Deutsche Post DHL Group “addresses challenges in PeP division”
Deutsche Post DHL Group is implementing a suite of measures to “sustainably secure the further earnings growth” in the Post – eCommerce – Parcel (PeP) division.
In a statement issued today (8 June), the company said: “To counteract the decline in profitability in the PeP division, which became evident in the first quarter of 2018, the Group decided on a range of measures to safeguard a positive earnings development in 2019 and 2020.
“The measures mainly target further improvement in productivity, indirect cost and yield management in the Post and Parcel business.”
Like postal operators the world over, Deutsche Post DHL has been managing a “structural shift from Post to Parcel”, which has resulted in “a number of challenges in 2018”.
As Deutsche Post DHL explained in today’s statement: “The challenge for Post is the unchanged structural volume decline with stable stamp prices since January 2016 and a high fixed cost base. Additionally, the structural shift with mail decline and parcel growth is currently not adequately reflected in the overhead cost of the division, and the investment into the further development of operations in PeP Germany has not been sufficient over the last years.”
The Deutsche Post DHL statement then outlined what steps it will take to address these challenges.
To increase productivity, the Group aims to “lift PeP operations onto the next S-curve through regular opex investments of €100m – €150m”. This will include automation and digitalization, continuous improvement, increased last mile productivity and intelligent network utilization.
The Group will look to “sustainably reduce the fixed cost base” mainly with an early retirement programme “focusing on civil servants in overhead areas”. Deutsche Post DHL said that this will come with restructuring costs of €500m in 2018 and will be implemented in 2018 and 2019. The Group expects the program to lead to an annual cost reduction of at least €200mi by 2020.
Deutsche Post DHL will also undertake measures that will focus on the balance between growth and yield.
While the group is looking for long-term sustainability, it added that “the measures will only help in part in 2018; therefore, the PeP-EBIT prior to one-off cost is now expected to come in at around €1.1bn”.
Frank Appel, CEO Deutsche Post DHL Group, commented: “We are fully focused on achieving our strategic and financial targets for 2020 and on positioning our business divisions for success in future years. In order to deliver long-term sustainable growth, we are now consciously accepting short-term negative effects on our earnings.”