Deutsche Post DHL Group, the world’s leading logistics company, once again grew profitably in the past financial year. With revenue of EUR 94.4 billion, the Group exceeded its record from previous year by 15.5%. The jump in revenue resulted entirely from the international business of the DHL divisions, despite the fact that global trade and e-commerce normalized in 2022 as expected with slowing momentum in the final quarter. Consequently, shipment volumes were slightly below the all-time high of 2021.
Thanks to flexible structures, the Group was nevertheless able to continue utilizing its global networks efficiently throughout the year. The company also benefited from the increasing demand for resilient supply chains in contract logistics and, particularly in the first half of the year, from high freight rates in the forwarding business. Overall, Deutsche Post DHL Group achieved a new record with operating profit (EBIT) of EUR 8.4 billion (2021: EUR 8.0 billion). The key driver was the positive earnings development in the internationally operating DHL divisions, which generated EBIT of around EUR 7.6 billion (2021: EUR 6.6 billion). With EUR 1.3 billion, EBIT of Post & Parcel Germany declined by around EUR 500 million compared with the prior-year result. The Group-wide EBIT margin was 8.9% (2021: 9.8%).
“We have demonstrated resilience and innovation capability in a challenging environment. Our course and strategy remain well on track. Once again, our thanks go to our employees for their extraordinary commitment in a challenging year,” said Frank Appel, CEO of Deutsche Post DHL Group.
Group invests more than ever before and exceeds free cash flow guidance
Last year, Deutsche Post DHL Group invested a record sum of EUR 4.1 billion (2021: EUR 3.9 billion) in its operating business as well as in digitalization and sustainability. The Group made progress in expanding its electric vehicles fleet, which grew by 7,000 to more than 29,000 e-vehicles worldwide. Further investments were made to modernize the Express division’s aircraft fleet and to build new CO2-neutral delivery bases in Germany. Investments were also made in sorting capacities and e-fulfillment solutions for the growing e-commerce business. There was an increase in efficiency due to investments in additional automation solutions.
Excluding acquisitions, free cash flow reached a new all-time high at EUR 4.6 billion (2021: EUR 4.1 billion). Free cash flow was therefore above the most recent expectation of EUR 4.2 billion and exceeded the guidance initially provided in March 2022 by around EUR 1.0 billion. Free cash flow including acquisitions and divestments amounted to EUR 3.1 billion. Payments for acquisitions and divestments totaling EUR 1.5 billion (2021: EUR 0.0 billion) focused primarily on the acquisition of the ocean freight specialist Hillebrand, whose subsidiaries were seamlessly integrated into the DHL Global Forwarding, Freight division.
The exceptionally good result is also reflected in higher net income. Deutsche Post DHL Group increased its net profit after non-controlling interests to EUR 5.4 billion (2021: EUR 5.1 billion). Basic earnings per share thus amounted to EUR 4.41 (2021: EUR 4.10).
Guidance: Group expects further growth in the medium term
In light of the continuing uncertainty about the course of an economic recovery, the Group’s 2023 EBIT guidance contains three scenarios and ranges from EUR 6.0 billion to EUR 7.0 billion:
• In the favorable case of a recovery starting around mid-year (‚V-shape‘ recovery) the Group expects EBIT of around EUR 7.0 billion.
• In case of a recovery starting more towards year end (‚U-shape‘ recovery) the Group anticipates EBIT of around EUR 6.5 billion.
• In the least favorable case of no significant recovery in 2023 (‚L-shape‘ recovery) the Group predicts EBIT of at least EUR 6.0 billion.
“The slowing macroeconomic growth momentum is reflected in our EBIT outlook. That is why we are acting particularly prudent in the first half of 2023 and focusing on our yield and cost management,” said Chief Financial Officer Melanie Kreis.
For 2023 the company foresees a gross capital expenditure in the range from EUR 3.4 billion to EUR 3.9 billion and predicts free cash flow of around EUR 3.0 billion independent of the macroeconomic scenarios. Investments continue to focus on organic growth, strengthening global networks and expanding the product range of climate-friendly transport solutions.
