DHL Group said Friday that it’s starting to feel troubling localized and global effects of the coronavirus.
In reporting 2019 financial results, the logistics company said it had a good start to 2020 in January and was prepared for the usual effects around Chinese New Year in February, when Chinese government imposed restrictions to keep the viral outbreak from spreading. Since then, the business development in its post and parcel business in Germany, as well as in DHL Supply Chain and DHL E-commerce Solutions has been only “marginally impacted” by the COVID-19 crisis that has infected more than 88,000 people and killed more than 3,000 worldwide since originating in the Chinese city of Wuhan.
“In contrast, the Group currently sees more significant effects for the DHL Express and DHL Global Forwarding divisions, where the business is particularly affected with regard to cross-border trade flows into and out of China,” DHL said. “Group-wide, the negative impacts of the [coronavirus] crisis on Group EBIT (earnings before interest and taxes) amount to around 60 million to 70 million euros ($66 million to $77 million) for the month of February.”
DHL said its 2020 earnings guidance is, as of now, excluding any effect induced by the coronavirus. However, the company noted that in recent weeks, trade volumes have weakened on inbound and outbound China trade lanes, and in other countries of Asia, and “constraints on industrial production are increasingly expected also outside of China.”
“Deutsche Post DHL Group had a very good year 2019 and a successful start to 2020 in January,” CEO Frank Appel said. “Thanks to our broad geographic set-up and our comprehensive portfolio we are more resilient than other companies. However, a worldwide crisis like the coronavirus does not leave us unaffected. It is currently hard to judge how strong the impact on our business will be. That is why our guidance is as of now excluding any impact of this.”
Also against the backdrop of the global economic uncertainties, DHL said it has decided to not further actively pursue exploratory talks regarding partnership options for the StreetScooter activities. Instead, StreetScooter will concentrate on the operation of the current fleet of e-vehicles.
Appel said that while StreetScooter has helped the company have one of the largest electric delivery fleets in the world and has had a significant contribution to the development of e-mobility, a further scaling of the business without the right partner does not fit with the company’s long-term strategic goals.
The company will instead focus on various levers, such as the production of alternative fuels, the optimization of its routes and energy efficiency in its buildings. The refocusing of StreetScooter is expected to result in one-off charges of 300 million to 400 million euros ($330 million to $440 million) for the current financial year.
DHL said implications for full year 2020 results cannot currently be concretely assessed.
“Should the macroeconomic situation normalize again, there could also be positive effects for logistics companies,” the company said, as has happened in previous natural disasters or crises. “In case of a longer duration or a worsening of the current situation over the coming months, the negative impacts for the group are likely to outweigh the positives. The concrete earnings impact can only be assessed after a normalization of the situation.”