Deutsche Post DHL Group: The enabler of global trade

written on May 12, 2021

From the founding of the modern postal system to establishing a leading global logistics group, Deutsche Post DHL Group’s 500-year history of trailblazing the industry reaches back even further than Britain’s organised postal couriers. After having struggled through some of history’s most difficult political events, the Group has come a long way.

Now, one of the world’s biggest post and freight companies, with a network that spans over 220 countries and territories, Deutsche Post DHL Group has managed to mark impressive growth even during the CODVID-19 pandemic. Handling a large increase in parcel shipments despite its global freight business being hit by the world economy’s slowdown, revenue last year increased by 5.5% year-on-year to €66.8 billion. With a strong focus on growing its core logistics businesses which have proven to be profitable so far and accelerating the digital transformation in all its business divisions, the Group is poised to retain its top spot in the industry.

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A brief history of Deutsche Post DHL Group

Considered the founder of the modern postal system, Franz von Taxis together with his successors set up a courier network that would eventually grow to cover all of Western Europe by the mid-16th century. The permanent post stations built grew into important economic centres, serving as places of trade and exchange, while becoming important focal points in the development of villages and cities. Decades later, the Universal Postal Union, headquartered in Berne, began promoting international postal services and it developed regulations for postal traffic.

In 1947, the Deutsche Bundespost, the federal German government postal service was created as a successor to the Reichspost, which was responsible for the national and international postal services and telecommunications. In addition to its postal section, the Bundespost also offered other services like postal giro and pension payment, while it also acted as a savings bank. Meanwhile, in 1969, Adrian Dalsey, Larry Hillblom and Robert Lynn established DHL – the three letters representing the initials of their last names. The founders personally transported cargo documents from their headquarters in San Francisco to various destinations by plane, which meant that customs processing of a ship’s cargo could begin before the actual arrival of the shipment. The move created a whole new industry sector, that of international air express service.

DHL began to rapidly expand its network, initially offering its services in the Far East and the Pacific Rim and eventually branching out to Japan, Hong Kong and Singapore. By the 1970s, it had expanded to Europe, Latin America, the Middle East and Africa, while it began to offer parcel delivery in addition to the delivery of documents.

On July 1, 1989 as part of a post office reform, Deutsche Bundespost was split into three divisions, namely the Deutsche Bundespost, the DBP Postbank and DBP Telekom. During the 1990s, investments in state-of-the-art logistics technology paved the way for the faster delivery of letters and parcels throughout Germany, whilst the modernisation of its mail centres not only helped it speed up its distribution process, but also expanded its network, from 33 parcel centres to 83 high-tech production centres. In addition, the Deutsche Bundespost Postdienst was renamed to Deutsche Post AG, which was officially registered in Bonn in 1995.

The company moved from being a loss-making, state-run government agency to a profitable global player and the preferred single service provider for both national and international shipping needs. Then, Deutsche Post AG went on to acquire shares in DHL International, forging a partnership a worldwide market leader in international courier shipments. At the same time, it launched a Europe-wide distribution network operating under the name Euro Express, while it also acquired Global Mail, Swiss logistics provider Danzas, as well as Air Express International (AEI), the largest American service provider in the field of international airfreight. Indeed, part of both its success and global reach has also come by way of acquisitions that have taken place over the years. The Group acquired StreetScooter GmbH, a small manufacturer of electric vehicles, as well as UK Mail, a business-focused postal service in the UK for $315.5 million.

Today, its postal division delivers approximately 61 million letters every single working day in Germany and provides services across the entire mail value chain. Its express division under the DHL brand offers worldwide courier, express and parcel shipment service, combining both air and ground transport. On the other hand, the global forwarding-freight division carries goods via rail, road, air and sea also under the DHL brand. Lastly, its supply division provides contract logistics like warehousing and warehouse transport, as well as corporate information, which handles documents of all types.

Fun fact

In 2018, DHL transported two live giant pandas, Hua Bao and Jin Baobao from Chengdu, China to Finland via climate neutral transportation. Onboard, the pandas were accompanied by two animal handlers and two vets, as well as a supply of 120 kilograms of bamboo.

When did Deutsche Post go public?

On November 20, 2000, Deutsche Post AG went public on the Frankfurth Stock Exchange in what was considered the largest IPO of the year in Germany, raising €6.72 billion. Shares were initially issued at €21 per share. Early selling saw the price fall slightly, but the stock rebounded to over €21.46 per share by the end of the first day of trading to give Deutsche Post a market capitalization of over €23 billion.

Apart from trading on the Frankfurt Stock Exchange, the stock is also listed in the Euro Stoxx 50 stock market index. On May 4, it was trading at €48.65, giving it a market cap of €60 billion.

Is Deutsche Post a buy?

Deutsche Post DHL Group, posted a record in the past financial year despite significant challen-ges brought on by the COVID-19 pandemic, confirming the 2020 preliminary figures announced in January. Revenue for the year increased by 5.5% year-on-year to €66.8 billion, while its operating income for the first quarter of 2021 surged by 221% compared to the first quarter of 2020, growing from €592 million as at end of March 2020 to €1,900 million as at end of March 2021.

More specifically, the Group’s eCommerce division which was created in 2019, proved to be a great winner, surging from a €6 million EBIT level to €115 million, up by €109 million on a yearly basis. Having said that, growth was also noted across all its underlying divisions, namely Global Forwarding Freight sector, DHL Express, as well as the Supply Chain division.

But there’s another appealing factor to this stock. A strong dividend company that has marked a consistent increase in its dividend payout year-over-year, according to the Group, part of its finance strategy is to pay out 40% to 60% of its net profits as dividends. Set for May 11, 2021 at €1.35 per share for the financial year 2020, this shows a 17% dividend increase on a yearly basis from the €1.15 per share dividend paid the previous year. In addition, thanks to its positive business trend and strong free cash flow generation that amounted to €2.5 billion for 2020, the company also announced a share buyback programme of up to €1 billion.

What’s next for Deutsche Post?

In a world that depends on logistics, the Group is positioned right at the forefront, serving as an enabler of global trade. And with trends such as globalisation, digitalisation, eCommerce and sustainability shaping the logistics industry, the Group aims to take its success story to the next level through its Strategy 2025, which aims to invest €2 billion in digitalization so as to enhance its customer experience, to improve employee experience, as well as increase operational excellence. This is expected to generate a yearly run rate benefit of at least €1.5 billion by 2025.

Yet, the Group is also known for endorsing sustainability. Alongside its current GoGreen portfolio, it aims to offer more products and services to both its private and business customers which can be used to offset emissions arising from parcel shipping. At the same time, it has paved the road toward zero emissions in Germany and beyond through its new sustainability strategy 2050. The goal is to transform its Post and Parcel Germany division into a more climate-friendly entity by investing in the construction of carbon-neutral production facilities, retrofitting existing buildings and further expanding its existing electric fleet.

With business to consumer growth expected to normalise within the course of 2021 and global business to business also anticipated to be on its gradual way towards recovery, Deutsche Post DHL Group will be riding high on the very top of this.

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