With the presentation of its Annual Report, Deutsche Post DHL Group again issued a medium-term guidance. The Group expects to be able to increase EBIT relative to 2023 again. The EBIT target for 2025 is set to more than EUR 8 billion. The Group anticipates to generate cumulative free cash flow of EUR 9 to 11 billion in the period from 2023 to 2025. Over the same period, the company forecasts cumulative capital expenditure (capex) in the magnitude between EUR 10 and 12 billion.
Earnings driven by international logistics business of DHL divisions
DHL Express: Revenue increased to EUR 27.6 billion (2021: EUR 24.2 billion). Pricing measures, exchange rate effects and increased fuel surcharges were the drivers of this development. The increase in average weight per shipment also had a positive impact on revenue development, while revenue growth was slowed by a decline in international time-definite express (TDI) shipments. Nevertheless, network capacities were efficiently utilized over the course of the year thanks to the high degree of flexibility. EBIT decreased by 4.6% year on year to EUR 4.0 billion. This was mainly due to higher costs and negative exchange rate effects. Profitability remained at a high level with an EBIT margin of 14.6% (2021: 17.4%).
DHL Global Forwarding, Freight: This division achieved a significant jump in revenue and earnings in 2022 thanks to operational improvements and high freight rates. EBIT increased significantly to EUR 2.3 billion (2021: EUR 1.3 billion). Revenue jumped sharply to EUR 30.2 billion (2021: EUR 22.8 billion). Air freight volumes were down 9.3% year on year, while road freight shipment volumes declined by 4.8%. In ocean freight, transport volumes grew by 4.8% due to the integration of the beverage logistics company Hillebrand. The division’s EBIT margin improved to an exceptionally high level of 7.6% (2021: 5.7%).
DHL Supply Chain: Demand for reliable supply chains increased once again in 2022. The division recorded its strongest ever figures for new business, which amounted to annualized revenue of approximately EUR 1.5 billion in 2022 (2021: EUR 1.4 billion). High demand pushed revenue up to a total of EUR 16.4 billion in 2022 (2021: EUR 13.9 billion). EBIT reached a strong level of EUR 893 million (2021: EUR 705 million) and the EBIT margin increased to 5.4% (2021: 5.1%). The division continued to standardize its processes, and implemented additional digitalization and automation projects, thus achieving further efficiency improvements. DHL Supply Chain has also further strengthened the establishment of dedicated e-fulfillment sites. The acquisition of a majority stake in the Dutch company Monta in the fourth quarter 2022 is intended to further accelerate growth in e-commerce.
DHL eCommerce Solutions: Following strong growth in the previous year, the division was able to maintain revenue in 2022 at the new level. Revenue climbed to EUR 6.1 billion (2021: EUR 5.9 billion), driven mainly by pricing measures. The expected normalization of shipment volumes materialized, with a 6.3% decline in parcel volumes. India recorded an encouraging increase in parcel volumes. Network utilization remained good. However additional inflationary driven cost increases had a negative impact. The division nevertheless closed the year profitably, with an EBIT margin of 6.3% (2021: 7.0%). At EUR 389 million, EBIT was moderately below the previous year (2021: EUR 417 million).
Deutsche Post DHL Group concludes 2022
Challenge Handling: The Air Cargo Horse Whisperer
Seven thousand horses made their way through the Horse Inn at Liège Airport in 2022, and onto carefully planned charters flying to the world’s equestrian events at destinations such as Doha, Mexico, Miami, New York, or Shanghai. From racehorses to dressage or thoroughbreds, Challenge Handling has handled them all.
The Challenge Group subsidiary has been running the Horse Inn since the state-of-the-art facility was opened in 2016. It is the sole operator serving the entire Liège cargo community and enjoys an excellent standing among leading specialized horse shippers, forwarders, and international airlines, alike. That reputation reaches beyond the Belgian borders. European horse transports to the world’s leading events primarily pass through the Wallonian airport.
