Deutsche Post DHL Announces Strategy 2020
OREANDA-NEWS. April 08, 2014. Deutsche Post DHL, the world’s leading mail and logistics group, announced its new “Strategy 2020: Focus.Connect.Grow.” today in Frankfurt – a continuation of the positive momentum generated by the successful “Strategy 2015” defining the Group’s next phase of development.
Strategy 2020 outlines the Group’s strategic priorities for the coming years and underscores its goal to become the company that defines the logistics industry. Among the focus areas of Strategy 2020 are the further expansion of logistics services in the world’s emerging markets and the international expansion of the company’s successful parcel business in order to take advantage of the global eCommerce boom. Consistent with Strategy 2015, the emphasis will remain on organic growth.
“The goal of Strategy 2015 was to unleash the tremendous power of our organization, and to unlock our full potential. Since introducing the strategy in 2009, we have seen significant revenue growth and a disproportionate increase in operating profit. We are on course to achieve our Strategy 2015 goals,” said Deutsche Post DHL CEO Frank Appel. “Our new ‘Strategy 2020: Focus.Connect.Grow.’ builds on what we have achieved so far. It will power the Group’s next big growth stage and open up new opportunities for sustainable profitable growth in today’s ever-changing environment. Our aspiration is to be the leading force in the logistics industry by 2020 and the company that defines ?logistics.”
Financial goals: Significant earnings growth through 2020
The new strategy includes ambitious financial targets: For the period 2013 to 2020, the Group expects earnings growth of more than 8 percent per year on average based on the 2013 EBIT of EUR 2.86 billion. The 2015 EBIT target of between EUR3.35 billion and EUR 3.55 billion remains unchanged. Despite the general slowdown of growth momentum in the forwarding market, the Group expects its DHL divisions to continue to be the main contributor to the Group’s revenue and profitability growth, with an annual average EBIT growth of approximately 10 percent per year over the period. In addition, the Group also sees the strongly increasing importance of the parcel business powering an improvement in operating profit of around 3 percent per year on average for its MAIL division. Furthermore, the Group expects to reduce Corporate Center/Other expenses to below 0.5 percent of consolidated revenues through year 2020.
“Even with the significantly increased earnings level achieved over the last several years, our new strategy will enable us to continue on our growth path beyond 2015 and significantly increase our profitability year by year. And we will achieve this primarily through organic growth,” said Larry Rosen, the CFO of Deutsche Post DHL.
New strategy builds on the successful implementation of “Strategy 2015”
The announcement of its new strategy comes at a time when Deutsche Post DHL is feeling the full impact of its “Strategy 2015”. Despite the profound structural change within MAIL, the division’s earnings have been stabilized thanks to the successful expansion into high-growth segments such as the parcel business. The Group’s targeted efforts to further enhance DHL’s unique position in global growth markets and to expand its activities in highly attractive business segments such as international express delivery and contract logistics have also paid off. The Group has also made significant progress toward achieving its overarching goal of becoming the provider, employer and investment of choice within the logistics industry. This is reflected in continuously improving customer and employee survey results as well as the significant share price increase. At the same time, the Group lived up to its corporate responsibility and made a major positive contribution to society.
A three-pillar strategy: Focus.Connect.Grow
Built upon the proven foundation of “Strategy 2015”, the Group’s new “Strategy 2020” will help the company anticipate and prepare early for changes in the market, in the competitor landscape, and in customer requirements. As far as trends go, the logistics industry is seeing a continuing shift towards emerging markets. The eCommerce segment, while posting accelerated growth, brings with it steadily increasing consumer demands in regard to the convenience and flexibility of delivery. As digitization also leads to changes in the competitive environment in the logistics markets, new opportunities and new business models for logistics companies are evolving. Moreover, customers are increasingly considering the company’s contribution to the environment and society when choosing a provider.
Against this background, Deutsche Post DHL has built its new “Strategy 2020” on three pillars.
