Deutsche Post DHL will invest at least €400 million in expanding its China infrastructure in thenext few years, including the new $175 million North Asia hub, but is not eyeing any major
acquisitions in the region, top executives said in Shanghai today.The company, which will officially open the new hub at Shanghai’s Pudong airport tomorrow, alsounveiled plans to increase DHL’s Asia Pacific revenues from a 19% share of last year’s €38.9billion worldwide revenues to about one third by 2017. Greater China, with DHL-wide revenues of€4.2 billion last year, now accounts for more than half of the Asia revenues and more than 10% ofworldwide revenues.
Outlining DHL’s Asia strategy to international media, including CEP-Research, and analysts, CEOFrank Appel said the company had invested more than $2.5 billion in acquisitions and organic growthin the region, and was now well-positioned to benefit from the continued strong growth in Asiantrade with regions such as the Middle East/Africa and Latin America as well as in intra-Asiatrade.
“Over the past three decades we have established a second to none platform in the Asian markets,which sets the foundation for the continued success of our DHL divisions,” Appel stated at thepress conference in Shanghai. “We are well positioned for prolonged profitable growth across theregion.”
Discussing the importance of China, he added: “Logistics plays a key role in the dynamicdevelopment of the Chinese economy. It is an essential component in ensuring both efficientinternational trade flows to and from China and the effective functioning of such a complexeconomy. We are committed to retaining our market-leading position here by helping internationalplayers to be successful in China as well as supporting Chinese fast-growing enterprises on theirinternational growth path. As a pioneer in the Chinese express and logistics market, we will becapitalising on the massive opportunities this country of superlatives is offering.”
CFO Larry Rosen said that investment in identified projects in China, including the North Asiahub, would top €400 million in the next few years but did not want to say how much of the recent$2.5 billion investment in Asia had been dedicated to China.
Appel declined to say how profitable Asia Pacific is for the group but commented he “would notbe excited about Asia” if the region’s margins were below the overall group-wide levels.
However, no more major acquisitions are currently planned in Asia or elsewhere, he stressed. “Wedo not see any need for any bolt-on acquisitions. We might acquire smaller companies but there isno need for bolt-on acquisitions.”
Appel stressed that DHL is “very happy” with DHL-Sinotrans, its 50-50 international expressjoint venture with Chinese state transportation group Sinotrans. “It gives us the best of bothworlds,” he commented. The company would continue with this “very fruitful” cooperation for theforeseeable future, he emphasised. “Our intention is to remain together with Sinotrans in theexpress business.”
DHL Express was the clear market leader in the region and bigger than FedEx, UPS and TNTcombined, he claimed. The business was expanding with the North Asia hub, new intercontinentalflights and ‘a Go West’ strategy within China.
However, the Deutsche Post chief also made it clear that DHL has no intention to re-enter thehighly competitive Chinese domestic express market which it quit in 2010 by selling its loss-makingbusiness. This was because of the “very strong domestic players” and the “regulatory circumstances”that would make it “very rough and tough” to establish a sizeable operation, he commented.
Moreover, the CEO played down the likelihood of any Chinese competitor growing large enough tobecome a significant international rival due to high financial entry barriers in express and theneed for a worldwide netwsork in freight forwarding.
Appel also highlighted the fast growth of DHL Supply Chain, which is relatively small in China. “ We have invested heavily in quality and we see that customers are demanding this.”
Other forthcoming new DHL facilities include a Supply Chain mega-hub in Hong Kong that willbundle four warehouses into one, a Global Forwarding logistics centre in Shenzhen, an ocean freighthub in South Korea and an air freight facility in Shanghai.