“The infrastructure we have at the Horse Inn is unique within Europe,” says David Alexis, General Manager of Challenge Handling in Liège. “Every aspect, from the size of the 55 individual horse stalls to the specific type of feed and cleaning products, is in alignment with the strict regulations and requirements stipulated by leading equestrian bodies. Horses are highly sensitive and valuable, requiring complex handling and ultimate comfort, particularly if they are being flown to compete in prestigious events. Our specialized staff ensure top quality, VIP service.”
Not only does the Horse Inn serve as a place for horses to rest prior to their flight or further road transport, but it also offers affordable accommodation for their accompanying grooms, with good connections to restaurants and other facilities in the vicinity. Around-the-clock access to vets and dedicated customs procedures complete the service. Liège’s proximity to Europe’s largest airports such as Amsterdam, London, Paris, and Frankfurt, adds to its suitability.
“The wellbeing of any animal is in our corporate culture. Respect and the correct care and protection is ensured by assiduous, trained staff, who are experts in handling all kinds of animals – with the strict exception of any animals intended for laboratory use, as per Challenge Group’s ethical code of conduct,” says Hay Sasson, COO of Challenge Group. “Our expertise has meanwhile established Liège as one of the best gateways in the world for horses. Not only is Challenge Handling an Olympics partner for horse transports to locations outside Europe, but we were also proud, in 2022, to be appointed to continue to run the Horse Inn for another five years. And our Challenge Airlines, too, are regularly entrusted with some of the world’s most valuable horse transports. In 2022 we carried around 5000 horses on our own aircrafts.”
Several Challenge Handling customers wrote reference letters to Liège Airport when the management of the Horse Inn came up for renewal in 2022: “We would highly recommend and request the airport authorities not to change winning teams and to keep Challenge Handling as operator of the facility, and even to make the use of the Horse Inn compulsory for all live equine shipments through Liège Airport. This is in the interest of animal safety and wellbeing” was Belgian-based European Horse Services’ recommendation. Others, such as Janah Management Company Ltd, commended the professional expertise of the staff, and the cleanliness of the facility.
Challenge Group’s many years of specialized equine experience in the air and on the ground, has led it to invest in and develop its own horse stalls as well as a unique, horse trailer prototype to transfers the animals from the Horse Inn to the aircraft and vice versa. While Challenge Airlines IL was awarded CEIV Live in September 2022, Challenge Handling’s separate, official certification is due to be presented later this year.
Etihad Cargo expands capacity offering to US
Etihad Cargo is reinforcing its commitment to the US market with the introduction of an additional three weekly flights to JFK starting April 24, 2023. The additional flights will bring Etihad Cargo’s total cargo capacity to over 600 tons out of the US per week.
The flights will be operated with both Airbus A350 and Boeing 787-9 Dreamliner aircraft, two of the most efficient in the world, with significantly less fuel burn and CO2 emissions than previous-generation twin aisle aircraft.
“The introduction of double-daily direct flights from our Abu Dhabi hub to New York comes in response to increased demand from customers, and Etihad Cargo will continue to explore opportunities to expand its global network and introduce the required capacity,” said Martin Drew, Senior Vice President Global Sales & Cargo, Etihad Aviation Group. “The addition of more flights per day to New York combined with Etihad Cargo’s services to other key US destinations and comprehensive road feeder service network will enable Etihad Cargo to fully support its customers in the transportation of their cargo to online and offline locations throughout this key market.”
Etihad Cargo currently operates 11 flights per week to JFK, which will increase to 14 weekly flights on April 24, 2023, and daily flights to Chicago’s ORD and Washington, DC’s IAD. Etihad Cargo also operates two dedicated B 777 freighter flights per week to Chicago via Amsterdam, supported by an offline network.
Cathay Cargo becomes first carrier to offer seamless sea-air shipments from GBA
Cathay Cargo has become the first carrier to offer customers in the Greater Bay Area (GBA) direct multi-modal links for upstream cargo acceptance, allowing flight-ready exports to be accepted and built up in Dongguan, then transported directly to Hong Kong International Airport (HKIA).
