By Alex Lennane

Deutsche Post DHL hit its earnings target for 2017, in “another very good financial year”, despite challenging first-half margins in air and ocean. Group operating profit rose 7.2 per cent to €3.74 billion ($4.64 billion), of which 40 per cent was accounted for by the Post – eCommerce – Parcel (PeP) division.

Group revenue rose 5.4 per cent to €60.4 billion, while PeP was up 6.4 per cent, to €18.2 billion. Global Forwarding revenues rose 5.4 per cent to €14.5 billion, while EBIT rose 3.5 per cent to €297 million.

DP DHL noted that “margins in air and ocean freight came under appreciable pressure particularly in the first half of 2017 due to the considerable increase in freight rates. In the second half of the year, the division was increasingly able to pass on the higher prices to its customers and with this significantly improve earnings in the last six months”. The company said: “Returning to former profitability levels remains our first priority.” It noted that its new IT system had now completed its pilot phase and was being rolled out.

Express revenues were up 9.5 per cent to €15 billion, while operating profit grew 12.4 per cent to €1.7 billion. The company put the growth down to “strict yield management and continuous improvements in the network”.

It was also announced today that DHL Express had taken two aircraft on an ACMI deal with Atlas Air, which is buying the two 777 freighters from LATAM. But one analyst on the earnings call with CEO Frank Appel asked whether there was any risk of overcapacity in the express market. “There has been a sizeable increase in freighter costs,” said Mr. Appel. “I don’t think there is a remote risk of excess express capacity.”

The Supply Chain division saw the weakest growth, with revenues for 2017 up just 1.4 per cent to €14.1 billion – but EBIT fell 3 per cent to €555 million. The company blamed the fall on the fact that ”the positive effects from the expanding business and the successful conclusion of the division’s optimisation programme were not sufficient to offset the one-off effect resulting from a write-down of customer relationship assets”.

It also looked for a more positive spin, noting that adjusted for negative currency effects, Supply Chain revenues in fact rose 4.6 per cent. It also pointed out that it generated new business and negotiated additional contracts worth €1.5 billion with new and existing customers during 2017.

“Thanks to successful business development in all four divisions, especially outside Germany, our company has registered another very good year,” said Mr. Appel in a statement. He added: “In 2017 we took another major step on the road to achieving our strategic and financial goals for 2020. With our international focus and our firm orientation towards the fast-growing e-commerce market, we implemented the right measures early on and are now positioned better than ever for future growth. At the same time, we are increasingly leveraging the digitalization opportunities that present themselves in all four divisions and expanding our foundation for a successful future.”

Reprinted courtesy of The Loadstar (