Trade uncertainty, geopolitical conflict hurt DHL in Q2

DHL Group today reported 19.8 billion euros ($23 billion) in revenue in the second quarter, a decrease of 3.9% year over year. “In the second quarter, trade conflicts and geopolitical tensions increased, impacting global economic dynamics,” Chief Financial Officer Melanie Kreis said in today’s earnings report. “We anticipate continued volatility in the global economy in the second half of the year.” [caption id="attachment_57289373" align="aligncenter" width="1920"] (Courtesy/DHL)[/caption] DHL Group reduced its aviation net supply cost by 7.7% YoY in Q2, according to the earnings presentation. “We have significantly reduced our air capacity and related costs,” Kreis said on today’s earnings call. “We have furthermore flexed capacity across the network to adapt to the volatile regional trade flows. As such, [we expect the] strongest decline in shipments into the U.S., to which we have responded with a significant reduction in airlift and in local pickup and delivery capacity.” Nevertheless, DHL reported positive YoY development and increased volume in Asia-Pacific, the Middle East and Africa, Kreis said. “Looking ahead, we expect this volatility to continue, and we also expect a usual seasonal uplift for the peak season,” she said. Q2 earnings DHL Group’s consolidated net profit for Q2 was $944.2 million, up 9.6% YoY. Its EBIT was $1.7 billion, up 5.7% YoY, and diluted earnings per share were 83 cents, up 14.3% YoY. Revenue per division in Q2 was: $6.8 billion for Express, down 5.7% YoY; $5.4 billion for Global Forwarding, Freight, down 5.3% YoY; $4.8 billion for Supply Chain, down 3.9% YoY; $1.9 billion for eCommerce, down 0.7% YoY; and $4.8 billion for Post & Parcel Germany, down 0.2% YoY. DHL Global Forwarding, Freight faced volatile volume and freight rate developments due to trade conflicts, the report said. While air cargo volumes increased slightly YoY, sea freight volumes fell YoY. Fleet expansion DHL Express has taken delivery of twenty-six new 777Fs to date and is preparing to receive its twenty-seventh unit from Boeing, an aircraft that DHL will assign to AeroLogic , the joint venture between DHL Express and Lufthansa Cargo, for CMI operation. The integrator has received four new 777Fs (68144, 68145, 68146 and 68147) this year and placed them all in CMI service with AeroLogic . The group placed orders for twenty-eight 777Fs from Boeing between 2018 and 2022. Additionally, DHL finished transitioning its Air Hong Kong-operated fleet to A330Fs in June, leaving Air Hong Kong with ten A330-300P2Fs and four production A330-200Fs, all Trent 700-powered. Outlook The group anticipates a subdued macroeconomic environment and expects an operating result of nearly $7 billion in 2025. However, the outlook “does not account for further potential escalation in tariff or trade policies,” the report said. DHL leadership is closely watching U.S. regulations regarding de minimis exemptions, but remains unclear on the repercussions, especially since the situation changes rapidly. “The de minimis topic ... is obviously one of the most volatile topics of the last months where we have seen quite a bit of back and forth ,” Kreis said. The U.S. government eliminated de minimis exemptions for goods from China and Hong Kong in early May and announced July 30 that the de minimis elimination will be applied to every country beginning Aug. 29 . “We will have to see whether the latest executive order from [July 30] will be implemented as announced and, if yes, what substitution effects will occur,” Kreis said. “In a worst-case scenario, we would see a maximum risk of up to [$232] million on our full-year 2025 EBIT. “We decided not to include this risk into the guidance as we don't consider this worst-case scenario the likely path forward.” Shares of DHL Group ( OTCMKTS: DHLGY ) were down 0.38 % from market open to $45.06 as of market close today. The company has a market capitalization of $53.9 billion. Editor’s note: All amounts have been converted to U.S. dollars. Cargo Facts Symposium, the quintessential event for stakeholders and key leaders in the global freighter and air cargo industries, will take place Oct. 22-24 at the Grand Hyatt in Nashville . Learn more and register today to take advantage of the early-bird rate before Sept. 5.

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