DP DHL says the outlook is cloudy as forwarding revenues take a hit

By Damian Brett

Deutsche Post (DP) DHL said the coming months are difficult to predict due to the coronavirus outbreak, while its airfreight forwarding business saw revenues and profits decline in the first quarter.

DHL Global Forwarding saw its first quarter airfreight revenues fall by 3.9% year on year to €1.1bn, volumes declined by 9.5% to 448,000 tonnes, but gross profit climbed by 0.9% to €226m.

Lower revenues were caused by a demand decline — as consumer spending slowed in line with the coronavirus — while higher airfreight rates boosted margins.

The overall forwarding business, including its ocean and road operations, saw first-quarter revenues decline by 4.1% to €3.8bn and earnings before interest and tax (ebit) slipped 27% year on year to €73m.

“The [forwarding] division is confronted with a severe shortage of available market capacity due to the pandemic, owing for example to the cancellation of passenger flights,” DP DHL said. “With declining volumes, the capacity shortage led to a positive gross-margin development in airfreight.”

The company said that its forwarding business in China showed signs of picking up in March, but Europe and North America saw downturns at the end of the reporting period.

Meanwhile, the overall DP DHL business saw first-quarter revenue improve by 0.9% to €15.5bn, ebit came in at €592m and profits dropped by 59.7% to €301m.

This includes a pandemic-related negative earnings impact of €210m, as well as negative effects of €234m incurred in the first quarter to realign the Group’s StreetScooter activities.

Last year the company also benefited from the transfer its supply chain operations in China to SF Holding in a ten-year strategic partnership.

If all of these effects are stripped out, underlying ebit would have been roughly in line with a year ago.

The company said it was protected by its “broad geographic footprint and comprehensive portfolio of logistics solutions — ranging from international express services, global air and ocean freight transport to warehousing, e-commerce solutions as well as post and parcel solutions in Germany”.

“Since the coronavirus began spreading around the world, various activities in the different regions performed better and in some cases worse than originally planned,” it added.

“Thanks to the great diversification in both the geographical areas in which the divisions operate and the industries they serve, the divisions were able to operate profitably even in a challenging environment, thus demonstrating their resilience in times of crisis.”

However, the company declined to provide an outlook for the rest of the year.

DP DHL chief financial officer, Melanie Kreis, said: “In the first quarter our business was less impacted by the pandemic than many others. It is nonetheless extremely difficult to predict the effects of the pandemic on the world economy or on our business operations over the coming months. That is why we withdrew our earnings guidance for 2020 on April 7.

“It is still too early to issue a reliable forecast for the rest of the year. As soon as a more reliable assessment is possible, we will communicate a new forecast.”

In management comments, the company added: “Lock down measures are now being reduced carefully at different levels and speeds across individual countries.

“This should also lead to a stabilisation and progressive resumption of economic activity and hence trade flows.

“We are strongly confident that logistics is an essential capability that is needed in any form and shape of recovery from the lock down situations.

“However, while these are encouraging perspectives, the shape and timeline of any economic recovery – and actually the further development of the virus itself–remain too uncertain to provide any reliable full-year forecasts today.”

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