German postal, transport and logistics giant Deutsche Post DHL Group (DPDHL) posted a 3 percent second-quarter revenue gain to EUR $15.4 billion (US$17.3 billion), with a 2.9 percent rise in operating profit to EUR 769 million. However, net profit, and basic and diluted earnings per share fell precipitously due to restructuring charges at its supply chain and e-commerce units.
For the quarter, total earnings came in at EUR 769 million, up 2.9 percent from EUR 747 million in the second quarter of 2018. Deutsche Post reports its bottom-line results in earnings before interest and taxes, or EBIT.
The Bonn-based behemoth also raised the low end of its 2019 profit estimate to EUR 4 billion from EUR 3.9 billion. The high end of the range remains the same at EUR 4.3 billion. The company reported EUR 1.9 billion in EBIT for the first six months, nearly half of its original minimum target for the year. It expects EBIT to exceed EUR 5 billion in 2020.
Net profit in the quarter declined 11.2 percent, while EPS dropped 9.5 percent and diluted EPS fell 12.2 percent, the company said. The overall results were weighed down by a 32 percent year-on-year drop in EBIT at the supply chain unit.
DPDHL CEO Frank Appel said the business units performed “as planned” despite “challenging” macro conditions. Appel said he was confident that the company will perform well during the fourth quarter, traditionally its strongest.
Of DPDHL’s five primary businesses, the e-commerce unit showed the strongest year-on-year growth at 6.2 percent, though the unit posted an EUR18 million loss, compared to zero in the prior-year quarter. E-commerce, which was separated from the parent’s German postal and parcel business in January and had never before reported as a stand-alone segment, accounted for 6.4 percent of the company’s total revenue in the second quarter. DHL Express, the global express carrier and the parent’s largest revenue-producing unit, reported revenue of EUR4.24 billion, a 4.8 percent gain. However, the unit’s earnings rose less than 1 percent.
The parent’s air and ocean freight forwarding unit, known as DHL Global Forwarding, posted an 18.1 percent gain in EBIT on revenue of EUR3.79 billion, a 2.5 percent gain. The unit reported higher gross margins in airfreight though the macro environment worsened throughout the quarter. The unit also benefited from cost-efficiency steps, the parent said.
Last October, DHL sold its Chinese supply chain business to SF Holdings, China’s largest parcel delivery company, for an upfront payment of US$792 million and 10 years of fee-based revenue. The proceeds from the sale were used in part to restructure DPDHL’s supply chain business in various locations, particularly in the United Kingdom. The restructuring charges hurt the unit’s profit.