While reporting record profits for the 2016 fiscal year, and it’s best-ever performance in the fourth quarter, Deutsche Post-DHL’s exuberance over its end-of-year report was tempered a bit by its airfreight performance. The integrator’s DHL Global Forwarding (DHL-GF) arm, which happens to be the world’s largest forwarder of air cargo, saw volumes drop 1.3 percent, year-over-year, to about 2 million tonnes for 2016.
Overall revenues for DHL-GF fell by 7.7 percent, y-o-y, in 2016 to €13.7 billion, but earnings before interest and tax (EBIT) rose sharply to €287 million in 2016, compared to a loss of €181 million in 2015, reflecting the write-off of DP-DHL’s failed €336 million IT system at the end of that year.
In the fourth quarter, DHL-GF’s performance showed stronger signs of health. The company saw airfreight demand increase by 5.7 percent, y-o-y, to 578,000 tonnes. However, “the upward trend was not reflected in revenue performance due to generally still-low selling rates in air and ocean freight,” the company said. “At the same time, the Group experienced a substantial increase in buying rates, which had a negative impact on fourth-quarter gross profit.”
While revenue was basically flat, rising by just 0.5 percent, total DP-DHL net profit in Q4 rose by 25 percent, y-o-y, to reach €841 million. EBIT, or operating profit, reached €1.1 billion, a y-o-y increase of 16.1 percent, which is the best quarterly performance the company has ever reported for the October to December period. Most of the earnings came from a 36.4 percent surge from DHL Express, which took in €435 million during that period.
For the full year, DP-DHL was even more impressive, with a 2016 net profit skyrocketing by 71.4 percent to €2.64 billion, compared t0 2015, and EBIT spiked by 44.8 percet to €3.49 billion. Again, however, total revenue for the year was down by 3.2 percent to €57.33 billion.
For the rest of the year ahead, DP-DHL predicted moderate growth in the global economy over the next nine months, but remained optimistic about its own growth. “Earnings are expected to increase significantly, with additional divisional operating improvements,” said DP-DHL CFO Melanie Kreis.
DP-DHL also forecasted a rise in group EBIT to €3.75 billion – €2.6 billion of which would come from DHL’s divisions. While impressive on paper, this rate of growth is still slightly short of the necessary 8 percent y-o-y increase required for the group to achieve its 2020 forecasts.
Nevertheless, DP-DHL’s buoyant CEO Frank Appel said he remained confident that the group will achieve the target it set itself in 2013. “We’ve not only seen a strong increase in net profit, but a high level of motivation among staff,” he said. “This has brought about increased customer satisfaction.”
Appel also noted that the DP-DHL’s overall results were further justification for the embrace of globalization, despite the protectionist and isolationist winds blowing through parts of Europe and from across the Atlantic from the Trump administration. “Globalization is a success concept,” he said. “There is no country in the world that succeeded with protectionism, but many have succeeded through open markets.”