Deutsche Post-DHL reported first-quarter net profit down slightly (0.9%) y-o-y to €633 million, as total revenue rose 7.3% to €14.88 billion. Operating profit (EBIT) for the quarter was up 1.4% to €885 million.
As is often the case, the reported results tell only part of the story. In the first quarter of 2016, DP-DHL’s Supply Chain division sold its stake in the King’s Cross development in London, generating a one-time boost. Adjusting for that, DP-DHL’s first-quarter 2017 operating profit was up 6.6%. Other than that, there were relatively few one-time impacts, although the company pointed out that a slightly higher tax rate in 2017 did have an impact on net profit.
The real story, however, is in the financial and operating results of the company’s four divisions – two of which did very well, and two less well. All four divisions were profitable, but the combined EBIT of the Post – eCommerce – Parcel (PeP) and Express divisions was almost six times the combined EBIT of the Global Forwarding, Freight and Supply Chain divisions. And, while PeP and Express combined EBIT was up 9.2%, Global Forwarding plus Supply Chain EBIT was down 21.9%
Looking at the quarterly results on a division-by-division basis:
Post – eCommerce – Parcel: As is the case worldwide, Deutsche Post mail volumes are declining, and revenue in the Post business unit was down 1.2% y-o-y to €2.50 billion. However, strong growth in volume and revenue in the eCommerce – Parcel unit more than made up for the decline at Post. eCommerce – Parcel revenue was up 17.5% to €2.04 billion. Breaking this down further, DP-DHL said revenue was up 6.1% for Parcel Germany, 70.3% for Parcel Europe, and 13.7% for eCommerce. (The huge jump in Parcel Europe revenue was driven in large part by the acquisition of UK Mail in December last year). DP-DHL also noted that the eCommerce unit’s domestic US and cross-border Asian businesses were “growing dynamically.”
Overall, the division performed very well, with an operating margin of 9.4% – down very slightly from 1Q16, but very strong nonetheless
Express: The DHL Express division continued its strong performance of recent years, with revenue up 13.0% to €3.60 billion and EBIT up 11.5% to €396 million. The revenue growth was strong across all regions, with only the Middle East & Africa region reporting a less-than-double-digit increase. The revenue growth was driven by an 8.0% increase in the company’s high-yield Time Definite International product. Operating margin in the Express division was a healthy 11.0%
Global Forwarding, Freight: Total revenue in the DHLGF division was up 6.6% in the quarter to €3.55 billion, driven by increased volumes in both air and ocean forwarding. Air freight tonnage was up 13.9% over 1Q17, while ocean volume increased 6.4%. However, rates also increased, and the company was unable to pass the increases on to its customers, resulting in a 1.4% drop in air freight gross profit (what some forwarders call net revenue).
Supply Chain: Perhaps the best that can be said of the Supply Chain division in the first quarter is that it did better than the Global Forwarding division. Revenue was up 3.8% to €3.52 billion, but EBIT fell 22.0% to €99 million. However, after adjusting for the impact of the sale of the company’s stake in the King’s Cross development, things look considerably better, with EBIT up 11% “due to business growth and the effects of strategic initiatives.”
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