News / Express the star performer in Q1 for DP-DHL, but forwarding and supply chain profits dip

Deutsche Post-DHL today announced  it had increased group revenue by around €1bn in the first quarter of the year.

But its freight forwarding and supply chain divisions saw pre-tax profits decrease by over 20%.

DP-DHL group Q1 revenue rose by 7.3%, year-on-year, to €14.9bn, from €13.4bn, while its earnings before interest and tax (EBIT) grew by 1.4% to reach €885m, compared with €873m last year.

However, this EBIT growth was driven by the group’s post, e-commerce, parcel (PeP) and express divisions. Forwarding and contract logistics appeared to suffer from significant margin pressure, despite seeing healthy growth in volumes.

Freight forwarding revenue, which included European overland transport business, grew by 6.6% to €3.54bn, but its EBIT declined from €51m in the first quarter of 2016 to €40m this year.

This was despite air freight volumes rising 13.9% to 952,000 tonnes, “driven by new business wins for the previous year”. However the company said gross profit on air freight declined 1.4%.

And sea freight volumes were up 6.4%, to 768,000 teu, but gross profit declined 0.6%.

DP-DHL chief financial officer Melanie Kreis said: “Freight forwarding continued to operate in a very challenging market, although there were some positives – air and ocean volume growth is back and rates also increased.

Chief financial officer Melanie Kreis

“However, there is a time lag with the rate increases, and that puts us in a difficult situation because it takes time to pass those increase onto our customers – so volumes are up but there is a bit of a margin squeeze.

“The forwarding results weren’t where I would have wanted them to be, but I hope the volume growth trend will now be able to be converted into a good EBIT result,” she said.

Contract logistics, which comes under the supply chain division, saw revenue growth of 3.8% €3.52bn, which the group said would have been 4.5% had it not been for €21m lost to negative currency effects.

However, its EBIT was down to €99m, a 22% decline on Q1 last year’s €127m, which Ms Kreis attributed to one-offs.

“The supply chain division saw dynamic growth across all regions and had a very good result in EBIT, which is surprising, because it actually fell year-on-year.

“However, the first quarter of 2016 had some one-offs, such as the disposal of some property in the UK, at Kings Cross, as well as some restructuring costs, so when you take in these two factors, we saw 11% growth in EBIT in Supply Chain,” she said.

The division won some €192m in annualised revenue from both new and existing customers during the period.

But it is clear that PeP and Express remain the group’s strongest performers.

Express was the star. Revenue increased 13% to €3.6bn and EBIT grew 11.5% to reach €396m, “driven by network improvement and strong international business growth”, it said, noting double-digit revenue growth in Europe, the Americas and Asia Pacific regions.

The PeP division continued to be the group’s largest, with revenue growing year-on-year by 6.4%, to reach €4.5bn, while EBIT was up2.7% to reach €425m.

Ms Kreis said the group remained on track to meet its full-year EBIT forecast of €3.75bn.

The group said: “Deutsche Post DHL continues to forecast that operating profit will increase by an average of more than 8% annually (CAGR) during the period from 2013 to 2020.”