News / DP DHL unveils €2bn investment: 'to digitise ourselves', says Appel

Deutsche Post-DHL has announced a new €2bn ($2.18bn) investment plan for digitisation initiatives through to 2025.

At its capital markets day in Frankfurt this morning, it said this would produce a yearly run rate improvement of €1.5bn by 2025.

The investment would chiefly be funnelled into “modernising IT systems, integrating new technologies and offering employees targeted advanced training to enable them to use these technologies”.

This would be accompanied “by greater automation and improved transaction processes through warehouse automation and robotics programmes” to improve efficiency, while data analytics would be applied to “foster routing optimisation through advanced algorithms and operational volume prediction”.

Chief executive Frank Appel said: “We will bundle our technological capabilities as a group in global centres of excellence. Here we will centrally develop key technologies like internet of things and then provide them to our divisions.

“This way we can leverage the strength of our group to push forward our digitisation.”

DP-DHL has forecast an earnings before interest and tax (ebit) of €5.3bn by 2022, as well as a cumulative free cash flow of €4.5-5.5bn between 2020 and 2022. It said cumulative capex between 2020 and 2022 would be €8.5-9.5bn.

Jeffries analyst David Kerstens said in a note that the group would look to its freight forwarding and e-commerce solutions divisions to generate most of the future growth.

In particular, DHL Global Forwarding and Freight was being targeted to “outperform market volume growth of 1%-3% in air freight, 2%-4% in ocean freight and 3%-4% in road freight, and a further conversion ratio improvement of up to 30% vs 20% targeted under Strategy 2020, resulting in a 5%-6% ebit margin, [which] is more in line with peers.

The division’s ebit margin was 3% last year.

Meanwhile, the recently created E-commerce Solutions division, which broke even last year, was targeting a top-line growth of 5%-10% and a long-term ebit margin of 5%.

Mr Appel added: “Deutsche Post DHL Group has never been in better shape. We are convinced that future growth will come from a consistent focus on our profitable core logistics businesses – and digitisation will become the greatest lever.

“We need not reinvent ourselves. We will digitise ourselves.”