Cautious Deutsche Post DHL steps up investments amid uncertain financial outlook

Deutsche Post DHL will expand operational investments as planned this year, including in 6 new B777 freighters, and remains open for affordable ‘opportunistic’ acquisitions but has scaled back its financial expectations amid uncertainty over the potential impact of the Ukraine conflict on the world economy.

Those were the key messages from CEO Frank Appel and CFO Melanie Kreis at today’s online presentation of the 2021 financial results along with the latest updates on the group’s operations in Ukraine, Russia and Belarus.

The cautious outlook for this year came after record results in 2021 driven by the worldwide economic recovery from the Covid-19 pandemic, continued high levels of B2C shipments and a clear upturn in B2B shipments.

Deutsche Post DHL Group ended 2021 strongly with quarterly revenues up by 22.4% to €23.4 billion, operating profits 12.6% higher at €2.2 billion and net profits of €1.48 billion, up 14% on the previous year. For 2021 as a whole, group revenues grew by 22.5% to €81.75 billion, driving EBIT up by 64.6% to just under €8 billion and generating net profit of €5.05 billion, a 69.6% rise from 2020.  

At a divisional level, DHL Express, the Global Forwarding, Freight unit, DHL Supply Chain and DHL eCommerce Solutions all improved profits strongly last year but the Post & Parcel Germany business saw moderate growth, with weaker results in the final quarter (see below for more details).

"We have demonstrated our full strength in demanding times and achieved a new revenue and earnings record. Never before has Deutsche Post DHL Group transported so much freight, express shipments and parcels worldwide,” said Appel. “We also make an important contribution to society through vaccine logistics. A big thank you goes to our employees for their extraordinary commitment in a challenging year."

Profitable growth in 2022

This year, Deutsche Post DHL Group now expects stable operating profits of about €8 billion (+/- 5%), excluding the difficult-to-assess potential impact of the Ukraine conflict on the global economy and transportation markets.

This guidance “is based on the assumption that e-commerce will maintain its strength and continue its structural growth after a phase of normalisation. Following the dynamic recovery in global trade over the course of 2021, growth in global logistics activities will likely continue, although at a slower pace. Intercontinental transport capacity is expected to ease earliest in the second half of 2022”, the group commented.

Higher investments

After investing a record €3.9 billion in organic growth, digitalization and sustainability last year, the group plans to increase capital expenditure to around €4.2 billion in 2022. “These investments will continue to focus on the expansion of transport and sorting capacities for the further increase in shipment volumes as well as the further implementation of the digital transformation,” DP DHL said.

The newest measure is DHL Express’ order for six additional B777 freighters, announced yesterday jointly with Boeing. This will give the express company a total of 28 such cargo planes in future, with 15 already in the fleet.

More M&A deals?

Following last year’s €1.5 billion acquisition of German freight forwarder Hillebrand, CFO Kreis took time to outline the group’s “very disciplined” and “opportunistic” M&A strategy, explaining that any potential targets should be ‘high quality’ financially healthy companies that would further develop the group’s core businesses and could be easily integrated.

“We can afford more than in the past but we don’t have to do anything,” she summarised.

Asked by CEP-Research whether DP DHL might be interested in XPO Logistics’ European transportation business, which the US company has put up for sale, Appel said the company would continue not to comment on possible targets.

More generally, he pointed out that while acquisition prices had been very high over the last two years it was too early to say whether deals might be cheaper this year due to changing economic conditions.

Appel also said that the group had no more plans for disposals following the recent sale of StreetScooter and software business Greenplan.

Express profits soar

At a divisional level, DHL Express kept up its strong profitable growth in the peak final quarter of 2021, with revenues up by 22.5% to €6.86 billion and operating profits 6.8% higher at €1.1 billion. Full-year revenues rose by 26.6% to €24.2 billion and EBIT by 53.4% to €4.2 billion, representing a record EBIT margin of 17.4% (vs 14.4% in 2020).

The full-year performance was driven by a 10.3% rise in time-definite international express (TDI) shipments and an increase in average weight per shipment. Network capacity utilization remained consistently high throughout the year, further improving the efficiency of shipment handling in the global network.

Freight boom

The group’s air, sea and land freight transport division DHL Global Forwarding, Freight made a dramatic improvement in its financial results, which benefitted strongly from the worldwide surge in demand and higher freight rates resulting from lower capacity last year. Quarterly revenues rose by 63.4% to €7.1 billion while operating profits more than doubled to €403 million. In 2021 as a whole, revenues grew by 44% to €22.8 billion and EBIT more than doubled to €1.3 billion.

Supply Chain expansion

Similarly, the group’s logistics division profited from high demand for reliable supply chains last year and won new customers, especially in e-fulfilment, as it expanded its network capacity. Q4 revenues increased by 4.4% to €3.65 billion and EBIT by 13.8% to €198 million. Full-year revenues were 10.5% higher at €13.9 billion with operating profits up by 66% at €705 million.

DHL eCommerce Solutions growth

The pandemic-driven boom in online shopping, including cross-border purchases, continued to support the growth of the international parcels division DHL eCommerce Solutions in the final quarter of 2021. Revenues grew by 14.4% to €1.7 billion and EBIT improved by 24% to €93 million.

In 2021 as a whole, the division more than doubled its earnings to €417 million as revenues grew by 22.8% to €5.9 billion, generating a 7% profit margin. Almost all regions posted double-digit growth rates, with particularly strong volume development in the Netherlands and India. Shipment volumes in cross-border transport in Europe also increased, by 21.6%.

Parcel record in Germany

Finally, the Post & Parcel Germany division successfully increased earnings and revenue last year, with EBIT up by 9.7% to €1.75 billion on a 6% rise to turnover of €17.4 billion. Parcel volumes rose to a new record of 1.8 billion items, up from 1.6 billion in 2020. In Q4, however, revenue dropped fractionally (-0.6%) to €4.78 billion and operating profits weakened by 14.5% to €576 million.