Thanks to an agreement with the Airport Authority Hong Kong (AAHK), shipments can be security screened, built up and accepted as cargo for flights at the HKIA Logistics Park in Dongguan, before being loaded onto ships to a secured area at HKIA. When they arrive, pallets and ULDs can be towed straight to waiting aircraft.
Cathay Pacific Services Ltd (CPSL), which operates the Cathay Pacific Cargo Terminal, is also the first Hong Kong cargo terminal operator to sign an air cargo service agreement with AAHK to operate in the pilot scheme. It has established its own upstream bonded facility – Cathay Cargo Terminal Dongguan – located at the Logistics Park Pilot Scheme in Dongguan.
‘We are delighted to join hands with AAHK to promote the economic growth of Hong Kong and the region, while further strengthening HKIA’s status as an international aviation hub by using this first and only upstream facility of its kind,” says Director Cargo Tom Owen. “The business is looking forward to offering this new option to the Hong Kong logistics industry For Frank Yau, Cathay Cargo’s Head of Cargo Sales, Hong Kong & GBA, the project tackles several issues that will help to maintain Hong Kong’s status as the top international air-cargo hub.
“From a macro point of view, resources like land and labor come at a very high cost in Hong Kong, so this is a great way to support our future airport growth,” he says. “This scheme also means that we can provide more opportunities and provide a better service to our customers in the GBA. In the same way that Cathay Pacific provides multi-modal options for our passengers in the GBA with connections direct to airside by boat, bus and limousine, we can now offer something similar to our cargo customers.’ and developing exports from – and then over the coming months, imports into – the GBA, which is a focus area for the airline.”
The scheme is open to Hong Kong freight forwarders that are ‘regulated agents’ (RAs). They will need to obtain acceptance from the Hong Kong Civil Aviation Department (CAD) for their application of Supplementary Pages to Regulated Agent Security Program (RASP), which extend the RAs’ remit to upstream operations. The HKIA Logistics Park in Dongguan uses CAD-approved X-ray machines and Explosive Trace Detectors, which provides Hong Kong’s aviation security services.
“The HKIA Logistics Park offers a cost-effective and efficient end-to-end solution to our freight forwarders and shippers in moving cargo to and from the GBA,” says Owen. “Our customers can benefit from competitive rates on screening, palletization, and terminal charges. The project is a tremendous opportunity to further develop an important regional market and demonstrate the strength of Hong Kong as the leading air cargo hub, as well as strengthening Cathay Cargo’s attractiveness to customers.”
For Frank Yau, Cathay Cargo’s Head of Cargo Sales, Hong Kong & GBA, the project tackles several issues that will help to maintain Hong Kong’s status as the top international air-cargo hub.
“From a macro point of view, resources like land and labor come at a very high cost in Hong Kong, so this is a great way to support our future airport growth,’” he says. “This scheme also means that we can provide more opportunities and provide a better service to our customers in the GBA. In the same way that Cathay Pacific provides multi-modal options for our passengers in the GBA with connections direct to airside by boat, bus and limousine, we can now offer something similar to our cargo customers.”
Cissy Chan, Executive Director, Commercial at AAHK, adds: “The HKIA Logistics Park brings our extensive air network, enormous handling capacity and efficient services to the doorstep of air cargo customers in the GBA, contributing to the supply chain and economic development of the region. We are delighted to have keen support from industry partners, especially the Cathay Pacific Group, which has pioneered the successful implementation of the pilot scheme of this strategic initiative with us.”
Cathay Cargo and CPSL had previously been involved with the AAHK pilot program, which enabled cross-border movements of cargo exports from the GBA during a moment when trucking services were severely limited because of COVID-19 restrictions.
Air Canada Cargo’s First Flight to Liege
A B767 freighter operated by Air Canada Cargo touched down in Liege, Belgium, on March 30, connecting a key European destination to Toronto and the carrier’s extensive global network.
Flights will operate twice per week to Liege, with service increasing to three flights per week later in the year. Service will originate in Toronto and have a stop in Halifax.
