DHL Group’s second quarter fell in line with company expectations as the logistics giant navigates a freight recession and subdued global economic growth. The Germany-based firm saw revenues jump 2.7 percent to 20.6 billion euros ($22.5 billion) on net income of 744 million euros ($812 million).
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At its freight forwarding business, DHL saw ocean freight volume growth of 6 percent to 847,000 20-foot equivalent units (TEUs), while air freight jumped 5 percent to 437,000 TEUs. These second-quarter freight volumes maintained similar year-over-year growth as in the first quarter, according to DHL Group chief financial officer Melanie Kreis.
While there remain disruptions in ocean freight markets, the volume growth also reflects improving demand, with Kreis observing that customers are starting to reali g n their orders with underlying demand after long periods of destocking.
For the first time in nearly three years, the second quarter saw all five divisions at DHL registering an increase in revenue. DHL Express saw a 1.6 percent revenue bump to 6.2 billion euros ($6.8 billion), while the global freight forwarding unit inched up 0.8 percent to 4.9 billion euros ($5.3 billion). DHL Supply Chain’s revenue increased 2.8 percent to 4.4 billion euros ($4.7 billion), while e-commerce had the largest spike at 10.5 percent to 1.7 billion euros ($1.8 billion).
Post & Parcel Germany saw a revenue uptick of 4.1 percent to 4.2 billion euros ($4.5 billion).
However, of the divisions, only DHL Supply Chain and Post & Parcel Germany incurred positive earnings before interest and tax (EBIT).
“In a nutshell, as we call it on our side, it’s not a broad-based acceleration yet, but some signals of the expected improvement in market conditions seem to be emerging,” Kreis said during the company’s earnings call.
Like U.S.-based competitor UPS unveiled last month, DHL will be implementing its own demand surcharges , which will come into effect for DHL Express customers Sept. 15. According to Kreis, the surcharges will be “trade-lane based,” with outbound product out of Asia being the highest.
Kreis alluded to the flood of air cargo shipped by Shein and Temu as a reason for the implementation of the demand surcharges.
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“Seasonality got more extreme over the last year,” Kreis said. “The situation, particularly on the aviation side, got much more complex now, and with the arrival of the Chinese e-commerce players, capacity constraints out of China and Asia overall have become even more pronounced. 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.”
As DHL expects volume fluctuations to remain volatile throughout 2024, Kreis said there will be a justification for a normal demand surcharge in certain periods of the year going forward.
Answering another analyst’s question about the necessity of the surcharges, Kreis said global trade lanes are “much more imbalanced” than ever from a demand perspective.
“We are not seeing demand explosion in Europe. We don’t have a demand-supply imbalance in Europe,” said Kreis. “There is a very clear demand-supply issue out of China, which also has implications for other parts of Asia. For example, what we’re seeing at the moment is much demand in southern China. Carriers are moving aircraft away from Vietnam into south China. There is a very regionally distorted trade lane imbalance. That is what got worse over the years…and that is also the clear expectation for what we will now see in the second half of the year.”
Those surcharges are expected to generate a “not insignificant” part of the 300 million euros ($327 million) benefit to second-half EBIT, namely impacting the fourth quarter.
The logistics giant reaffirmed its forecast for the 2024 financial year. It anticipates EBIT of between 6 billion euros ($6.6 billion) and 6.6 billion euros ($7.2 billion) as well as free cash flow excluding acquisitions and divestments of around 3 billion euros ($3.3 billion).
Kreis noted in a statement that DHL is confident in reaching the lower end of its EBIT target range even if the recovery of the global economy is less dynamic.
In its medium-term forecast for 2026, DHL Group continues to expect an operating profit of between 7.5 billion euros ($8.2 billion) and 8.5 billion euros ($9.3 billion).
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