DHL Group continues to feel the pressure of international macroeconomic trade headwinds, with the company’s air and ocean freight forwarding division pulling down both revenue and earnings for the logistics giant.
The Germany-based company saw total revenue decline 3.2 percent in its first quarter to 20.3 billion euros ($21.8 billion), with net profit coming down 18.4 percent to 743 million euros ($799 million).
“We are in an unusually long phase of low momentum in global trade. In this environment, we continue to focus on consistent capacity and cost management,” said Tobias Meyer, CEO, DHL Group in a statement, calling 2024 a “year of opportunities.”
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DHL still expects more positive global economic momentum in the second half of 2024, with Meyer saying, “we are ideally positioned to benefit from an upturn in global trade.” The World Trade Organization is backing up Meyer’s predictions, recently forecasting that world merchandise trade volume would grow by 2.6 percent in 2024, a swing from the 1.2 percent decline in 2023.
The company’s attitude reflects that of U.S. logistics competitor UPS, which expects a return to volume and revenue growth later this year despite a 5.3 percent revenue decline in the second quarter and plummeting net income of 41 percent due to higher labor costs. Like DHL, UPS and rival FedEx are both sharing a focus on keeping costs down, with both implementing their own long-term cost-cutting plans expecting to slash billions of dollars each.
Overall, the group reiterated its 2024 fiscal forecast, expecting earnings before interest and taxes (EBIT) between 6 billion euros ($6.5 billion) and 6.6 billion euros ($7 billion) and free cash flow excluding acquisitions and divestments of around 3 billion euros ($3.2 billion).
Volumes across the company’s expedited delivery branch, DHL Express, reflect the wider weakness in demand. International volumes dipped 1.2 percent to 1.05 million packages per day, reflected in the lower B2B volumes moved in the quarter, while domestic volumes declined 7.8 percent to 472,000 per day.
The declining volumes at the unit have resulted in sinking sales of 4.4 percent to 6 billion euros ($6.5 billion).
DHL’s global freight forwarding division had the worst revenue performance, seeing sales decline 15.8 percent to 4.6 billion euros ($5 billion). EBIT declined 32.4 percent to 263 million euros ($283 million).
While volume growth exists across both air (5.1 percent) and ocean freight (6.6 percent), with the former getting a boost from the Asia-to-Europe trade lanes in the wake of the Red Sea disruptions, the revenue declines pervaded due to lower freight rates from the year prior. Air freight saw revenue drop 16.2 percent to $1.4 billion ($1.6 billion), while ocean freight sales had a steeper 25.3 percent drop to $1.3 billion ($1.4 billion).
“The return of volume growth in forwarding, as well as the uptick in economic indicators and growth expectations can be taken as encouraging signals that should point to an improvement in the second half of the year, again, as we have assumed in our guidance,” said Melanie Kreis, chief financial officer at DHL Group, during the company’s earnings call on Tuesday.
Kreis described the confidence of DHL customers as a “mixed bag” saying that while there are very positive customers, there are also those that are more skeptical. The CFO also highlighted the current impact of Chinese e-commerce players like Shein and Temu on the overall air freight capacity market out of China, without saying either of their names.
“That has been really a little bit of a seismic shift in the fourth quarter, when all of a sudden some players popped up which hadn’t taken up a lot of air capacity before and are now really impacting the overall dynamic,” said Kreis. “That is one of the structural questions which is very high on customers’ minds.”
For the quarter, DHL saw 8.5 percent growth in its e-commerce unit to 1.6 billion euros ($1.8 billion) on a 26.9 percent EBIT decline to 60 million euros ($65 million) reflects higher costs from ongoing investments in its network expansion.
The DHL Supply Chain segment recorded 5.5 percent revenue growth to 4.3 billion euros ($4.7 billion) on the best EBIT performance across all units at 12.8 percent growth to 256 million euros ($275 million). The quarter’s results were supported by new business wins, contract renewals and growing e-commerce business.