“We are pleased to begin operating our freighters to Liege, a further strengthening of the Air Canada Cargo network as we continue to expand and provide customers with reliable, year-round service. This is another important connection from a key European market with Air Canada and Air Canada Cargo’s global network through its Toronto hub,” said Matthieu Casey, Managing Director, Commercial at Air Canada Cargo.
“We are extremely pleased about the start of the new Air Canada Cargo freighter operation in Liege, being now connected to the global network of Air Canada Cargo. Liege Airport has been chosen by Air Canada Cargo as the first ever freighter-only station, which clearly shows the fast growing importance of Liege Airport as a leading European cargo hub,” said Laurent Jossart, CEO of Liege Airport.
Forwarders and airfreight shippers seek longer term contracts
Longer-term contracts between shippers and freight forwarders may signal ‘more common ground’ in a stabilising global air cargo market says industry analysts CLIVE Data Services, part of Xeneta.
In its report published on 5 April, it said that demand dipped by -3% year-over-year in March.
The number of six-month shippers’ agreements rose to 36% versus 23% in the fourth quarter of 2022, a shift which Xeneta chief airfreight officer Niall van de Wouw, said could indicate a “hunt for volume” by forwarders wanting to lock-in customers for longer.
Meanwhile, some retailers are getting concerned about the hoped for rise in consumer spending in the third quarter of this year and a resulting need to restock inventory levels. As the cost-of-living crisis gather pace in prime consumer markets, and the conflict in Ukraine shows no sign of abating, retailers now fear a slower and subdued market, meaning restocking and the peak season airfreight windfall this usually creates may not materialise.
Niall van de Wouw said: “I think we’re seeing signs that some forwarders are willing to take a little more risk on what airfreight rates might do because they don’t expect the market to drop much further. Everybody wants to achieve growth, but if the market is not growing, you have to grab a share from someone else.
“The fact that we see longer term contracts between shippers and freight forwarders is a signal that the market is stabilising. Shippers have regained some ground because of the lower rate conditions, which have affected the airlines and forwarders, but it’s not like the bloodbath we see in the ocean market.”
The global airfreight market continued to normalize in March. The -38% reduction in the general air freight spot rate year-on-year produced an average rate cost of US$2.62 per kg, a -4% decline over February. This is attributed to both shrinking cargo volumes and recovering cargo capacity. Global cargo volumes have been falling for the past 13 consecutive months but showed some sign of relief in March, as volumes registered their smallest drop of -3% year-over-year, the lowest monthly decline in over a year.
International cargo capacity continued to recover in March, recording its largest increase of 16% from a year earlier. CLIVE’s global dynamic load factor in March was 60%, 6% pts adrift of the same month a year earlier but recovered 6% pts from the seasonal low in January this year.
March 2023 data must also be considered against the market impact created by Russia’s invasion of Ukraine, which began just over 12 months ago.
Among the world’s top three corridors, the previously resilient transatlantic westbound air cargo trade registered its first year-on-year volume fall of -11% in March. This was in line with the latest German and UK manufacturing Purchasing Managers Index, which both indicated shrinking manufacturing activities.
The average general airfreight spot rate from Europe to the US in March fell -46% versus March 2022 to US$2.71 per kg. It was the only corridor among the world’s top three to record a year-end freight rate increase last year.
The market is yet to see any meaningful impact on air freight rates resulting from recent strikes in some European airports. Germany, France, Spain, and the UK were the latest countries to face disruption caused by airport strikes, threatening supply chain disturbances. Further industrial action is due in France and the UK over the Easter break.
In contrast to the transatlantic corridor, the outbound China cargo market bounced back compared to global market downturns. Supported by upbeat Chinese manufacturing activities, with its PMI readings showing expansion for two months in-a-row, March volumes out of mainland China grew 30% from last month and were down only -2% from a year earlier. But the growth of air cargo capacity outpaced the growth of volumes. For instance, the capacity from mainland China to Europe restored 63% month-over-month and 155% from a year ago in March.