Focus: The Group will continue to concentrate on its existing strengths, with the goal of further expanding margins.
The Group’s successful stakeholder orientation will continue to be a major driver of the company’s future activities. Part of the Focus pillar is a clear confirmation that Deutsche Post DHL is a family of four high-performance divisions, each providing excellent services in clearly defined markets. At the same time, these divisions are unified through a common understanding of market and customer needs and efficient Group-wide service units. Logistics will remain at the core of the Group’s business activities due to growth and overall attractiveness. The new strategy is also an articulation of the Group’s commitment to its MAIL division, which will be renamed to “Post - eCommerce - Parcel” to better reflect the division’s business activities in the years to come. In addition to traditional postal services, the division will increasingly focus on expanding the products and services offered for the high-growth eCommerce market.
Connect: Deutsche Post DHL will further systematically increase connectivity in the organization in order to extend its quality leadership and to deliver consistent, top service to its customers
One of the central components of the second “Strategy 2020” pillar is the roll-out of certified training programs across the entire Group. So far some 100,000 employees from the company’s EXPRESS division have successfully undergone the Certified International Specialist training program. Deutsche Post DHL plans to train more than 80 percent of its worldwide workforce in comparable training programs across all of its divisions by the year 2020. By making a significant investment in training and development, the Group plans to meet customer requirements even better than before and set the standards when it comes to service and product quality. This large-scale training initiative designed to reach employees at every level of the company is not just groundbreaking for the Group but unique in the industry. Additional components of the strategy’s second pillar include the commitment to building a uniform leadership culture across the Group and tapping the full potential of the Group’s strong brands as well as a more customer-centric cooperation between the individual DHL divisions. This also includes the development of tailored, climate-friendly solutions as part of the Group’s GoGreen program.
Grow: Deutsche Post DHL will tap new market opportunities to continue to grow above market average
Deutsche Post DHL will continue to emphasize organic growth through expansion into new countries and regions, and through tailored solutions that respond to ever-evolving customer requirements in both existing and new market segments. A significant further expansion into emerging markets is a key aspect of the growth strategy. Today, emerging market revenues contribute just over 20 percent of the Group’s revenues; by 2020, the Group expects this figure to climb to 30 percent. Given the significant increase in revenues expected by the year 2020, this means a substantial increase in absolute revenue growth in the emerging market countries. Another major area of focus will be eCommerce-related logistics services. Here, Deutsche Post DHL wants to establish itself as the number one provider of cross-border eCommerce services on the most important international trade lanes, and one of the top three B2C domestic parcel delivery service providers in selected markets. The Group plans to gradually export its industry-leading expertise in the parcel business to other parts of the world, taking its German success model to countries in Europe, Asia and the Americas. To this end, it already shifted parcel activities in the Benelux countries, Poland, the Czech Republic, and India from DHL to the MAIL division earlier this year.
The Group’s well-established finance strategy, which aims to maintain Deutsche Post DHL’s strong credit rating and ensure the company’s financial stability and flexibility over the long term, will remain unchanged and serve as the framework for growth. Accordingly, the Group plans to pay annual dividends of between 40 percent and 60 percent of its consolidated net profit adjusted for one-time effects to shareholders. While the company’s capital expenditure intensity will remain unchanged at around 3 percent of revenues, excess liquidity is planned to be used primarily for the continued gradual funding of pension obligations as well as for share buybacks or special dividends.
“Over the past several years we have demonstrated what we are capable of over the last several years,” said CEO Frank Appel. “Now we will accelerate our organic growth and continue to pursue a clear vision: we want Deutsche Post DHL to be not only the most global company in our industry, but also the clear leader in quality and customer orientation.”
Please visit www.dpdhl.com for additional information about Strategy 2020. The press conference will be broadcast live on the Internet starting at 10:00 AM. The Capital Markets Day presentations can be followed on the Internet starting at 2:00 PM.