DHL profits on strong express, e-commerce business

DHL profits on strong express, e-commerce business

DHL CEO Frank Appel announces the integrator's financial results. Photo credit: DHL

DHL is expecting a strong finish to the year as the global integrator builds on robust demand for time-definite shipments that drove up revenue and volume by more than 10 percent in key markets around the world.

Pointing to improving economic conditions in the United States, Europe, and Asia, DHL CEO Frank Appel said he was expecting good business in the build up to the holiday season.

“The macro economic prognosis is good. There will be lots of business around Christmas so we expect a really good, very positive fourth quarter,” he told reporters while announcing DHL’s third-quarter results.

The express segment saw earnings before interest and taxes rise 10.4 percent to €372 million ($432 million) in the third quarter as DHL capitalised on rising cross-border e-commerce in all regions and especially Asia. Daily volume of this time-definite business was up almost 12 percent year over year.

It was the eighth consecutive quarter of growth for DHL as the strong volume and revenue in all segments in and outside Europe saw the integrator delivering a year-over-year increase in nine-month EBIT of 12 percent.

Overall group revenue rose by 5 percent to €14.6 billion and EBIT grew by 9.5 percent year over year. Net profit in the third quarter was up by almost 4 percent. Over the nine-month January through September period, revenue rose 6 percent to €41.9 billion with EBIT up 12 percent to €1.4 billion.

“There was very positive revenue development for the first nine months and we are really satisfied with these results,” Appel said, reiterating that the group would achieve its EBIT target of €3.75 billion for the full year 2017.

Not so satisfying was that strong gains in air and ocean volume in the third quarter for DHL’s forwarding unit was not rewarded by rising profit as pressure on margins dragged the gross figures into the red.

Ocean freight volume at DHL Global Forwarding in the third quarter grew by 8.5 percent to 847,000 TEU, but despite handling 66,000 more containers compared with the same quarter last year, gross profit tumbled by 7.7 percent. It was a similar picture with air freight volume that grew by 8 percent to 982,000 tons, although the declining gross profit was down 3.2 percent year over year.

However, Appel said the forwarding division was gaining growth after a difficult first half. “The decrease in margins has slowed down and we are confident this positive development will continue in the coming quarters and the earnings before interest and taxes will improve,” he said.

Europe generated particularly strong revenue for the Germany-based logistics group, with parcel shipment revenue rising almost 63 percent to €448 million in the third quarter, attributed largely to the acquisition of UK Mail in late 2016. The post, e-commerce, parcel business generated almost a third of total group revenue in the third quarter.

DHL’s Supply Chain sector reported 8 percent growth in EBIT from July through September to €138 million.

However, the strong quarterly performance and the expected good full-year results will not make upcoming wage negotiations with the unions any easier.

“There will be very difficult talks with the trade unions because the expectations are very high. If your company is doing well they expect strong increases, but the money came in from other countries and was not earned in Germany,” Appel said.

“We will have some hard discussions with the trade unions. There is not much we can bargain with for significant increases in wages because the situation in the wage market in Germany is very competitive.”

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.