Deutsche Post DHL is targeting large-scale growth in booming China and will invest further inits network, infrastructure and services in the world’s future second-largest economy, CEO Frank
Appel told CEP-Research in Shanghai. Acquisitions are also an option.The Asia Pacific region as a whole already generates 18% of the company’s revenues, and grewabout 40% in revenue terms in the first half of 2010, he told journalists from Germany. “This willincrease more in the years to come,” he predicted.
In China, Deutsche Post DHL sees itself as already well-positioned, the CEO stressed. Thecompany is the market leader in express and forwarding, for example. The overall business (express,forwarding and logistics) has nearly 13,000 employees, 2,450 vehicles and 300 locations. DHL had 18million shipments and more than 510,000 TEU of sea freight in China in 2009. Revenues for thecountry were not disclosed, however.
Appel explained that the group now aims to profit from long-term trends in China such asurbanisation, fast growth in domestic consumption, government investment in interior cities awayfrom the eastern seaboard while also contributing to sustainable logistics solutions for thecountry’s increasingly congested ‘mega-cities’. By 2025 China is expected to have the largestmiddle-class in the world with more than 600 million people, and demand for consumer goods isincreasingly rapidly.
Deutsche Post DHL believed it could profit in the highly fragmented Chinese logistics marketwith its thousands of small firms by offering quality services, individual solutions and good jobsfor employees, Appel said. In 2009, for example, the company had not cut jobs in China but had onlyreduced salaries, which had been appreciated by staff.
Appel stressed that the German postal and logistics group has invested more than $1 billion inGreater China (including Hong Kong and Taiwan) in recent years, and the next major event will bethe opening of the $175 million North Asia Express Hub in Shanghai in the first half of 2012. Thiswould complement the existing Central Asia Express Hub in Hong Kong. The DHL Supply Chain businessalso plans to expand facilities in China over the next few years.
Asked at a separate briefing with Chinese journalists about possible acquisitions in China,Appel commented: “We are very happy with our relationship with Sinotrans. We do not have any plansto do M&A globally except in niches or in China.” DHL-Sinotrans, the express joint venture, hasrecently made acquisitions to expand its domestic express business in the very fragmentedmarket.
Responding to CEP-Research about the decision to brand the new domestic express operator “Sinotrans-APEX”, thus avoiding the DHL brand, Appel said: “In China we are trying to positionourselves. We are trying out different things.” The group had already been active in the domesticexpress market for 2-3 years, he pointed out.
The Deutsche Post DHL CEO stressed the importance of emerging markets with largeconsumption-driven domestic economies for the group’s future growth. The BRIC countries (Brazil,Russia, India, China) and Mexico were key markets due to their size.
Following the heavy losses in the domestic express markets in the USA, UK and France, however,the company would only run profitable domestic operations and these had to be driven by customerdemand rather than based on cost synergies, Appel declared. There was also relatively littlecrossover between domestic and international business, he noted. “The lesson from the USA and theUK is that the synergies of scale are minimal. Domestic is relatively separate from internationalbusiness,” he commented.
Appel also disclosed that the DHL Express US international business is now growing again andwinning market share after the domestic market exit. “Quality is better than before. We have risinginternational market share for the first time in 10 years,” he stated. The CEO said the financialresults were now better than expected but declined to give any financial targets for the USbusiness. The essential error in the USA after the Airborne acquisition had been “to try to changea value player into a premium player”, he commented.
Addressing financial topics, Appel told journalists that the company divisions were now allclose to earning their capital costs in terms of Return on Capital Employed (ROCE) for the firsttime. The group was gradually regaining the confidence of the financial markets, he added.
