Deutsche Post DHL Annual Report 2012

Annual Report 2012

Seal: DHL in China


Excerpts from Deutsche Post AG's 2012 Group Annual Report.


Business Units and Market Positions

Customer-centred solutions in two business units

The SUPPLY CHAIN division comprises the two business units of Supply Chain and Williams Lea, in which we offer customer-focused outsourcing solutions worldwide.

Integrated end-to-end offering in contract logistics

In the Supply Chain business, we provide logistics solutions along the entire supply chain for customers in a wide variety of sectors. From planning, sourcing, production, storage and distribution to returns and recycling, customers rely on us to ensure a smooth logistics flow.

Logistics and value-added services along the entire supply chain

We offer warehousing, distribution, managed transport and value-added services as well as business process outsourcing, supply chain management and consulting solutions. By ensuring that our customers’ products and information reach their markets quickly and efficiently, we secure them competitive advantages. With local insight and global scale, we serve customers in more than 60 countries and support them in optimising their complex processes.

Our Supply Chain business provides expert solutions in mainly six focus sectors: Consumer, Retail, Technology, Life Sciences & Healthcare, Automotive and Energy. We manage the supply chains all the way from the source of supply to the end customer. Two of our largest sectors are Consumer and Retail. Flexibility, reliability and cost efficiency are the key value drivers for our services in these sectors, which range from international
inbound logistics and warehouse and transport services to packaging and other value-added services. In November 2012, we opened a new logistics centre in Mönchengladbach, Germany, for the Primark fashion chain. Primark is an example of the customers, with whom we have maintained a good business relationship for many years and for whom we offer integrated, customised logistics solutions across national borders. We have already had a DHL logistics centre for this customer in the UK since 2008 and in Spain since 2010. The services of the new logistics centre in Mönchengladbach cover all warehouse activities plus transport to Primark shops in Germany, the Netherlands, Belgium and Austria.

Customers in the Technology sector require fast, flexible and efficient supply chains. In addition, demand for integrated product and service logistics is increasing. Our portfolio ranges from Inbound-to-Manufacturing services and warehouse and transport services through to integrated packaging solutions, returns management and technical services.

We are also increasingly providing integrated solutions in the Life Sciences & Healthcare industry, where supply chains and logistics processes are still developing in many parts of the world. Our offering takes account of steadily rising cost pressure whilst meeting the high quality standards of our customers.

The Automotive industry is one of our truly global sectors. Production is shifting increasingly to emerging markets such as China, India and Brazil, in which we already have a strong presence. For our Inbound-to-Manufacturing, aftermarket logistics and lead logistics provider solutions, the key factor is our ability to offer a high degree of global flexibility and reliability whilst further lowering costs.

The fast-growing Energy sector is another market in which the DHL divisions provide integrated logistics solutions that cover procurement to disposal. With our maintenance, repair and operation services we offer streamlined supply chain and service solutions that can often substantially reduce costs whilst significantly increasing maintenance productivity.

A variety of outsourcing solutions for companies

Williams Lea provides services in two areas: marketing solutions and business process outsourcing. Document management, marketing and customer correspondence are amongst the solutions supplied, which we offer to customers in the financial services, retail, consumer goods, pharmaceutical, publishing and public sectors as well as in the legal sector.

Global market leader in contract logistics

DHL remains the global market leader in contract logistics, with a market share of 7.8% (2011). This market is highly fragmented: the top ten players account for only about 21.4% of the overall market, the size of which is estimated to be €154 billion. We lead the market in our key regions of North America, Europe and Asia Pacific and also enjoy a very strong position in rapidly growing markets such as Brazil, India, China and Mexico. Thanks to our global expertise and many years of business relationships with multinational corporations, we are confident that we shall be able to expand further in these markets.

Williams Lea is the market leader in outsourcing document management and marketing production. This market is also highly fragmented and consists largely of specialists offering either a very limited set of services or occupying exclusive niches. Due to our broad range of international services and long-lasting customer relationships, we succeeded in building on our leading market position even more during the year under review. Thanks to DHL’s good customer relationships Williams Lea was able to gain additional new business.

Contract logistics market, 2011: top 10

Revenue and Earnings Performance

Revenue increases by 8.4%

Revenue in the division increased in the reporting year by 8.4% to €14,340 million (previous year: €13,223 million). This figure includes positive currency effects of €691 million. Revenue was also impacted by the previous year’s acquisition of Eurodifarm and Tag as well as the sale of Exel Transportation Services (ETS). Excluding these effects, revenue growth was 3.4%, with the Life Sciences & Healthcare and Automotive sectors providing the largest increase. Fourth-quarter revenue increased by 5.2% from €3,548 million to €3,733 million. Excluding positive currency effects (€100 million), revenue growth was 2.4%.

SUPPLY CHAIN: revenue by sector, 2012

In the Supply Chain business unit, revenue for 2012 amounted to €13,000 million, up 8.3% on the previous year (€11,999 million). Growth was 4.2% excluding positive currency effects, the sale of ETS and the Eurodifarm acquisition. Revenue from our 18 key global customers increased by 5.7%.

SUPPLY CHAIN: revenue by region, 2012

In the Americas region, business in all sectors demonstrated good progress. The Consumer and Retail sectors performed best, supported by new business, higher volumes and strong growth in Brazil and Mexico.

The highest level of regional revenue growth was achieved in Asia Pacific, due to significant volume increases and new business in Australia, Thailand and Indonesia.

In Europe, revenue in the Life Sciences & Healthcare sector grew from additional business with the UK National Health Service, boosted by an optimised mix of higher-value products. Volumes and new business also increased in Eastern Europe, the Middle East and Africa.

Williams Lea revenue was €1,345 million in the reporting year, an increase of 9.8% on the previous year (€1,225 million). Excluding the Tag acquisition and positive currency effects, revenue declined by 4.3%, due primarily to the loss of two major Financial Services customers in the UK in the previous year and a move towards digital publishing in the public sector that reduced print volumes.

New business of around €1.2 billion concluded

In the Supply Chain business unit, we concluded additional contracts worth around €1,210 million in annualised revenue with both new and existing customers. Major gains were achieved in the Life Sciences & Healthcare, Consumer, Retail and Technology sectors. The contract renewal rate remained at a constant high level.

EBIT margin rises to 2.9%

EBIT in the division increased by 14.9% to €416 million in the reporting year (previous year: €362 million). The prior-year figure included a €23 million net gain on the disposal of ETS. The increase in EBIT was driven by improved contract portfolio management along with continued cost efficiencies. This compensated for margin pressure and start-up costs associated with new business customers. The EBIT margin rose to 2.9% (previous year: 2.7%). Fourth-quarter EBIT amounted to €115 million (previous year: €73 million). Operating cash flow rose from €394 million in the previous year to €432 million, primarily due to better working capital management. This included cash outflows of €20 million from funding our pension obligations in Germany.