusting for negative currency effects, revenue was up 2.5% – not a bad result, but nothing like the growth in the Express division. Gross profit (what many forwarders call net revenue) was down 5.7% to €845 million.

In the division’s Global Forwarding unit, total revenue was down 4.1% to €2.52 billion (up 1.9% on an adjusted basis), but gross profit fell 7.6% to €574 million. Air freight volume was flat with 1Q13 but air freight revenue was down 5.0% to €1.15 billion. Ocean freight volume rose 4.7%, but even so, ocean freight revenue was down 3.1% to €839 million. Commenting on the difficult environment, the company said: “Airlines continued to expand their passenger capacities

whilst reducing their freight capacities resulting in further pressure on rates. In addition, several large airlines adjusted the basis for calculating fuel surcharges, which also had a negative impact on margins.

In the Freight unit (land transport in Europe), revenue was up 2.6% to €1.04 billion, but “persistently high pressure on margins in the highly competitive European transport market as well as negative currency effects reduced gross profit slightly by 1.5 % to €271 million.”

Supply Chain: DP-DHL’s Supply Chain division reported first-quarter revenue up 1.0% to €3.51 billion. Adjusting for negative currency effects of €115 million and a €85 gain from disposals in 1Q13, organic revenue growth was a solid 6.7%. Divisional EBIT was up 1.2% to €84 million.

The new PeP division: Starting with the first quarter of 2014, DP-DHL made significant changes to the reporting structure of what was formerly the Mail division. The newly renamed Post – eCommerce – Parcel division, or PeP, is divided into two units:

• Post, which includes all letter mail (including import/export to and from Germany), as well as new services like E-Post and ADAC Postbus. Post revenue was up 3.3% to €2.61 billion.
• eCommerce – Parcel, which, in addition to the German domestic parcel business, now includes the Blue Dart express business in India and the parcel business in Czech Republic, Netherlands, Belgium, and Poland. Revenue in the eCommerce – Parcel division was up 4.2% to €1.29 billion, driven by strong growth in the Germany domestic parcel business.