DHL Group 2017 profits up 7.2pc to US$4.5 billion as sales rise 5.4pc

Germany's Deutsche Post DHL Group's 2017 operating profit increased 7.2 per cent year on year to EUR3.7 billion (US$4.5 billion), drawn on revenues of EUR60.4 billion, which increased 5.4 per cent.

The Bonn-based corporate giant, ranked first among global forwarders, saw fourth quarter group revenue increase 4.5 per cent year on year to EUR16.1 billion.

"With our focus and orientation towards the e-commerce, we implemented the right measures early on, and are now positioned better than ever for future growth," said CEO Frank Appel.

"At the same time, we are leveraging the digitalisation opportunities that present themselves in all four divisions and expanding our foundation for a successful future." he said.

DHL as the world's biggest buyer of airfreight - Kuehne + Nagel tops it in seafreight - said its express and e-commerce businesses "continued to see dynamic growth".

Global Forwarding's freight performance improved over the year with revenue up 5.4 per cent to EUR14.5 billion in 2017.

Forwarding's pre-tax profit rose 3.5 per cent to EUR297 million, with gains retarded in the first half by untransferable rate increases. But, rising rates in the second half were more easily passed on to customers, greatly improving profits. Swiss rival Panapina had the same experience.

Full year revenue in the post, e-commerce and parcel (PeP) division increased 6.4 per cent to EUR18.2 billion, gains attributable to volumes and revenue growth from e-commerce.

The most substantial gain was posted by Parcel Europe, where revenue grew 65.4 per cent. A key driver of the increase was the first-time inclusion of the UK Mail's 2017 revenue of EUR536 million.

In the PeP division, operating profit increased 3.9 per cent year on year to EUR1.5 billion and was attributed to growth in the German Parcel business, stable post revenues and "disciplined cost management".

At the same time profit growth was held back by further investments in the international parcel network and the e-commerce business, said the company statement.

The upward revenue and earnings trend in the express division continued in 2017. Revenue rose 9.5 per cent to EUR15 billion.

"The division registered growth across all regions," said the company. "This dynamic performance was driven once again by the international time-definite delivery business, where daily volumes increased 9.9 per cent year on year.

"The volume increase will enable the division to utilise its unique global express network even more efficiently.

Operating profit grew 12.4 per cent to EUR1.7 billion on the back of strict yield management. The operating margin rose to 11.5 per cent, up from 11.2 per cent in the previous year.

Revenue in the supply chain division increased by 1.4 per cent to EUR14.2 billion in 2017. Adjusted for negative currency effects, the year-on-year increase in revenue came to 4.6 per cent.

Said the company statement: "Once again, supply chain generated new business. The division concluded additional contracts worth EUR1.5 billion with both new and existing customers."

Drewry helps small shippers in block buying to win lower rates

The recent launch of Ocean Buying Group (OBG) intends to confer greater bargaining power on small shippers, who pay more and get less from carriers than bigger shippers do.

London's Drewry Supply Chain Advisors is assisting the process with a new partnership with Chainalytics in OBG.

Drewry director Philip Damas told London's Loadstar that OBG has already managed to procure 100,000 TEU from small shippers over a six-month pilot period.

"Typically, Ocean Buying Group has been able to secure rates that are roughly US$200 lower than a SME shipper is likely to get on his own," said Mr Damas.

This is a completely innovative way of procuring capacity and a boost for SMEs having a tough time negotiating as lone entities, he said.

"We buy capacity from the carriers using the leverage we have in terms of shippers signed up to the OBG, and then the shipper signs on as an additional party to benefit from fixed rates," said Mr Damas.

"After this, the shipper goes direct to the carrier, buys capacity and is invoiced for the space through them, without us taking a cut."

But one industry source doubted OBG would be able to swing this larger block buy into a deal for the low rates enjoyed by major shippers, as well as forwarders, who have long wielded their collective cargo clout to wring better deals from carriers.

"It is a good idea in theory," he said, "but I wonder how it will work in practice. I can see the carriers running with this; they already have enough big boys trying to screw them on rates."

He also said that shippers may have concerns over transparency and whether their boxes would be more likely to get rolled in favour of those of the larger players.

But Mr Damas disagreed. "Total volume is what matters to the carriers and 100,000 TEU - it doesn't matter if it's aggregated from various shippers.

"And 100,000 TEU undeniably counts as a big volume, so I do not think there will be any suggestion that shippers may find their goods stranded," Mr Damas said.

Looking to the future, Mr Damas said the group had no target set, but it was certainly looking to both broaden its horizons and increase the number of shippers signed up.

He denied that the consultancy and research organisation would have any conflicts of interests in getting involved with booking capacity, noting that Drewry already offered services such as benchmarking, and this would complement such offerings.

"We do have some research facilities, but our main interest is advising companies," he said.

Big shippers warn of east to west coast import shift if ILA dock talks stall

More than 100 major shippers and shipping firms have warned the east coast dockers union and waterfront employers that they will divert imports to the more tranquil west coast if stalled dock talks do not soon resume.

A coalition of beneficial cargo owners (BCOs), agribusinesses, logistics providers led by the National Retail Federation, "expressed deep concern" over the breakdown in talks between the United States Maritime Alliance (USMX) and the International Longshoremen's Association (ILA).

The two ended contract talks on December 6 over the definition of what constituted an "automated terminal". The current master contract covering east and Gulf coast ports expires on September 30, noted IHS Media.

Last year, west coast employers agreed to extend the west coast waterfront contract to July 1, 2022. That gives BCOs four peak seasons without labour strife.

Cargo diversion is expected to accelerate as the September deadline approaches, reversing a trend of cargo increasingly opting for the east coast partly because of the newly expanded Panama Canal has reduced slot costs on that route.

The west coast share of US imports from Asia dropped by 12 per cent from 79 per cent in 2005 to 67 per cent in 2016, based in part on labour trouble at west coast ports.

The Pacific Maritime Association (PMA) and International Longshore and Warehouse Union (ILWU) had contentious contract negotiations in 2002 and again in 2014 to 2015 that involved crippling union work go-slows.

Shippers stress their reliance on certainty in cargo routing. If they enter a year in which no longshore contract negotiations are scheduled, they plan their entire supply chain for the year based upon assurances of port performance.

But, even if there are no early warnings of labour strife, shippers will hedge to avoid being shut out later in the year if contract negotiations break down.

(Source:HKSG-GROUP)

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