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DHL Lowers Guidance on ‘Weak Economic Dynamics,’ Rules Out GXO Acquisition
Glenn Taylor
5 min read
DHL Group lowered its earnings guidance for the 2024 fiscal year as the logistics giant maneuvers through “weak economic dynamics,” sending company stock down nearly 4 percent in Tuesday morning trading.
The Germany-based delivery and supply chain management company saw revenue increase 6.2 percent to 20.6 billion euros ($22.5 billion) in the third quarter, with net profit coming in at 751 million euros ($819 million).
However, DHL adjusted its expected earnings before interest and taxes (EBIT) for 2024 to 5.8 billion euros ($6.3 billion), down from the prior range set at 6 to 6.6 billion euros ($6.5 billion to $7.2 billion).
Another major logistics firm reporting its earnings results, U.S.-based GXO, saw third-quarter revenue growth of 28 percent to $3.2 billion, with organic revenue up 3 percent. The contract logistics provider reeled in a net income of $35 million.
GXO reaffirmed its guidance for 2024, calling for organic revenue growth of 2 percent to 5 percent and adjusted EBITDA of $805 million to $835 million.
Although GXO has been the subject of recent reports about being involved in a possible sale, CEO Malcolm Wilson said in an earnings call that the company would not comment on market speculation.
And over on DHL’s earnings call, CEO Tobias Meyer denied that the company would have any interest in acquiring GXO.
“If you go through our criteria list…you will find that it’s not matching our criteria very well,” Meyer said. “And we feel quite attached to those criteria.”
Commenting on the state of DHL within the wider logistics atmosphere, Meyer said DHL is observing a “very heterogeneous development of B2B trade” that held the firm back in the quarter.
“We have some trades and some modes that have been growing more and quite pronounced in the third quarter, but we also still see markets with contraction, particularly the freight markets in Europe have been rather disappointing given the macro environment is falling short of the expectations that we and others had for this year,” Meyer said.
DHL, which unveiled a goal in September to grow current revenue 50 percent by 2030, felt a significant profit hit at its global freight forwarding business. Despite seeing volumes boost 9 percent for air freight and 8 percent for ocean freight versus a low 2023 base of double-digit declines, EBIT across the division decreased 9 percent to 277 million euros ($302.5 million).
The global forwarding unit had the biggest revenue jump of 14 percent to 5 billion euros ($5.5 billion).
“We have seen a good peak season in ocean freight, and that has also driven a good profit contribution from ocean freight in Q3. However, in air freight, we had been preparing for a stronger peak season demand uplift than what we have seen in the last few weeks,” said Melanie Kreis, chief financial officer at DHL Group. “We also do not anticipate that this will significantly improve in Q4.”
Kreis called the forwarding segment “the main disappointment” versus initial 2024 expectations, with the company now having less EBIT contribution from the peak season embedded in the new guidance.
For GXO, earnings come as the company is hitting a speed bump regarding its $965 million acquisition of U.K.-based logistics services provider Wincanton that had closed in April.
The U.K.’s antitrust watchdog, the Competition and Markets Authority (CMA) determined Friday following a “phase one” investigation that the deal would reduce competition in the supply of mainstream contract logistics services in the country.
“Although GXO will continue to face competition from other contract logistics providers, many of these are significantly smaller, or focus on specific industries or types of logistics services (such as transport),” the CMA said in a statement. “The CMA is therefore concerned that the deal could raise costs for businesses that rely on contract logistics suppliers to move goods around the U.K. and for other supply chain activities.”
The CMA determined that the merger would “materially increase the level of concentration in the market” with a combined share in the U.K. between 20 percent and 30 percent.
GXO has until Friday to submit a proposal to address the CMA’s concerns.
Wilson said in the call that the firm is reviewing the CMA’s determination in detail, noted that the company will be prepared if it is required to undergo a “phase two” investigation.
“We’re remaining pretty confident that we’re going to see a positive outcome to it,” Wilson said.
According to Wilson, while GXO had initially planned to complete the full integration of Wincanton into the business by early January, “I think it’s fair to say that we might see a delay on that process probably stretching out into the beginning of the second quarter.”
As GXO’s transaction hangs in the balance, DHL is shuttering two Houston-area warehouses in Missouri City and Sugar Land, Texas. These closures will affect 53 workers across both facilities, which will permanently close Jan. 13.
According to DHL, the closures are due to the loss of an unnamed DHL customer, which transferred operations to a different logistics provider. The Missouri City facility already saw 173 layoffs late last year through January 2024, while the Sugar Land warehouse had 39 in the same time frame.
In September, DHL announced the closure of a warehouse in Elizabethtown, Penn. set for Nov. 10, affecting 268 employees. Another DHL facility that serves Carhartt in Canal Winchester, Ohio will close in April, affecting 173 employees.
