DP-DHL: Express thrives, Forwarding drags

DP-DHL2Q15Deutsche Post-DHL reported second-quarter net income down 29.3% y-o-y to €326 million, as total revenue rose 7.3% to €14.70 billion. Operating income (EBIT) for the quarter was down 18.1% to €537 million.

DP-DHL is a sometimes awkward combination of four separate reporting divisions – or, perhaps more accurately, a combination of three reasonably solid, if not closely related, businesses, with a huge forwarder somewhat awkwardly bolted on. In the second quarter, the DHL Express and Supply Chain divisions performed very well.

Express was particularly strong, with revenue up 11.8% to €3.46 billion and EBIT rising 13.6% to €376 million. Express operating margin in the quarter rose to a record 10.9%.

Supply Chain received a bit of an artificial boost from “real estate-related transactions,” but would have done fairly well in any case.

The Post – eCommerce – Parcel division (PeP, successor to the old Mail division) saw EBIT fall over 60% to €75 million, but this was largely due to the one-time €100 million impact of a postal strike in Germany. Absent the impact of the strike, EBIT in the PeP division would have been down, but only by about 7%. As is the case with postal services worldwide, the division’s mail business continues to decline, but eCommerce revenue jumped 26.3% and Parcel revenue was up 9.3%.

DP-DHL’s Global Forwarding & Freight division, on the other hand, continues to struggle. Division revenue was up 3.8% to €3.78 billion, but operating profit tumbled over 60% to just €40 million, dragged down by ongoing problems with a transformation program initiated last year. In fact, the reported results mask the extent of the problem, as the division received a one-time boost of €99 million from the partial divestiture of DP-DHL’s stake in Chinese logistics company Sinotrans.

Looking more closely at the Express division, average daily volumes were up for both the Time Definite International and Time Definite Domestic products, as was daily revenue for both. Revenue was up significantly in all regions, but the company pointed out that absent positive exchange-rate impacts, the gains would have been lower.

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