Deutsche Post DHL Group says it has taken “steps to future proof” the Post and Parcel business.
This follows the release of the company’s annual report 2018 which revealed that the restructuring in the Post – e-commerce – Parcel (PeP) division has led to losses despite overall growth of Group revenue by 1.8% to EUR 61.6 billion .
The German logistics giant issued a profit warning last June when it began the restructuring programme at its PeP division. This included an early retirement programme, as well as splitting its post-and-parcel delivery division into a German and an international unit.
The annual report revealed that all four DPDHL divisions – post, express, forwarding and supply chain – contributed to the financial year 2018 positive trend, although group operating profit from activities (EBIT) fell 15 % to €3.2 billion and “thus reached the adjusted earnings target communicated in June 2018”.
Frank Appel, CEO of Deutsche Post DHL Group commented on the results: “2018 was a challenging year for Deutsche Post DHL Group, which we closed with a successful Christmas business. Despite rising geopolitical uncertainties, global trade continued to register growth. This benefitted our DHL divisions in particular. In our German post and parcel business, we initiated measures to secure the division’s long-term EBIT growth – and we consciously accept that this comes with a short-term burden on EBIT…We have thus created the conditions for reaching our 2020 targets and for continuing to grow profitably in the years thereafter.”
Deutsche Post DHL predicts the restructuring will lead to significant profit by 2020. “The P&P division is expected to contribute between EUR 1.0 to 1.3 billion to the Group’s projected EBIT for 2019. In the DHL divisions, of which there are now four (Express; Global Forwarding, Freight; Supply Chain; e-commerce Solutions), the Group anticipates total EBIT to grow to EUR 3.4 to 3.5 billion. Group EBIT is projected to rise to at least EUR 5.0 billion in 2020.”
Frank Appel spoke on the company’s website about the restructuring“ “We took steps to future-proof the structures in the Post and Parcel business and position the business for long-term profitable growth. This includes three points in particular: one, improved yield management; two, investments in boosting productivity; three, lowering our indirect costs.
“We are making good progress and are fully on track. Most of these initiatives are now underway, and the expected expenses were recognised as planned in the past financial year. In terms of prices, we have already been able to implement adjustments in the parcel business. The framework for increases in letter postage prices are determined by the Bundesnetzagentur, as the regulatory authority. This process is still ongoing. We are increasingly investing in new sorting equipment to improve productivity. And we are also making brisk progress when it comes to improving cost structures. Our offer of early retirement to civil servants working in indirect functions has been very well received. In addition, we completed the announced split of PeP at the end of the year. The new Post & Paket Deutschland (P&P) division will now be able to concentrate fully on completing the restructuring process and, in its new structure, increasing profitability.”
Deutsche Post DHL Group also projected an increase in operating profit to EUR 3.9 to 4.3 billion in 2019. Structural and operating improvements in all Group divisions are expected to contribute to the increase. The measures initiated to raise profitability in the German post and parcel business are expected to be one of the main factors having a notably positive impact on earnings in the current financial year.