Deutsche Post DHL (OTCMKTS: DPSGY) said Wednesday that 2020 operating profits hit record levels and significantly surpassed its original guidance for the year, as demand for the company’s services surged due to the impact of the novel coronavirus on global ordering behavior and a positive environment for freight services in general.
Operating profit, reported as earnings before interest and taxes (EBIT), came in at $5.88 billion, exceeding the original EBIT estimates of $4.9 billion to $5.3 billion, DPDHL said in releasing preliminary full-year results. Official 2020 results will be published March 9, but the numbers will be almost identical to those reported Wednesday.
DPDHL also raised its earnings outlook as far out as 2022. In July, it forecast $6.4 billion in 2022 EBIT if anything close to a global V-shaped recovery takes hold. However, the company said Wednesday that it expects $6.56 billion in EBIT in 2021. Unless global trade and commerce collapse, DHL is assured of topping its own initial estimates for its 2022 bottom line.
Free cash flow in 2020 came in at more than $3 billion, well above the $2.4 billion initially forecast, the company said. DPDHL said it expects to generate $7.29 billion in free cash flow from 2020 to 2022. Previously, $7.29 billion in total free cash flow was the high end of the range.
DHL’s five operating divisions combined to post $83.6 billion in 2020 revenue, according to company data. That is the best top-line performance since the current corporate structure was rolled out in 2007, according to Daniel McGrath, a DPDHL spokesman. The company does not provide revenue forecasts, McGrath said.
Four of the units reported gains in revenue and net income. The outlier, as it has been in the past, was DHL Supply Chain, its contract logistics arm. Revenue dropped 7% to $15.2 billion, while EBIT fell 53% to $523 million. The weakness was due to a decline in demand from certain verticals, such as automotive, where the unit is active, McGrath said.
The strongest performances came from the company’s Express and E-Commerce Solutions units, no surprise given unprecedented global e-commerce growth and the Express unit’s role in transporting medical supplies needed to combat the pandemic. Most of those shipments moved by airfreight given their urgent nature.
The Express unit’s revenue rose 12% to $23.1 billion, while full-year EBIT rose 35% to $3.34 billion. The E-Commerce unit posted a 19% gain in revenue to $5.83 billion, while earnings swung from a $97 million loss to a $194 million gain.
Shares Wednesday closed at $51.33 a share, off 32 cents.