Air freight spot rates from mainland China to the US and Europe stood at US$5.07 per kg and US$3.65 per kg respectively in March, both down -7% month-over-month and -43% from a year earlier. But it is worth noting that for both corridors the downward pressure on rates started to ease from the second week of March, with rates stabilizing until the month end.
Looking ahead, Hong Kong is expected to receive a boost as the government eases a ban on transshipments of e-cigarettes and vapes products via Hong Kong. The restriction, which was imposed in April last year, cut cargo volumes equivalent to 10% of Hong Kong’s annual export volumes.
In the face of global economic headwinds, the jet fuel price remains highly volatile. The aviation market expects higher jet fuel costs as crude oil prices soared after last week’s announcement of production cuts from OPEC+, a group of the world’s largest oil producers.
Niall van de Wouw commented: “We don’t see an air freight market in crisis, we see it finding a new baseline, which we referenced last month when we acknowledged the need to move on from pre-Covid comparisons.
“If we are seeing a shift to longer-term contracts, this will certainly benefit shippers’ logistics purchasing departments which, due to the level of volatility in the industry, have been forced away from traditional annual deals. Their core business is making pills or smartphones, for example, and not about having to renegotiate air freight rates every week or every month.
“We see a calming down and a greater appetite for shippers and forwarders to come together on a longer term. There’s more common ground for longer-term deals in a positive way. The next interesting market development is what airlines do with their summer schedules and the further capacity boost this traditionally brings?”
Wholesaler AMI opens second Canada branch
Wholesale freight forwarder Air Menzies International (AMI), part of Menzies Aviation, has opened a branch near Toronto Pearson International Airport.
It is AMI’s second branch in Canada and offers a variety of wholesale air freight services including door-to-door services on global import and export shipments; exports with consolidation and ‘Back2Back’; ‘Quick2Ship’, AMI’s market leading platform for express shipments; X-ray screening and warehousing services; as well as customs clearance and documentation support.
The new Toronto branch is headed by Sam Wangpeng, country manager for Canada, bringing over 25 years’ experience in the freight forwarding industry in Canada. He is also a Certified Customs Specialist (CCS) and a CIFFA (Canadian International Freight Forwarder Association) accredited Professional Freight Forwarder (PFF).
Toronto brings AMI’s presence in North America to a total of nine branches including seven in the USA: New York, Chicago, Miami, Atlanta, Dallas, Los Angeles and Seattle.
David Rice joins Sterling Transportation
Airfreight trucker Sterling Transportation has appointed David Rice to handle business development for the Western region of the US, based in Los Angeles. He brings over 10 years of transportation experience, specifically in the expedited LTL market.
He has been the recipient of numerous awards throughout his transportation career, including Sales Manager and Terminal Manager of the Year.
Kuehne+Nagel flies first charter to Birmingham Alabama
Kuehne+Nagel operated its first charter cargo flight into Birmingham-Shuttlesworth International Airport in Alabama, from Stuttgart, Germany on 2 April. The weekly 747-8F flight is aimed at the automotive, aviation, and pharmaceutical industries and others that are experiencing congestion at major hub airports.
It follows the signing of a partnership between the Swiss-based logistics operator and the US airport in February.
Senior vice president, air logistics at Kuehne+Nagel, Greg Martin, said: “Our vision is to make Birmingham into a long-term gateway to and from the Southeastern Corridor of the U.S. and we’re pleased to be able to provide customers with alternative options that support their supply chain needs.”
Maersk adds China-US flights
Danish-owned logistics giant AP Moller-Maersk’ss Air Cargo arm has introduced two new air freighter between the US and China.
There will be twice- weekly Boeing 767-300F flights between Greenville-Spartanburg Airport and Shenyang Taoxian International Airport and with between Chicago Rockford and Hangzhou Xiaoshan. Both will be increased to three weekly flights from May 2023.
Maersk recently opened a new Chicago air freight gateway facility for customers using Chicago O’Hare International and Rockford International.
On March 20, Maersk inaugurated its new air freight service with three weekly scheduled flights between Billund in Denmark and Hangzhou and also recently launched between Greenville-Spartanburg and Incheon, Korea.