Deutsche Post DHL today presented strong results for 2019 but gave a cautious outlook for this year as the coronavirus crisis continues to hit international trade flows.
The German logistics group reiterated that it cannot currently estimate the financial impact of the Covid-19 virus on business this year. It already disclosed on February 28 that operating profits took a financial hit of about €60 – 70 million in February as production closures in China impacted cross-border express and freight flows. Parcel and supply chain operations have been less affected so far.
As a consequence of this uncertainty, DP DHL has now excluded the financial effects of the coronavirus crisis from its €5 billion EBIT forecast for 2020. It also expects one-off charges of €300 – 400 million from the StreetScooter production stop that was announced last month.
“We will not remain entirely unaffected by this worldwide crisis. However, it is currently much too early to judge its financial impact,” explained CEO Frank Appel.
But he emphasised: “Thanks to our broad geographic set-up and our comprehensive portfolio we are in a very robust position and more resilient than other companies in our sector. We succeeded in growing further in all areas and generating record earnings despite the challenging global economic environment in 2019.”
Strong holiday season drives Q4 EBIT growth
In 2019, Deutsche Post DHL increased group revenue by 2.9% to €63.3 billion, with all five divisions contributing to the positive performance. Operating profit (EBIT) improved by 30.6% to a new record of €4.1 billion and net profit rose to €2.6 billion from the previous year’s €2.1 billion.
In the final quarter of 2019, revenue grew only fractionally by 0.2% to €17 billion but the group increased operating profit by 10.9% to €1.3 billion (underlying +6.7%), largely thanks to the strong holiday season.
Post & Parcel Germany delivered a new record of 1.6 billion parcels last year, up 5.9% compared with the previous year. This helped to compensate for a 3% drop in mail volumes and generate a 2.5% rise in divisional revenue to €15.5 billion. Adjusted EBIT (excluding positive one-off effects) improved by 14% to €1.2 billion.
Thanks to the sustained boom in e-commerce, the German parcel business continued to perform very well and transported more than 250 million parcels in the six weeks before Christmas, the group said.
The EBIT improvement “demonstrates that the measures introduced to increase productivity and reduce indirect costs are taking hold. However, the positive impact of the pricing and cost initiatives implemented at Post & Parcel was counteracted by higher personnel expenses, transport costs and costs of materials”, DP DHL noted.
DHL Express maintains double-digit profit margin
DHL Express continued to increase revenue and profits last year. Revenue was up 5.9% to €17.1 billion, with the division registering growth across all regions. “This dynamic performance was once again driven by the international time-definite (TDI) delivery business, where daily shipment volumes rose by 5.7% compared with the prior-year period to more than 1 million items,” the group commented.
Operating profit grew by 4.2% to €2.0 billion on the back of strict yield management and continuous improvements in the network, and the operating margin remained high at 11.9%.
DHL eCommerce Solutions makes underlying profit
The new DHL eCommerce Solutions division registered strong growth in its very first year of existence. Created at the beginning of the year as a carve-out from the German mail and parcel business, the division increased revenue by 5.5% to €4.0 billion. All regions contributed to this improvement, with especially the United States, the Netherlands and Poland increasing revenue.
The division reported a €51 million operating loss due to €80 million worth of restructuring costs but achieved an underlying profit after adjusting for the restructuring expenses. DHL eCommerce Solutions is expected to contribute between €50 and 100 million to EBIT in 2020.
Global Forwarding, Freight improves profits
In a challenging market environment, the Global Forwarding, Freight division posted a year-on-year revenue increase of 1.0% to €15.1 billion. The development of the global air freight market had been weak since the second quarter of 2019, and the ocean freight and overland freight transport markets also lost momentum as the year progressed. But the division improved operating profit by 17.9% to reach €521 million thanks to the systematic implementation of measures to boost cost efficiency.
Supply Chain restructures UK business
The Supply Chain division increased revenue by 0.6% to €13.4 billion in the past financial year despite the sale of its Chinese business to S.F. Holding in the first quarter 2019. After adjusting for portfolio and foreign exchange effects, revenue grew by 1.5%. There were continued gains in new business: DHL Supply Chain concluded additional contracts worth €1.2 billion with both new and existing customers during financial year 2019.
Operating profit was up significantly to €912 million (2018: €520 million) mainly as a result of one-time effects generated from the S.F. Holding transaction, which contributed €426 million to division EBIT. The Supply Chain division immediately reinvested a portion of the proceeds of the transaction in restructuring its business – mainly in the United Kingdom – with the goal of improving future profitability. After adjusting for one-time effects, Supply Chain reported an operating margin of 4.7%, which is at the upper end of the targeted range of 4 to 5%.
- CEP-Research will report on the DP DHL results press conference in more detail tomorrow.
