"Strong revenue growth in all divisions"

After a record year in 2016, Deutsche Post DHL Group carried over this momentum into the new year. The company increased its revenue in all four divisions in the first quarter. The Group also improved its operating profit. In this interview with DPDHL Group News, Chief Financial Officer Melanie Kreis gives a positive half-time review of Strategy 2020 and explains how the company aims to continue growing in the coming years.

Chief Financial Officer Melanie Kreis

Ms. Kreis, how would you assess the latest business results?

Melanie Kreis: We had a solid start to the year. Deutsche Post DHL Group generated EUR 1 billion more in revenue than in the prior-year period. An increase of 7.3 percent in challenging markets is quite an achievement. Even if you factor out currency effects and acquisitions, we still grew by 6 percent. The fact that all four divisions contributed to this performance was particularly encouraging. At the same time, we also further increased our operating profit to EUR 885 million - the best first quarter in our history. This is now the sixth quarter in a row in which we have posted new highs for operating profit compared with the respective quarters in prior years. This shows that the measures we have undertaken in recent years are increasingly paying off. The growth drivers outlined in our Strategy 2020 remain intact.

You announced Strategy 2020 in 2014 - which means you have now reached the end of the first half. What is your interim assessment as CFO?

Melanie Kreis: Absolutely positive. We've already reached a number of significant milestones. All four divisions have been positioned to leverage growth opportunities. As CFO, I'd like to let some of the numbers speak for themselves: In the last three financial years we have generated cash inflows of EUR 9.9 billion from operating activities. We've invested EUR 5.2 billion and paid out EUR 3.0 billion in dividends. At the same time, our workforce has grown to more than half a million employees and we have paid more than EUR 57 billion in wages and salaries and associated social contributions. And we are making very good progress toward our long-term earnings target. We are confident that we will increase operating profit, as previously announced, by an average of more than 8 percent annually between 2013 and 2020. In three of four divisions, we are already making very good progress toward this goal, and in our forwarding business, where there is still some work to be done, we are regaining ground.

Let's take a closer look at the business development in the individual divisions. How did PeP perform in the first quarter of 2017?

Melanie Kreis: PeP had a solid first quarter. Divisional revenue grew by 6.4 percent, driven primarily by the eCommerce - Parcel business unit. We are seeing sustained robust growth in both the German and the European Parcel businesses, as well as in international eCommerce. Parcel Europe stands out here, however, with a 70 percent increase in revenue, including the UK Mail business, which has now been consolidated into the unit's results after the successful completion of the acquisition. This isn't the only indication of the positive progress we are making in establishing the "United Parcel Nations of Europe". In addition, the division expanded its European Parcel network in the first quarter to include Spain and Portugal. We are now operating in 22 countries including Germany - making us the ideal partner for online retailers. And this is not just in Europe, by the way. We have recently announced our entry to the Chilean and Malaysian markets, where we are leveraging further growth opportunities in emerging markets - as envisaged in our Strategy 2020. At the same time, we work in a focused way to further improve our service quality and build on our leading market position in our home market of Germany. With DHL Paket Prio, we recently introduced guaranteed next-day delivery for major customers. This offer has met with tremendous interest.

The expert for international time-definite shipments is DHL Express. What kind of first quarter did this division have?

Melanie Kreis: The global delivery of shipments within guaranteed transit times requires an excellent global network. As the global market leader for time-definite international shipments (TDI), Express also had strong growth in the first quarter of 2017. Revenue and operating profit each grew by a double-digit percentage, with an EBIT margin of 11.0 percent. But we won't be resting on the laurels of this success - we are continuing to invest in expanding our leading global position.

Global Forwarding, Freight is also operating worldwide. The market environment here has been very challenging in recent quarters. How would you summarize the first quarter for DGFF?

Melanie Kreis: The environment remains difficult, even though we're seeing encouraging developments. In line with the positive trend in the market, revenues and volumes at Global Forwarding increased in the first quarter. The general rate level in the freight industry is now picking up again considerably, and the historic lows of recent quarters are behind us. We're therefore optimistic that the market is gradually recovering. This trend has a negative short-term impact on the division's profitability since increased buying rates in the market cannot be passed on in full to customers. However, we expect this situation to improve as the year goes on.

How is business at Supply Chain?

Melanie Kreis: The positive performance of the preceding quarters has carried over smoothly at Supply Chain. Revenue rose following dynamic business development across all regions. Adjusted for one-off effects in the previous year, operating profit also climbed by a solid 11.2 percent. In the automotive sector in particular, Supply Chain capitalized on its longstanding market experience and expanded successful partnerships with well-known manufacturers. For example, Supply Chain has taken on the logistics for Volkswagen's Autoeuropa plant in Portugal and Jaguar Land Rover's new production facility in Brazil.

After the good start in the first quarter, what are your expectations for the full year?

Melanie Kreis: We anticipate moderate growth for the global economy this year. Together with the positive effects of our strategic measures and initiatives, this should lead to a significant increase in EBIT. We are optimally positioned to improve operating profit to around EUR 3.75 billion this year as announced, and we are firmly convinced that 2017 will be another good year for Deutsche Post DHL Group.

Interview with CFO Melanie Kreis