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"In 2024, our focus is on capitalising on our opportunities"

The world's leading logistics company DHL Group got off to a solid start to the 2024 fiscal year. Revenue and operating profit (EBIT) were in line with expectations. The Group has confirmed its forecast for the year as a whole. In an interview with DHL Group News, CFO Melanie Kreis assesses the results of the first quarter and talks about the expected upturn in global trade in the second half of 2024 as well as growth opportunities for DHL Group for the rest of the year.

CFO Melanie Kreis

Ms. Kreis, as expected, the global economy has not yet picked up. How do you view DHL Group's business performance in the first quarter?

Melanie Kreis: DHL Group has gotten off to a solid start to the new fiscal year - despite the global environment. The wars in Ukraine and the Middle East, persistent inflation, comparatively high interest rates and geopolitical tensions - all of these factors have led to an unusually long period of slow momentum in global trade. We anticipated this in our forecast for the year. We expect the global economy to pick up in the second half of the year.

Despite these circumstances, revenue was almost stable compared to the same quarter of the previous year, although we had fewer working days due to the early Easter holidays. Earnings were clearly above the level of the pre-pandemic year 2019. This once again underlines our structurally improved performance capability.

Pessimistic voices fear that the recovery will fail to materialize or that there could even be a permanent reversal of globalization. What's your view on this?

Melanie Kreis: As one of the world's most global companies, we are following these developments very closely. In the data we analyze, however, we see no evidence that the process of international division of labor and cooperation could fundamentally weaken or even reverse. For example, our recently published DHL Global Connectedness Report shows that globalization reached a record high in 2022 and remained at this level in 2023. However, globalization is changing. The keyword is omnishoring. Companies and countries want to reduce dependencies and spread risks. Supply chains are becoming more resilient, but also more complex as a result. With our decades of experience and activities in more than 220 countries and territories worldwide, we are the ideal partner to support our customers on this journey. We therefore see the current developments more as a medium-term opportunity for further growth.

The challenging environment is currently leading to declining results for DHL Express and DHL Global Forwarding, Freight after the record figures of previous years. How do you assess this trend?

Melanie Kreis: These developments come as no surprise to us. The Express volumes skyrocketed due to the pandemic and led to a very high utilization of our network. We used this tailwind to invest in the expansion and modernization of our infrastructure. Currently the network is not optimally utilized. Nevertheless, Express once again achieved a very good double-digit EBIT margin in the first quarter. With our efficient network, we will be optimally prepared when global trade gains momentum again. We will then benefit from the operational leverage effect of increasing utilization of our network.

At Global Forwarding, Freight (DGFF), air and ocean freight volumes picked up again following a weak performance in the same quarter of the previous year. Freight rates have also seen a smaller decline since the end of 2023.  As we are comparing the first quarter of 2024 with the first quarter of 2023, we still see quite a large delta there. Overall, the division posted EBIT of EUR 263 million and an EBIT margin of 5.7 percent. This is still a good result - and clear evidence that our measures to safeguard earnings are having an impact.

The other two DHL divisions, Supply Chain and eCommerce, increased their revenue in the first quarter. Where does the growth in these areas come from?

Melanie Kreis: Supply Chain has an extraordinarily resilient business model. In the first quarter, the division was able to seamlessly build on the very good performance of the previous year with rising revenue and improved profitability. Supply Chain benefited in particular from strong new business in North America. The significant growth at eCommerce is primarily due to the acquisition of MNG Kargo in Turkey. Acquisitions such as these help us to quickly take leading positions in exciting growth markets and thus benefit from the continuing trend toward online retail in additional regions. There is fierce competition in e-commerce. Economies of scale and active cost management are therefore key factors in further increasing profitability in the international parcel business.

There is also strong competition in the domestic parcel business. Nevertheless, the Post & Parcel Germany division was able to achieve robust growth in earnings in particular. How does this come about?

Melanie Kreis: The performance of Post & Parcel in the first quarter is pleasing thanks to the hard work of our colleagues in the division. It is nevertheless difficult to draw a comparison with the previous year, as the same quarter of the previous year was for example burdened by additional staff costs due to the wage dispute. At the same time, we can see what key role the parcel business plays in the division's success today. This becomes particularly clear if we take the 2019 figures from before the pandemic as a basis. For some products in the mail sector, such as dialogue marketing - i.e. traditional advertising mail - volumes in individual months are a good third below the 2019 level. At the same time, parcel volumes have increased significantly over the same period. The earnings figure in the first quarter shows that the Post & Parcel team is implementing the transformation to the parcel business very well. The fact that we were able to pass on rising costs in the parcel business is helping us here. Unfortunately, this is not possible in the regulated mail business. This once again proves how urgently an appropriate reform of the Postal Act is needed so we can secure a cost-effective, high-quality and sustainable universal postal service in the long term.

You mentioned growth opportunities. Let's take a look ahead. What do you expect in 2024?

Melanie Kreis: I'd like to take a quick look back before I talk about 2024. We have worked hard over the past few years to become even better and more efficient. Today, our results are at a whole new level compared to the pre-pandemic numbers. This is also a result of our structurally improved performance capability. At the same time, our key growth drivers of e-commerce, omnishoring, sustainability and digitalization remain intact. With our portfolio, we are ideally positioned to benefit from an upturn in global trade. 2024 therefore offers us a number of opportunities, and our focus is on making the most of them.