Parcel costs weigh on DP DHL

Mail carrier and third-party logistics provider’s earnings dropped 14.3 percent year-over-year in the second quarter.    Deutsche Post DHL Group saw its consolidated net profit for the second quarter of 2018 fall 14.3 percent year-over-year to 516 million euros (U.S. $598.1 million), according to the company’s latest financial statements.
   The Bonn, Germany-based mail and logistics company reported earnings per share of 0.42 euros for the quarter, down from 0.50 euros per share in the same 2017 period despite a 1.4 percent increase in revenues to 15.03 billion euros.
   Second-quarter earnings before interest and tax (EBIT) slid 11 percent year-over-year to 747 million euros, missing a Reuters analyst poll projection by 15 million euros.
   Deutsche Post DHL attributed the decline in earnings primarily to higher transport and staff costs in the company’s Post-eCommerce-Parcel (PeP) division.
   “As reported at the beginning of June, the group has initiated a comprehensive program for PeP to raise productivity and improve the division’s cost situation,” DP DHL said. “This led to increased expenses and the recognition of first provisions in the second quarter.”
   Group CEO Frank Appel said the Q2 results were “in line” with company expectations, adding that the challenges facing the PeP division are “clear” and the company is “implementing measures for aligning the division toward long-term profitable growth.”
   Operating profit in the PeP division plummeted 58.5 percent to 108 million euros during the second quarter, even as segment revenues rose 3.4 percent to 4.4 billion euros compared with Q2 2017. Revenues in the Post unit were down 1.2 percent to 2.3 billion euros due in part to a 3.3 percent decline in mail volumes, while total Parcel and eCommerce revenues grew 8.7 percent to 2.2 billion euros.
   “The booming e-commerce business remains the primary growth driver for our German and international parcel businesses — here we continue to see tremendous potential for profitable future growth,” said Appel. “In the last years, we have worked hard to expand our leading position in the competitive German parcel market. In the next market development phase, we will focus more closely on our prices and costs in both the Post and Parcel businesses in order to translate the volume development into steadily rising earnings.”
   The company’s Express division reported second quarter EBIT of 517 million euros on 4.05 billion euros in revenue, year-over-year increases of 10.2 percent and 7.9 percent, respectively, driven by an 8.4 percent jump in daily international time-definite delivery volumes and 6.4 percent growth in daily time definite domestic shipments.
   DHL’s Global Forwarding, Freight division saw its EBIT skyrocket 56.7 percent year-over-year to 105 million euros for the quarter, as revenues ticked up 2.5 percent to 3.7 billion euros despite volume declines of 1.6 percent in ocean freight and 4.7 percent in air cargo.
   “The division was better able to pass on higher freight market rates to its customers than in the first quarter,” DHL said, adding that “measures introduced to improve cost efficiency are also proving effective.”
   In the company’s Supply Chain segment, EBIT grew 3.2 percent to 128 million euros compared with the second quarter of 2018, despite revenues falling 8.6 percent to 3.21 billion euros.
   DHL attributed the decline in Supply Chain revenues primarily to negative currency effects and portfolio effects resulting from the sale of U.K.-based subsidiary Williams Lea Tag during the fourth quarter of 2017.
   Through the first six months of 2018, DP DHL Group profits have fallen 9.6 percent to 1.12 billion euros despite a 0.3 percent uptick in revenues to 29.78 billion euros compared with the first half of 2017.
   Despite the somewhat disappointing results, Deutsche Post confirmed its full-year operating profit projection of about 3.2 billion euros in 2018 and more than 5 billion in 2020.