Home » 3PL/4PL, Breaking News » e-commerce boom, trade growth drive DP DHL revenue growth in 2018

Deutsche Post DHL (DP DHL) reported continued financial growth in 2018, spurred by the ongoing boom in e-commerce as well as sustained growth in international trade flows.

Group revenue rose 1.8% to EUR61.6 billion (US$69 billion) last year, up 6.0% more after adjusting for currency effects and portfolio changes, the company said in a statement. All four group divisions contributed to the positive trend.

Group operating profit (EBIT) came to EUR3.2 billion to reach the adjusted earnings target communicated in June 2018.

“2018 was a challenging year for Deutsche Post DHL Group, which we closed with a successful Christmas business. Despite rising geopolitical uncertainties, global trade continued to register growth. This benefitted our DHL divisions in particular,” said Frank Appel, CEO of DP DHL group.

The company projects an increase in operating profit to EUR3.9 to EUR4.3 billion in 2019, with structural and operating improvements in all group divisions expected to contribute to the increase.

Among the measures implemented to raise profitability were the changes made to the structure of DP DHL effective January 1, 2019. The previous Post-eCommerce-Parcel (PeP) division was split into two separate divisions. The new Post und Paket Deutschland (P&P) division focuses on the mail and parcel business in the domestic market, while the group’s international parcel and e-commerce activities have been combined to form the new DHL eCommerce Solutions division.

The P&P division is expected to contribute between EUR1.0 and EUR1.3 billion to the group’s projected EBIT for 2019. In the DHL divisions, of which there are now four (Express; Global Forwarding, Freight; Supply Chain; eCommerce Solutions), the group anticipates total EBIT to grow to EUR3.4 to EUR3.5 billion.

Group EBIT is projected to rise to at least EUR5.0 billion in 2020.

Overall net profit for the year fell to EUR2.1 billion from EUR2.7 billion in 2017. The more substantial decrease in net profit compared with group EBIT was due to a lower financial result owing to the transitioning to the new IFRS 16 accounting standard.

PeP division

The Post-eCommerce-Parcel division reported revenue growth of 1.7% to EUR18.5 billion in 2018, attributable to higher revenue in the eCommerce-Parcel business unit.

Revenue at DHL eCommerce climbed by 6.9%, adjusted for negative currency effects even by 12.0%, reflecting DP DHL’s “strong positioning in international e-commerce.”

In the post business unit, revenue dropped below the prior-year figure of EUR10.0 billion to EUR9.7 billion, the result of structural volume declines in mail communication and dialogue marketing.

EBIT for the PeP division came to EUR656 million in the past financial year from 2017 figure of EUR1.5 billion.

“The one-time expenses incurred to secure the EBIT growth projected for the coming years were the main factor contributing to the decrease,” said the company.

Announced in mid-2018, the steps planned are primarily intended to improve productivity, reduce indirect costs and drive active yield management in the post and parcel business.

Express division

In the express division, revenue climbed by 7.3% to EUR16.1 billion last year, rising to 11.0% on an organic basis. Growth was registered across all regions, driven by strong performance in the international time-definite delivery business.

Operating profit increased by 12.7% to EUR2.0 billion on the back of strict yield management and continuous improvements in the network. The operating margin rose to 12.1%, up from 11.5% in the prior year.

Freight forwarding

The global forwarding, freight division, increased revenue by 3.4% to EUR15.0 billion despite focusing only on high-margin business. Adjusted for negative currency effects, revenue improved by 6.7%.

Gross profit also rose 3.9% over the prior year to EUR3.6 billion. The division registered gross profit margin improvements in both air and ocean freight. Road and rail transport in Europe also showed a positive development.

Operating profit surged 48.8% to reach EUR442 million in the full year 2018, “thus demonstrating that the initiatives to improve cost efficiency are taking effect,” said the statement.

Supply chain segment

Revenue in the supply chain division came in at EUR13.4 billion in the past financial year from EUR14.2 billion the preceding year. In addition to negative currency effects, the revenue decline mainly reflects the sale of the subsidiary Williams Lea Tag. After adjustments, revenue for the division increased by 4.3%.

Operating profit amounted to EUR520 million, down from EUR555 million in the previous year, attributable to one-time negative effects of EUR50 million from customer contracts and EUR42 million from pension obligations. If adjusted, EBIT improved by 4.3%.

In the fourth quarter, DP DHL Group registered an increase of 5.1% in total group revenue to EUR16.9 billion. All four divisions contributed to the improved revenue. Operating profit declined by 4.0% to EUR1.1 billion, due above all to restructuring costs at PeP. Consolidated net profit decreased by 2.9% to EUR813 million, mainly as a result of the lower EBIT at PeP and the implementation of the new accounting standard.

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