Deutsche Post DHL could be heading for its biggest strategic U-turn since the pullout from the US domestic express market seven years ago with reports that it is considering a partial or full sell-off of its heavily loss-making freight forwarding business.
DHL Global Forwarding (DGF), the world’s largest air freight forwarder and number two in ocean freight, plunged into the red last year due to a failed global IT upgrading that forced DP DHL to write off €345 million in one-off charges.
Reuters reported yesterday that the German postal and logistics group “is looking at the possibility of spinning off its ailing freight forwarding operation or making an outright sale”. According to two informed sources, “Deutsche Post may seek a partnership, create a joint venture or sell either part or the complete operation”, although no decisions have yet been made. The DHL Freight road transportation business would probably be retained, however.
One option under consideration is apparently a potential sale to Japan Post, which aims to expand internationally and already acquired Australia’s Toll Group last year, the news agency wrote.
A DP DHL spokesman told CEP-Research today: “We don’t comment on market speculation or rumours.” However, DP DHL will be expected to explain its strategy at the latest on March 9 when it presents its 2015 results to journalists and analysts.
If any sale does go ahead, it would be a major strategic U-turn for Deutsche Post DHL after two decades of building up the world’s largest logistics group and leave the company focused on mail, parcels, express and contract logistics.
Quizzed on the future of the freight forwarding business at the Q3 results press conference last November, DP DHL CEO Frank Appel claimed that “we can start to see the turnaround” and declared: “Global Forwarding will remain a strategic element in our business in the future.”
However, Appel, who is running the division on an interim basis after Roger Crook resigned early last year, is no stranger to tough decisions. In 2009, shortly after taking over as CEO, he decided to stop the massive financial losses in DHL’s domestic US express business by completely closing down the operation at considerable cost and with thousands of job losses.
In 2014, the freight division already saw its operating profit drop by 39% to €293 million on flat revenues of €14.9 billion, which represent about one quarter of DP DHL’s total turnover. Last year it tumbled to a loss of €280 million in the first nine months of the year, including €337 million in the third quarter, mostly due to high costs of turnaround measures.
DHL Global Forwarding is the world’s largest air freight forwarder and number two in ocean freight, according to DP DHL figures. Any buyer would therefore leapfrog dramatically to become one of the world’s biggest freight companies alongside competitors such as Kuehne + Nagel, DB Schenker and Panalpina.
Japan Post could be a potential buyer given its stated ambitions to become a global logistics player and its extensive financial resources, although other expanding companies from around the world may also be interested in acquiring DGF’s extensive network, customer base and experienced staff.
