DHL Express hit the 10% profit margin level last year but wants to go further and aim for thelevels of UPS, according to CEO Ken Allen.
In 2014, the Deutsche Post DHL Group division increased revenues by 5.7% to €12.5 billion andimproved operating profits by 16.3% to €1.26 billion, driven by revenue growth and cost controls.This improved the profit margin to 10.1% from 9.2% in 2013.
This puts DHL well ahead of FedEx and TNT in terms of profit margins but still lagging UPS whichnormally has operating profit margins in the mid-teens range for its US Domestic and InternationalPackage businesses. DHL reached the double-digit figure one year earlier than planned, and afurther improvement is expected for this year.
Asked by CEP-Research at yesterday’s DP DHL results press conference whether DHL Express istargeting the higher profit margins of UPS, Allen responded: “It’s a figure that I constantly showto my management team. It will take time. We’ve done a great job so far. But it will be anevolutionary approach to get there over time.”
DP DHL Group CEO Frank Appel praised Allen’s “excellent work” and announced that the contract ofthe long-serving manager has been extended by the supervisory board until 2020 when he will be 65.Appel admitted that the group had not expected the express business to grow as fast as it has inrecent years and pledged further investment for continued growth.
Outlining some of DHL Express’ major investments, Allen said that the Leipzig hub is currentlybeing doubled in capacity to cope with volume growth. The hub had been planned for 3% annual growthbut volumes were in fact increasing about 8% a year, he explained. The €150 million expansion isscheduled to go into operation later this year.
Brussels is also booming seven years after the Europe hub was relocated from there to Leipzig. “Today we are moving more through Brussels than when it was the original hub, due to volume growth,”he pointed out. DHL will invest €114 million in a new Brussels hub to triple capacity.
In Asia, the Central Asia hub in Hong Kong “is mostly full”, which already prompted the creationof the North Asia hub in Shanghai, Allen said. “We are looking at flying material directly fromChina to Europe because there is no capacity available in Hong Kong,” he commented.
In the Americas, DHL has already increased the capacity of the Cincinnati hub three times inrecent years and now has 35 sub-contracted planes operating domestic feeder flights within the USAcompared to original plans for 13 jets, the DHL Express chief said.
Other key expansion projects include East Midlands and Heathrow in the UK, and Dubai in theMiddle East, he added.
