Restructuring at DHL Supply Chain holds back profits growth

Restructuring costs in DHL Supply Chain held back Deutsche Post DHL’s growth in operating profit in the second quarter, which was up 2.9 per cent at €769 million, the group said in its quarterly results.

Group revenue was up three per cent to €15.5 billion for the second quarter. “Our business developed as planned in the second quarter,” said chief executive Frank Appel.

Frank Appel

DHL Supply Chain is reinvesting a portion of the funds generated from the SF transaction in the restructuring of the business, notably in the United Kingdom. This negatively impacted second-quarter operating profit by €53m as expected. As a result, EBIT amounted to €87m (2018: €128m).

Despite the divestment of the Chinese business revenue of the division advanced by 1.2 per cent in the second quarter to €3.3bn. Supply Chain continued to generate new business, concluding additional contracts in a total volume of €435m with both new and existing customers during the first half of 2019.

The Express division performed strongly with revenue rising to €4.2bn from €4bn the year before. Operating profit rose from €517m to €521m. Operating margin was 12.3 per cent.

The Global Forwarding, Freight division posted a 2.5 per cent increase in revenue year-on-year to €3.8bn in the second quarter. Growth in the global air freight market lost momentum in the period from April to June, while ocean freight remained largely stable and overland freight transport continued to see organic growth. EBIT improved by 18.1 per cent to €124m.

Revenue at DHL eCommerce Solutions rose by 6.2 per cent to €995m. However, restructuring expenses meant that the division produce an operating loss of €18m.

For the current financial year, Deutsche Post DHL Group now expects to increase operating profit to between €4.0 and €4.3bn (previously €3.9 to €4.3bn).

Appel said: “We have already generated Group EBIT of about €1.9bn after six months. That’s nearly half of our minimum target for 2019. The measures we initiated to improve productivity at P&P and the postage rate increase as of July 1 will provide further momentum in the second half of the year, as will the traditionally strong final quarter. We are therefore confident about our further performance and have raised the lower end of our full-year forecast – despite the challenging macroeconomic environment.”