DHL Group reaffirmed its full-year guidance on what the company called a “limited” impact from the Middle East conflict in the first quarter. The logistics giant still anticipates an operating profit above 6.2 billion euros ($7.3 billion) and free cash flow of about 3 billion euros ($3.5 billion).
But going forward, DHL CEO Tobias Meyer was quick to flag the concerns created by the effective slowdown of traffic through the Strait of Hormuz, saying during a Thursday earnings call “something has to give at some point” if a continued daily shortfall of 10-12 million barrels of crude oil lingers.
Oil prices remain over $100 a barrel due to the restricted passage of shipping through the conduit, with Meyer acknowledging that the wider air freight market is seeing demand destruction based on current price levels. Major global airlines worldwide have curtailed their normal service schedules into the summer due to the rising prices and the potential for jet fuel shortages, which some officials warn could begin in June.
Earlier last month, Meyer had indicated that DHL can secure fuel for its airline fleet in Europe through June, but there’s less certainty about supply across Asia.
“We obviously remain cautious because the jet fuel situation raises prices and costs for our customers,” said Meyer during the Thursday call. “At some point that also has effects on the demand side.”
Along with the price concerns amid additional fuel surcharges, Meyer said the demand disruption could also be in preparation for the E.U.’s elimination of the de minimis exemption for all parcel shipments worth 150 euros or less or July 1. Under that rule, a new 3-euro customs duty would be applied to all eligible parcels.
The E.U. is following a trajectory similar to what the U.S. has already enacted, prepping to close the duty-free loophole that has enabled online sellers like Shein and Temu to flood European consumers with cheap, untaxed shipments.
While acknowledging the greater macro risks throughout the call, Meyer remained upbeat surrounding the status of DHL.
“I think relative to other airlines, I see ourselves in a good position,” Meyer said. In March, the CEO had indicated that DHL had advantages during disruptions like the Iran war since customers often prefer to seek an alternate route or transportation mode to move their freight.
Through network adjustments, the company’s DHL Express segment was able to respond to the war’s geopolitical impacts and maintain service for its customers, with chief financial official Melanie Kreis saying “we have done a good job in rebalancing capacity and do currently not see utilization challenges.”
The Express unit has been carried heavily by B2B shipments, with the segment now seeing daily weight of time-definite international shipments to non-U.S. countries growing 2.9 percent compared to the year-ago period.
Despite international shipments outperforming U.S.-bound parcels, which brought total global shipments down 2.1 percent, Meyer highlighted a “significant” improvement from last year as the U.S. tariff changes annualize.
For the quarter, organic revenue growth of 2 percent, with an operating profit of $1.8 billion, up 8.3 percent year over year. Total reported revenue at DHL Group declined by 1.9 percent year-over-year to $24.1 billion.
DHL Express and DHL Supply Chain both reported an increase in earnings before interest and taxes (EBIT), with the former’s revenue declining 1.9 percent and the latter showing organic strength with 5.7 percent growth.
The company’s global freight forwarding division had a 5 percent revenue decline attributable to lower average freight rates than the year prior, with EBIT sinking 18.5 percent. The e-commerce businesses saw the biggest annual revenue contraction at 11.1 percent, on a 4.9 percent dip in EBIT.
The company is expanding its capabilities in the data center market and aims to add more than 10 additional warehouse sites in North America totaling 7 million square feet by the end of 2026.
The new facilities will serve data center operators that require reliable and secure supply chains as they expand.
“This is a value chain that is still unfolding. We see particularly high demand in North America, to stage inbound-to-construction supplies there,” Meyer said. “We would bring the components of data centers close to the location of usage, store them locally to have them just in time available when the construction of the data center progresses.”
