Tuesday 26th Mar 2019 - Logistics Manager Magazine

Deutsche Post splits DHL Logistics

Deutsche Post World Net has split its logistics business in two, supply chain and freight forwarding, following the promotion of Frank Appel to chief executive of the group.

Appel said: “Logistics is facing increasing organic growth demands in the future. Having a dedicated CEO for each of the logistics businesses on the executive board will further strengthen both businesses. At the same time, collaboration will be of prime importance, which is above all in the interest of customers.”

Edwards joined the company in 1989 as president of the logistics consumer retail business in the Americas. He had been global chief executive for the supply chain business since March last year. As part of his extended role he will take charge of Corporate Information Solutions (Williams Lea).

Ude has worked for the group since 1998. Most recently he has driven forward the turnaround of the European Freight business as chief executive of Freight. Global functions within Logistics will report to both Edwards and Ude.

The decision to split Logistics into two business units is a structural move without any immediate costs or gains associated with it and there will be no changes to the Group’s reporting structures for the time being.

Supply Chain and Corporate Information Solutions has annual proforma revenue of more than 13 billion euros and focuses on long-term, complex outsourcing agreements with large customers.

Global Forwarding and Freight is an asset-light business with annual revenue of around 13 billion euros with focus on the brokerage of transport capacity.

The company has also decided to reintegrate DHL Global Mail (formerly one of Appel’s responsibilities) into the Mail business division. By combining the two units the group hopes to strengthen its cross-border mail opportunities via strong links with domestic mail.

Logistics profits rise

Deutsche Post’s logistics business saw profits rise 20 per cent last year. Earnings before interest and tax (EBIT) rose to 898 million euros from 751m euros in 2006.

At DHL Exel Supply Chain, revenue gained 9.2 per cent to 13.1 billion euros, boosted by the NHS contract as well as higher operational revenue in all regions. The unit generated new business of around 1bn euros in annualised revenue last year.

At DHL Freight, revenue showed an organic growth rate of 6.2 per cent. Reported revenue was at 3.6bn euros compared with 3.7 bn euros a year earlier, mainly because the 2006 revenue included sales between the group’s own businesses.

Strong volume growth at DHL Global Forwarding was countered by lower freight rates in the division’s air freight activities.

The Express division reported a 46 per cent increase to 420m euros in EBIT before non-recurring effects for 2007, excluding the 594m euro write-down on fixed assets in the Express Americas division in the fourth quarter. The reported EBIT loss amounted to 174m euros.

In local currencies, organic revenue grew 2.9 per cent. Sales in the US were little changed as performance improvements in the ground and international products were offset by the decline in the domestic air business, especially in the second half of the year. Revenue in the Asia Pacific region rose 5.4 per cent to 2.6bn euros.

The group said its German post business had maintained its position with major key account clients following liberalisation of the German mail market at the start of 2008. The division won back more than 30 large customers in December.

The Mail division reached its full-year EBIT target of 2bn euros. The group said a 4.3 per cent decline from a year ago was mainly attributable to the lack of 1.8 working days in 2007 and price reductions in Parcel Germany.

Deutsche Post World Net expects 2008 EBIT excluding non-recurring effects of around 4.2 billion euros.

The Logistics division has been set an EBIT target of some1.05bn euros for 2008 while the target for the Express division is about 500m euros. An earnings decline is expected in the Mail division – it is now expected to reach EBIT of around 1.95bn euros this year.

Chief financial officer John Allan (above) said Deutsche Post World Net was making good progress on its “Roadmap to Value” capital markets programme, which was introduced in November 2007.

“The program is already delivering tangible results and we remain heavily focused on its execution.”

To help meet its goal of raising profitability, the group has identified more than 100 initiatives, which will underpin EBIT growth by one billion euros through 2009.