Deutsche Post DHL Group (NASDAQ:DPSGY) Tuesday posted a 4.4% year-on-year increase in group revenue to US$19.1 billion, with “organic” revenue up 9% after adjusting for a gain in the quarter from currency fluctuations.
The Bonn, Germany-based transport and logistics giant posted third-quarter earnings before interest and taxes (EBIT) of $1.62 billion, up 46% from the year-earlier period. Diluted earnings per share grew nearly 49% to 79 cents per share, the company said.
Deutsche Post DHL had telegraphed its third-quarter bottom-line results in early October when it raised its 2020 earnings guidance range to between $4.8 billion and $5.1 billion from $4.1 billion to $4.4 billion. The company said at the time that it would disclose revenue forecasts when it formally released its results on Nov. 10.
DHL Express, the company’s international time-definite air delivery unit and the largest of its five business units, posted a 14.6% revenue gain to $5.8 billion. The unit posted a 65.9% year-on-year gain in operating profit to a record $899 million. Operating margin rose 15.5%.
DHL eCommerce Solutions posted a 26.1% year-on-year gain to $1.4 billion, while operating profit jumped exponentially — albeit off a low base — to nearly $90 million from $7 million, due to rapid growth in business-to-consumer (B2C) activity in Europe and the Americas.
The parent intra-German post and parcel unit posted a 3.4% revenue gain to $4.5 billion. Operating profit rose to $475 million from $446 million. DHL Global Forwarding, the company’s air and ocean freight forwarding unit, posted a slight revenue increase to $4.5 billion, while operating profit rose 25% due mostly to strong gains in global airfreight margins, the company said.
DHL Supply Chain, the parent’s contract logistics unit, posted revenue of $3.6 billion, down from $4 billion in the year-earlier period. Adjusted for employee bonuses, operating profits were flat at $191 million. The unit was expected to post subpar numbers as it has taken the longest to recover from the COVID-19 pandemic-related shutdowns in the prior quarter.
Also on Tuesday, top North American executives from three of the parent’s business units predicted significant double-digit gains in peak holiday season traffic throughout the Americas, which in the DHL network extends from the northern tip of Canada to Argentina in South America. The U.S., in particular, will experience record e-commerce volumes, and carrier capacity will be stretched to the limit to accommodate the demand spikes, the executives said.
The parent boosted its full-year free cash flow projections to $2.3 billion, up from $2.1 billion it forecast last month. The October figure represented an increase from the initial projection of $1.65 billion.
DHL eCommerce, which relies exclusively on the U.S. Postal Service to deliver its customers’ goods in the U.S., expects to be able to manage effectively through the peak because it only uses the Postal Service network for the final mile of a parcel’s journey from the local post office to residences, said Craig Morris, chief information officer for DHL eCommerce Americas.
The unit does not rely on the Postal Service for door-to-door deliveries of its parcels. That part of the Postal Service’s business is expected to be under severe reliability pressure this cycle, experts have maintained.
The unit has passed along to customers the Postal Service’s peak-season delivery surcharges that were announced on Oct. 18. DHL eCommerce will also levy a small separate surcharge to offset higher warehousing labor costs this season.
Most shippers and retailers already have their delivery ducks in a row heading into peak, Morris said. Delivery networks should perform in decent fashion as long as they don’t encounter traffic surges beyond the tsunami already expected, he added.
That outlook may be optimistic. Consultancy ShipMatrix has predicted that daily peak demand will exceed capacity by about 7.2 million parcels this year. On Monday, ShipMatrix announced a deal with the Postal Service to funnel large volumes of door-to-door traffic from the consultancy’s shipper and third-party logistics (3PL) customer base into the Postal Service system.
DHL eCommerce has opened six U.S. processing “annexes” that will augment the company’s main distribution center operations this peak. The annexes are in Dallas-Fort Worth, Atlanta, Chicago, Los Angeles, Phoenix and Avenel, New Jersey. All but the Atlanta and Los Angeles facilities will just be open for the peak period.