Lower global trade volumes that weighed on DHL Group’s top line in the second quarter brought the company’s revenues down nearly 4 percent, but the logistics giant has held its profit guidance steady despite the volatile backdrop.
DHL reported that net profit grew 9.6 percent to 815 million euros ($943.8 million), while revenue declined 3.9 percent to 19.8 billion euros ($23 billion) in the period.
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Although it anticipates a subdued economic environment alongside expected cost cuts, DHL’s outlook for the 2025 fiscal year remains unchanged, with earnings before interest and taxes expected to reach at least 6 billion euros ($7 billion). Free cash flow is still guided to be roughly 3 billion euros ($3.5 billion).
For the second quarter, cross-border time-definite international shipments (TDI) at the company’s DHL Express segment declined 10 percent. Chief financial officer Melanie Kreis called it “a higher number than what we had in previous quarters.”
B2B volumes saw a 2 percent decline, while B2C volumes brought the wider number down at a 20 percent collapse.
From a market standpoint, U.S.-destined TDI shipments, which represent 17 percent of the global volumes, sank 31 percent in the quarter.
De minimis-related shipments from China and Hong Kong into the U.S. were the main culprit, with Kreis describing it as the “only market subsegment with a significant reduction in volumes.”
The closure of the duty-free trade exemption on packages worth less than $800 on May 2 did a number on air cargo in between the Chinese and U.S. markets. UPS already reported in late July that volumes from China to the U.S. tanked 34 percent on an annual basis in May and June once de minimis was scrapped. The provision ended just weeks after the U.S. temporarily slapped 145 percent tariffs on Chinese goods, further comprising air cargo supply chains on the trans-Pacific trade lane.
DHL has the benefit of not being U.S.-centric like UPS is. The firm said in April that it had reduced its exposure to de minimis volumes ahead of the May 2 date.
To counteract the overall DHL Express segment decline, the company reduced air capacity by 7 percent. The company’s annual rate increase implemented at the start of the year has also helped boost revenue per kilogram shipped by 4 percent.
“We have furthermore flexed capacity across the network to adapt to the volatile regional trade flows,” Kreis said, who noted that in the U.S., “we have responded with a significant reduction in airlift and in local pickup and delivery capacity.”
Volume volatility across trade lanes has also impacted DHL’s freight forwarding division, where revenues declined 5.3 percent to 4.6 billion euros ($5.3 billion).
Air freight volumes moved increased 1 percent to 442,000 metric tons in the second quarter, while ocean freight volumes declined 6 percent to 796,000 20-foot equivalent units (TEUs). On an adjusted basis, DHL says volumes for ocean would have been flat from the year prior if it wasn’t for the discontinuation of low-revenue cargo from two of its larger customers.
In anticipation of the peak holiday season, DHL will once again implement demand surcharges for the second year in a row. Those surcharges varied by trade lane last year and were most heavily based on Asia-to-U.S. flights as the company experienced capacity constraints.
Kreis was scant on details, but hinted that the fees may be carried out differently for the 2025 holiday based on the current climate.
“The intention of the demand surcharge is to optimally balance the cost of production on the supply side with anticipated demand,” Kreis said. “And here, we’ll really take some time to work through the details, so that we get it right, including the right demand surcharge per trade lane, where the situation is quite different on the trans-Pacific compared to what it was last year.”
The earnings call followed a series of big-money international investments in recent months for DHL, including investing more than $740 million in robotics programs in the U.K. and Ireland, as well as $500 million to expand infrastructure in Saudi Arabia and the United Arab Emirates.
Although those investments have helped set the table for international and category growth, the company’s cost-cutting capabilities within its “Fit for Growth” program have helped DHL drive profits in the uncertain environment.
Aviation costs were cut 7.7 percent in line with the reduction in capacity at DHL Express, while pickup and delivery (PUD) costs are cut 5.2 percent. In the U.S., the PUD costs were driven by consolidation of deliveries and capacity adjustments.
Across the board, facilities costs have declined 1.3 percent, offsetting wage inflation, DHL says. The logistics giant is experiencing lower labor costs from a year prior, with direct full-time equivalent costs contracting 3.2 percent. Indirect labor costs are down 1.1 percent.
