People in Germany send fewer letters every year – but this development has now accelerated significantly. The logistics group DHL, the parent company of Deutsche Post, previously assumed that volumes would fall by two to three percent per year. But in the past twelve months the loss was a good six percent: “an unusually high value,” as CEO Tobias Meyer said on Wednesday when presenting the quarterly figures in Bonn. The management of the DAX company with 600,000 employees worldwide no longer expects a return to the previous, gentler trend.
One reason is progress in digitalization in this country, said Meyer, who has been leading the group for six months. For example, citizens can now get sick leave online – and therefore fewer documents are sent in envelopes. This means less income for DHL, but the German mail business only accounts for seven percent of sales anyway. The company earns his money especially in the international express business, in air and sea freight and in supply chain services. Here, the people of Bonn are feeling the effects of the weak global economy. Freight volumes and prices are falling – and with them sales and profits in the third quarter.
Meyer therefore expects an operating result of only 6.2 to 6.6 billion euros for the year as a whole, depending on the development of the economic situation. Management previously thought up to seven billion euros was possible. Meyer also trimmed the profit forecast for 2025. While it was said in March that DHL was targeting earnings of more than eight billion euros, it should now be seven to eight billion euros. This means shareholders will have to wait longer for the 2022 earnings record to fall. DHL reached 8.4 billion euros; it was the fourth record in a row.
With this series, long-time CEO Frank Appel stepped down and handed over leadership to Meyer. Appel benefited from a helpful environment. The pandemic caused online retail and thus the number of packages to grow even faster than expected. Prices for air and sea freight rose sharply. Meyer, on the other hand, has to contend with a weak economy and falling freight prices.
Investments are falling in Germany
In addition, the collective agreement with Verdi concluded in March significantly increases costs in the struggling German mail and parcel division. In the first nine months of the year, the division’s operating profit halved compared to the same period last year. In the current year, as in the previous year, the division cannot contribute anything to the dividend payment.
Meyer made it clear that he did not expect this to happen either. At the same time, the other areas of the group would not be able to subsidize the traditional German business. The area has to earn the money for investments itself, said the 48-year-old. And since the division is not very profitable, investments in Germany are falling. Meyer said there would be less investment in locations, vehicles or climate protection.
The federal government wants to soon present a new postal law that will modernize the rules for delivery. The current legal act is a quarter of a century old; Since then, customer needs have changed due to the rise of email. Meyer complained that the fact that the legal act was still taking a long time was bad because DHL lacked planning security. The manager calls for more attractive conditions for the shrinking postal service: “The scales are out of balance.”
Would you prefer ATMs instead of branches?
The Federal Ministry of Economics published a key points paper on legal reform at the beginning of the year. Accordingly, the government is considering improving the competitive conditions for Deutsche Post’s smaller rivals and giving the Federal Network Agency, as a supervisory authority, the opportunity to impose penalties for the first time. On the other hand, the new law could also make Deutsche Post’s life easier. This could eliminate the requirement that 80 percent of letters have to be delivered on the next working day. A waiver of this would mean that the postal service would have to transport fewer letters by plane through Germany. This would reduce costs and greenhouse gas emissions.
In addition, the company could then introduce a two-class system for letters, as already exists in some foreign countries. Then there would be more expensive premium stamps for letters that have to be delivered the next morning.
On Wednesday, Meyer also indicated that he would like to save costs for the postal service by replacing branches with automated postal stations. There, customers can buy stamps and pick up and drop off packages. The former management consultant said the machines were “very popular” with customers. So far, the postal law requires a certain number of branches and does not allow machines to be set up instead. However, Meyer said that operating an ATM in addition to a neighboring branch would be “grossly uneconomical”.