News / DP-DHL has 'another good year', despite tighter margins in air and ocean

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Deutsche Post DHL hit its earnings target for 2017, in “another very good financial year”, despite challenging first-half margins in air and ocean.

Group operating profit rose 7.2% to €3.74bn ($4.64bn), of which 40% was accounted for by the Post – eCommerce – Parcel (PeP) division.

Group revenue rose 5.4% to €60.4bn, while PeP was up 6.4%, to €18.2bn. Global Forwarding revenues rose 5.4% to €14.5bn, while EBIT rose 3.5% to €297m.

DP DHL noted that “margins in air and ocean freight came under appreciable pressure particularly in the first half of 2017 due to the considerable increase in freight rates. In the second half of the year, the division was increasingly able to pass on the higher prices to its customers and with this significantly improve earnings in the last six months”.

The figures support this analysis. Air freight gross profit for 2017 fell 1.4%, despite volumes up 8%, and also despite an 11% rise in gross profit in the fourth quarter. Ocean freight saw gross profit fall 5.8%, although volumes rose 6.5%.

The company said: “Returning to former profitability levels remains our first priority.”

It noted that its new IT system had now completed its pilot phase and was being rolled out.

Express rose even more, with revenues up 9.5% to €15bn, while operating profit grew 12.4% to €1.7bn. The company put the growth down to “strict yield management and continuous improvements in the network”.

It was also announced today that DHL Express had taken two aircraft on an ACMI deal with Atlas Air, which is buying the two 777 freighters from LATAM. But one analyst on the earnings call with CEO Frank Appel asked whether there was any risk of overcapacity in the express market.

“There has been a sizeable increase in freighter costs,” said Mr Appel. “I don’t think there is a remote risk of excess express capacity.”

The Supply Chain division saw the weakest growth, with revenues for 2017 up just 1.4% to €14.1bn – but EBIT fell 3% to €555m.

The company blamed the fall on the fact that ”the positive effects from the expanding business and the successful conclusion of the division’s optimisation programme were not sufficient to offset the one-off effect resulting from a write-down of customer relationship assets”.

It also looked for a more positive spin, noting that adjusted for negative currency effects, Supply Chain revenues in fact rose 4.6%. It also pointed out that it generated new business and negotiated additional contracts worth €1.5bn with new and existing customers during 2017.

“Thanks to successful business development in all four divisions, especially outside Germany, our company has registered another very good year,” said Mr Appel in a statement.

He added: “In 2017 we took another major step on the road to achieving our strategic and financial goals for 2020. With our international focus and our firm orientation towards the fast-growing e-commerce market, we implemented the right measures early on and are now positioned better than ever for future growth. At the same time, we are increasingly leveraging the digitalization opportunities that present themselves in all four divisions and expanding our foundation for a successful future.”

You can read all the results here, and we will follow it up more fully in The Loadstar shortly.