Dusseldorf The sharp slump in German online retail is dampening the growth of Deutsche Post DHL. The European market leader in the parcel business lost 10.7 percent of its sales in the second quarter compared to the previous year, which caused the operating result in the core division “Post and Parcel Germany” to drop by almost a quarter to 242 million euros.
The express business, which has been growing for years, with which DHL delivers time-critical shipments worldwide overnight, also showed growth weaknesses for the first time. Although sales continued to rise, the bottom line was that the operating result fell by 6.5 percent. CEO Frank Appel explained: “The temporary lockdowns in China had a negative impact.”
The group as a whole nevertheless exceeded the expectations of the analysts. Deutsche Post DHL achieved earnings per share of EUR 1.20 between April and June, after EUR 1.05 in the second quarter of the previous year. Analysts had only expected just under one euro.
Quarterly sales of EUR 24 billion also exceeded expectations. However, this time 530 million euros came from the initial consolidation of the spirits forwarder Hillebrand, which the group had acquired last year.
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As at the beginning of the year, the growth in earnings came from the freight and forwarding division. These more than offset the decline in the parcel business. The division managed by Tim Scharwath, which a few years ago was still considered a case for restructuring, benefited from the high freight rates, particularly in sea and air transport. Quarterly sales grew by 55.8 percent to EUR 8.16 billion, and operating profit doubled to EUR 746 million. The warehousing business, which the group runs under the name “Supply Chain”, also grew strongly.
Prognosis even increases slightly
CEO Appel said: “The Group’s well-balanced portfolio once again showed its strength in the second quarter of 2022.” he maintained. There was even a slight upward correction. “If the business development continues unchanged, the group believes an EBIT of more than 8.4 billion euros is possible,” he explained.
The CEO is confident.
(Photo: imago images/sepp spiegl)
Most recently, however, some investors had warned Deutsche Post. A few days ago, the US analysis company Bernstein Research renewed its concerns: The logistics group may have good prospects for the coming years, but in the short term the decline in European e-commerce volumes is causing concern.
The gap between the previously excessive demand and the low supply of air and sea freight transport is gradually closing again. This could soon put pressure on the high margins in DHL’s freight division. Bernstein analyst Alexander Irving therefore only rated the share as “Market-Perform” and named a price target of EUR 42.50, which is only slightly above the current value.
At the same time, the major Swiss bank UBS lowered the price target for Deutsche Post from EUR 60 to EUR 54.75, but left the recommendation at “buy”. Because of the expected weakness in the global economy, analyst Cristian Nedelcu also cut his earnings estimates for 2023.
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In June 2022, e-commerce across Germany fell by 15.1 percent compared to the same month last year, as the Federal Statistical Office announced a few days ago. Experts from the German Retail Association (HDE) cited the high price increases caused by the Ukraine war as the reason, which had led to austerity measures among consumers in recent weeks. The massive decline compared to June 2021 was reportedly the strongest year-on-year decline since 1994.
The US DHL competitor UPS also suffered from the consequences of inflation in the past quarter, as the publication of its figures a few days ago showed. However, the booming freight business with corporate customers also saved the revenues there.
With sales up 5.7 percent to $24.8 billion, operating income rose 8.5 percent to $3.5 billion. Like the somewhat smaller US rival FedEx, CEO Carol B. Tomé wants to focus on deliveries with higher margins in order to compensate for the dwindling desire to buy due to inflation.
More: Post boss Appel holds out the prospect of further acquisitions.