DHL CFO M. Kreis

Deutsche Post (DHL) also continues to expect to be able to offset fluctuations and disruptions in international freight traffic through a well-structured portfolio. Chief Financial Officer Melanie Kreis discusses the increasing importance of logistics services in times of growing uncertainty.

Ms. Kreis, Deutsche Post achieved strong results in the second quarter as well. What were the key factors for this success in the current volatile market environment?

Melanie Kreis : Right now, our customers appreciate a reliable logistics partner. Even in the event of temporary disruptions to individual trade routes, we find solutions for stable goods flows – even if this entails temporarily higher costs. (...) Our customers are willing to pay a fair price for this, and that is reflected in our results.

Ludwigsfelde sorting plant

Given the challenging market environment, what results do you expect in the short and medium term?

The risks currently dominating the capital markets, such as energy prices, inflation, and interest rates, are not playing a significant role in our earnings performance at present. Rising energy prices are only having a minor impact on our earnings, as fuel surcharges are an established component of our pricing and are adjusted regularly. Accordingly, we can maintain our positive earnings outlook and confirm our earnings forecast of €8.0 billion for 2022, with a deviation of +/- 5 percent, even in light of a potential global economic downturn in the second half of the year. (...) Should global economic growth merely slow, we expect EBIT to be at the upper end of our forecast range, between €8.0 and €8.4 billion. Even in the event of a sudden, drastic slowdown in the global economy in the second half of the year, we expect EBIT in 2022 to be at the lower end of our forecast range, between €7.6 and €8.0 billion.

The past two fiscal years have clearly demonstrated the advantages of our balanced portfolio. Immediately after the outbreak of the pandemic, it was the B2C business that drove strong growth and has now stabilized at a high level. Currently, the B2B business is clearly the growth driver. (...) We are well positioned and are maintaining our medium-term EBIT forecast of around €8.5 billion for 2024.

How did business go at DHL Express?

The division once again delivered a profit exceeding one billion euros. Despite moderately decreased TDI volumes, we continue to observe a trend toward higher weight per shipment. This is having a positive impact on our revenue. We are able to offset the higher kerosene prices through monthly adjustments to fuel surcharges – with a two-month lag. Ultimately, we achieved another EBIT margin of 15.7 percent. This strong result allows us to continue investing in the division's sustainable growth. In the Americas region, we are expanding our capacities this year and investing in buildings, aircraft, and the expansion of our electric delivery fleet. At our hub in Leipzig, we are using a smart scanner for loading air freight containers. This enables us to operate even more efficiently and conserve resources. Many small and large measures contribute to this (...).

12 units have been ordered: Alice electric airplane

DHL Freight has once again achieved enormous growth rates. What factors were decisive for this?

Global Forwarding, Freight continued its outstanding performance from the first quarter and, with €8.2 billion in revenue, was once again the strongest division. (…) In ocean freight, we recorded higher transport volumes than in the same quarter of the previous year, thanks to the successful integration of the beverage logistics company Hillebrand. At the same time, freight is increasingly shifting from air back to sea. This is certainly influenced by the fact that air freight capacity remained tight and on-time delivery performance at sea has improved. Consequently, air freight volumes declined moderately. Demand for road transport and customized multimodal logistics services also remains high. We are therefore expanding our network and have, among other things, opened a new freight terminal in the Bulgarian capital, Sofia. (…)

How did the second quarter go for DHL Supply Chain?

Supply Chain has surpassed the €4 billion revenue mark and achieved an industry-leading EBIT margin of 6.0 percent. The resurgent global trade has had a positive impact on contract logistics, enabling strong performance in all regions. Earnings development was particularly strong in North America. This positive performance underscores the increased importance of stable supply chains. Customers are now more frequently willing to maintain higher inventory levels to prepare for uncertainties such as renewed lockdowns. Overall, demand for warehousing and distribution services has increased, especially in the automotive, life sciences & healthcare, and retail sectors.

We are addressing the growing importance of transport and warehouse logistics with our recent acquisition of the Australian Glen Cameron Group. However, we are investing particularly heavily in automation and digitalization to improve productivity. Of the 100,000 full-time warehouse workers at Supply Chain, 75 percent are already supported in their work by specific digitalization and automation projects. For example, over 2,000 robots are already in operation at our North American locations, having picked more than 100 million units. This is resulting in significant efficiency gains and enhancing the value of warehouse operations.

Do you still expect growth in online retail?

Yes, e-commerce is a long-term trend and a key pillar of our Strategy 2025. In the long run, we expect online retail to grow faster than the global economy. This remains true even though consumers are currently more cautious due to rising inflation. This doesn't necessarily mean that shipment volumes will decrease. The increased price transparency in online retail can even attract more consumers. There is also significant potential in the B2B sector, where a growing number of online shops for businesses are emerging. We are very well positioned in the regions where online retail is showing particularly promising growth: these include North America, India, and Europe. In these markets, we are investing heavily in expanding capacity. In the UK, for example, we have launched a €560 million investment program. This money is being invested in vehicles with alternative drive systems, a new parcel center, and collection and delivery depots, all of which meet the highest environmental standards. This also shows that online retail and sustainable business practices are not contradictory, but go hand in hand.

What importance do sustainable solutions have?

Climate change is and remains humanity's greatest challenge. By 2030, we intend to invest seven billion euros in climate-neutral logistics solutions. Sustainable fuels across all modes of transport are a key lever for decarbonization. We recently signed a cooperation agreement with Hapag-Lloyd for the use of biofuels in container shipping. We have also established partnerships for the procurement of sustainable air fuels (SAF) in air freight. We would like to accelerate this pace further, but there is a shortage of SAF available on the market. (...) For last-mile delivery, we are focusing on electromobility. By expanding our fleet with 44 electric Volvo trucks, we are now testing this on long-haul routes as well. This will save us around 600 tons of CO2 and almost 225,000 liters of diesel fuel per year. As you know, the Express Division was also the first company in the world to order twelve Alice electric aircraft.

www.dpdhl.com