DHL restructuring pays off with higher Q2 operating profits

Deutsche Post-DHL’s ambitious 2015 restructuring agenda is beginning to pay dividends, with the company posting record-high second quarter results. Earnings before interest and taxes (EBIT) rose 40 percent to a record US$832.25 million for the second quarter, prompting DHL to reconfirm its expected financial position for full-year 2016: a consolidated EBIT of between $3.79 billion and $4.12 billion. This took place despite revenues for the second quarter falling by 16.2 percent and cargo volumes shrinking by 4.7 percent.

DHL “took the right decisions and made the right investments in 2015, a year of transition, to set the stage for improving our profitability this year, and in the years to come,” said CEO Frank Appel. While the global forwarding business continues to struggle with overcapacity, DHL’s DHL-Global Forwarding division bucked the trend, with operating profits up 72.5 percent to $76.9 million.

The results are a change of tune from last year when DP-DHL said it would write off $384.5 million due to a faulty IT platform, which was at the center of its New Forwarding Environment (NFE) transformation project.

Like many other operators in the sector, DHL saw its revenues decline, this time by 9.3 percent in the second quarter to $3.7 billion. In Airfreight, for example, prices were under pressure from “large surplus capacities and low fuel costs, which reduced our revenue by 17.3 percent and gross profit by 4.5 percent,” said the company.

Outgoing CFO Larry Rosen added that the DHL Express segment was “a continuing success story, driven by fantastic growth in time-definite international shipments.” Volumes for Express were up 8.2 percent in the second quarter. For Rosen, this was evidence that DHL was adding market share, despite overall anemic growth in the market.

The e-commerce “megatrend,” as the company termed it, was a driver for Express volume and revenue growth. With added efficiencies, DHL was able to translate its share of the market into meaningful profits. Revenues in Express rose 2 percent to $3.92 billion, while EBIT rose 11.7 percent to $468.17 million. Operating margin hit an all-time high of 11.9 percent.

With the effect of negative currency effects, lower fuel surcharges and the generally low level of air- and ocean freight rates, global forwarding and freight revenue decreased by 10.8 percent to $7.53 billion in the first half of 2016 – a decline from 2015’s $8.43 billion. In Airfreight, volumes fell by 7.7 percent, y-o-y, in the first half of the year. In dollar terms, that translated into a 17.3 percent decline, y-o-y, for the first half, to $2.37 billion.

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