Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DHL Group (DHLGY, Financial) confirmed its full-year guidance, indicating confidence in meeting market expectations.
- Ocean freight volumes maintained mid-single-digit growth rates, showing resilience in the B2B segment.
- The supply chain division reported strong performance with EBIT slightly ahead of the high base from Q2 2023.
- Digital e-commerce division saw strong B2C volume growth, confirming the structural shift towards online shopping.
- Parcel revenue growth in the P&P division was 8.5%, supported by strong cost control and good yield management.
Negative Points
- B2C express volumes were down 8% year-over-year, reflecting yield measures on China e-commerce and indicating potential challenges in this segment.
- The global TDI weight load factor, although improved sequentially, remains at a rather low level compared to historical standards.
- The new postal law, while providing some operational flexibility, also includes drawbacks that could impact the P&P division.
- The full-year EBIT guidance implies a significant acceleration in the second half, raising concerns about the feasibility of achieving this target.
- The introduction of a demand surcharge in express, effective September 15, may face resistance from customers and could impact volume growth.
Q & A Highlights
Q: I just wanted to explore that EUR1.3 billion number, which I think I found quite surprising, if I'm totally honest because it would then imply, obviously a very large Q4, almost like a sort of COVID quarter to get you to the EUR6 billion. So wanted just to probe a bit there in terms of assumptions, how much of the EUR300 million that you pointed to in the bridge, how much of that is expected and impact Q3? Thank you.
A: Yeah, morning, Andy. So a good question. Fair question. I mean, as I said, we have to see how the volume develops in the course of the third quarter. August is always a relatively weak summer months so we have to see how September plays out. I just wanted to flag clearly that we will have a back-end loading towards the fourth quarter, A, because obviously, the traditional peak seasonality is most impactful in the fourth quarter, but also because the EUR300 million benefit will be very much favorable in the fourth quarter. For example, the demand surcharge in express, which is a not insignificant part of the EUR300 million, that is only being introduced on September 15, and that'll than half the full benefit in the fourth quarter.
Q: The first one is on express B2C volumes. We are seeing a lot of luxury companies profit warning recently. So I wanted to ask if we clean the headwind-to-volumes from the e-tailers contract renegotiation, what was the clean volume development year-over-year in B2C in Q2? And maybe in relation to this, for a few quarters now we've been seeing depressed volume development for B2C express. I guess my question here is what gives you confidence there is no structural issue here like down-trading or anything else that is holding back down the B2C volume?
A: Yes, thank you, Cristian. Let me start with B2C question. So minus 8%, I mentioned the fact that we compute measures on the Chinese e-comm players. That is, as you correctly spotted, only part of the explanation. Also if you take that out, we had a volume decline of B2C because particularly some of the high-end express using B2C customers didn't see a dynamic volume development in the second quarter. So that has an impact on us. That takes me to your structural question, for express and we always made it clear, there's only a small slice of the cross-border B2C market, which is attractive. And we have seen over the last years much more rotation in customers in this segment than on the B2B side. And that has to be managed totally differently for express, but also totally differently to the domestic e-comm businesses. And I think our express colleagues are really the masters that art. So with regard to the small sliver of a relatively high value cross border shipments, we don't see that as a structural change, but more as a phase where due to general consumer attitude at the moment, there is currently less spending then over the cycle. So we would expect that to improve over time. But again, in combination from the Chinese side and the general situation, B2C volumes will be down for express in the second half of the year. I'm pretty sure about that.
Q: So you've talked about this new demand -- peak season demand surcharge, can you help quantify what the surcharge is and why do you think customers will accept it and kind of any feedback you've had in terms of stickiness of this demand surcharge? Then secondly, on the forwarding side, if you could talk a bit more on your expectations around the forwarding contribution in your third quarter. We've heard quite a positive commentary from some of your peers during the earning season in terms of 3Q yields. And also like how that is compared with your expectation at the start of the year?
A: Yeah, thank you Muneera. Let me try to tackle the three questions, starting with the demand surcharge. So we have only introduced the demand surcharge today. So communication is now also going out to our customers. We're publishing a lot of material on our website. The basic structure of this demand surcharge is that it will be original trade lane based. So you can see a grid now where we communicate the surcharge for the different relations. Not surprisingly, outbound Asia, it will be the highest, but it will be differentiated lane by lane. How are we going to explain that to the customers? I think we simply have to acknowledge and that is why we are introducing this demand surcharge, seasonality got more extreme over the last years. The situation, particularly on the aviation side got much more complex now with the arrival of the Chinese e-comm players. Capacity constraints, out of China out of Asia, overall has become even more pronounced. So we will have to spend more to make sure that we deliver the expected service quality to our customers. And in order to be able to do so, we are asking for the demand surcharge.
Q: Just in terms of the EUR300 million, how much of that it is across those the three buckets that you highlighted, please?
A: Yeah, Se we expected the question, but we consciously decided not to kind of like do a percentage split between the different categories. But as I already mentioned, the last category, the new elements, demand surcharge has a significant role to play in the EUR300 million.
Q: Could you specifically talk about the unit GP for both air and sea in Q3 and Q4 because we've obviously seen the sequential downward trend in air. And whether this will be improving. And then lastly, I had a question on the Postgestz [and the Bonn]. Customers now obviously will have the options for three day delivery instead of two. Could you please elaborate on what impact that will have on the run rate cost decreases? If you can share anything on that. Thank you.
A: Tobias, thank you very much also for having -- allowing me to clarify on something around B2C volume statement because as you rightly asked, I'm not saying that we won't have a peak in B2C. So we will have a peak in B2C express; very clearly, Q4 will be much stronger than the other quarters. But year over year, also because of the yield management we're doing, it will see a decline, but there will be a peak, very clearly. In terms of utilization and express, yeah we try to -- so that for the aviation side, with the weight load factor, it is still significantly below the historically normal levels. But in the second quarter, it started to move into the right direction. One element, which is very important here, particularly on the aviation side, is not just what is happening with regard to volumes, but also what is happening with regard to weight. And here, we also saw a positive development, which should help us to improve operating leverage in the second half of the year.
Q: With a lot of
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
