Despite revenue growth across all segments during the fourth quarter, and operating profit (EBIT) growth in the Express and Global Forwarding segments, Deutsche Post-DHL Group (DP-DHL) reported Group EBIT declines of 4.0% year-over-year to €1.13 billion, and 15.5% to €3.16 billion for the 4Q and FY2018 respectively, due to sharp declines in the Post-eCommerce-Parcel (PeP) segment. PeP EBIT fell 28.4% and 56.4% for the fourth quarter and FY 2018, respectively on revnues that were up 5.1% in 4Q to €16.93 billion and 1.8% higher in FY2018, to €61.55 billion.
The troubled PeP segment results come as no surprise, as weakness in PeP plagued the Group throughout every quarter of 2018. In discussion of DP-DHL’s results, CEO Frank Appel noted, “Developments in our [PeP] division certainly affected the overall impression of 2018 and I don’t want to gloss over what happened. These developments definitely dominated in a year in which we had to cut our earnings forecasts, in which many things were called into question.”
One of the most significant things called into question during the year was the structure of the PeP division, and in fact, the ongoing weakness in the division prompted a company reorganization that split PeP into two segments – Post & Paket Deutschland and DHL eCommerce Solutions. The restructuring, announced in September 2018, went into effect at the beginning of this year, with Appel himself assuming responsibility for strengthening the German segment and Ken Allen heading the eCommerce Solutions segment.
To break down the results by division:
Post-eCommerce-Parcel: As noted in the accompanying chart, revenues for PeP increased 1.5% y-o-y to €5.13 billion, while EBIT fell to €366 million. For the full year, revenue was up 1.7% to €18.48 billion, but EBIT declined by 56.4% to €656 million, due in part to restructuring costs. Mail volumes, and declines in Post revenue, also contributed to the division’s weakness.
DHL Express: The Express division posted a revenue increase of 9.0% for the quarter to €4.42 billion. EBIT rose by 14.2% to €570 million, with growth in the Time Definite International and Time Definite Domestic delivery businesses. For the full year, revenue grew by 7.3% to €16.15 billion an EBIT rose 12.7% to €1.96 billion.
DHL Global Forwarding, Freight: Revenues in Global Forwarding and Freight were up 5.6% for the quarter to €4.00 billion and 3.4% for the full year to €14.98 billion. EBIT also increased by 30.9% to € 161 million and 48.8% to €442 million for the 4Q and FY2018, respectively. According to DHL, air freight volumes fell 3.9% for the year, but revenue increased thanks to higher global freight rates.
DHL Supply Chain: Supply Chain revenue increased 3.4% for the quarter to €3.74 billion, but fell for the full-year by 5.7%, to €13.35 billion. EBIT was also strained during both the quarter and FY2018, with growth flat during 4Q at €184 million, and down 6.3% for the year to €520 million. According to the company’s earnings presentation, the decline in 4Q EBIT included a one-time €42 million pension charge related to a United Kingdom court ruling on gender equality regulation.
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