The Bonn, Germany-based parcel carrier and logistics provider posted a third quarter 2016 net profit of 618 million euros, a significant increase from just EUR 49 million in third quarter 2015, even as revenues slipped 3.9 percent to EUR 13.9 billion.
Deutsche Post DHL Group saw consolidated net profits in the third quarter of 2016 skyrocket to 618 million euros (U.S. $682.9 million) compared with just EUR 49 million in the same 2015 period, according to the company’s most recent financial statements.
The Bonn, Germany-based parcel carrier and logistics provider posted earnings per share (EPS) of EUR 0.49 compared with EUR 0.04 per share in third quarter 2015, in-line with consensus analyst expectations.
DHL Group CEO Frank Appel noted earnings before interest and taxes (EBIT) increased to EUR 755 million from EUR 197 million the previous year, a third quarter record for the company, despite what he called a “weak economic tailwind.”
The company attributed the sharp rise in earnings over the prior year primarily to sustained organic growth in operating profit in all divisions, as well as the non-recurrence of substantial one-time effects.
Revenues for the quarter, on the other hand, fell 3.9 percent year-over-year to EUR 13.9 billion. DHL attributed the decline to negative currency effects and lower fuel surcharges due to falling oil prices, as well as a change in the recognition of revenue generated from a key customer contract in the company’s Supply Chain division, which took effect in the fourth quarter of 2015. Adjusted for the above effects, group revenues grew 2.4 percent from third quarter 2015.
Capital expenditures fell 9 percent year-over-year to 498 million euros in the third quarter of 2016.
“Investments continued to focus on positioning the Group for future profitable growth in all four divisions,” the company said. “For example, Deutsche Post DHL Group made further progress in extending its national and international parcel infrastructures and invested in the production of its StreetScooter electric vehicle, in addition to expanding global and regional hubs in the Express division and modernizing and expanding the aircraft fleet.”
The company’s Post-eCommerce-Parcel (PeP) unit saw profits from operating activities (EBIT) jump from EUR 142 million in third quarter 2015 to EUR 295 million this year. PeP revenues for the quarter grew 4 percent year-over-year to EUR 3.96 billion.
DHL noted its expansion efforts in Europe via parterships with postal companies in Hungary and Slovenia, bringing the number of countries covered by its parcel network to 18. In addition, the company announced in September its plans to acquire UK Mail Group plc for 242.7 million British pounds (U.S. $315.6 million).
The acquisition of UK Mail, one of the largest mail and parcel carriers in the United Kingdom, will strengthen DHL’s cross-border network and expand its customer base in Europe’s largest e-commerce market, and also has the potential to deliver “significant” synergies, according to the company.
“The upward trend (in earnings) once again, illustrates how Deutsche Post DHL Group is increasingly benefitting from positioning itself successfully as a market and innovation leader in the high-growth e-commerce segment,” the company said.
EBIT in Deutsche Post DHL’s Express division, however, dropped 7.7 percent to EUR 336 million for the quarter despite revenues ticking up 2.9 percent to EUR 3.43 billion compared with the same 2015 period.
The Global Forwarding, Freight segment reported third quarter EBIT of EUR 63 million compared to a EUR 337 million loss the previous year, even as division revenues fell 6.3 percent to EUR 3.36 billion.
The company’s supply chain saw EBIT rise 35.6 percent year-over-year to EUR 137 million, but revenues fell 14.7 percent to EUR 3.42 billion for the quarter. Deutsche Post attributed the earnings growth primarily to the positive impact of the division’s optimization initiative, which began last year and aims to increase the operating margin in the Supply Chain division to between 4 percent and 5 percent by 2020 by increasing standardization, improving efficiency and better leveraging economies of scale in the global business, as well as lower restructuring costs.
Through the first nine months of the year, DHL Group’s net profits have more than doubled to EUR 1.8 billion on revenues that dropped 4.5 percent to EUR 41.9 billion.
“The strong trend in operating profit in all four divisions shows that we have set the right priorities with our Strategy 2020,” Appel said of the results. “We are taking an increasingly active role in the dynamic development of e-commerce all over the world and are continuing to invest in this segment.”
Looking ahead to the remainder of the year, Appel said the company is “well on track to reaching the ambitious goals we have set for 2016 and beyond.”
Deutsche Post reconfirmed its full-year 2016 EBIT forecast of between 3.4 billion euros and 3.7 billion euros based on the company’s performance in the first nine months of the year and continued moderate growth in the world economy.
The group also confirmed its target for an average increase in operating profit of more than 8 percent annually during the period from 2013 to 2020.
Deutsche Post Q3 earnings soar despite ‘weak economic tailwind’
