As Expected, Deutsche Post DHL Posts Strong 2020 Results

German logistics giant Deutsche Post DHL Group DPSGY reported Tuesday that its 2020 operating profit hit about $5.8 billion, higher than the original estimates of between $4.9 billion and $5.3 billion and essentially matching preliminary results the company disclosed in January.

DPDHL also forecast about $6.6 billion in 2021 operating profit, slightly above the preliminary forecast in January. DPDHL, which traditionally delivers rolling three-year forecasts, predicted that 2023 operating profit will exceed $7.1 billion. DHL measures operating profit by earnings before interest and taxes (EBIT).

Free cash flow in 2020 came in at around $3 billion, well above the $2.4 billion initially forecast, the company said. DPDHL said it expects to cumulatively generate between $8.9 billion and $10.1 billion in free cash flow from 2021 through 2023.

The company also initiated a $1.2 billion share repurchase program and raised its annual dividend 24 cents a share to $1.61 per share.

DHL's five operating divisions combined to post $79 billion in 2020 revenue, according to company data. Four of the units reported gains in revenue and net income. The strongest performances came from the company's Express and E-Commerce Solutions units, no surprise given unprecedented global e-commerce growth and the Express unit's role in transporting medical supplies needed to combat the pandemic. Most of those shipments moved by airfreight given their urgent nature.

DHL's Express division, which operates an international air express arm specializing in time-definite deliveries, posted $3.27 billion in EBIT in 2020, a strong increase from $2.43 billion in 2019. DHL Global Forwarding, the world's largest air freight forwarder and one of the largest ocean forwarders, overcame weak initial demand and tight supply of aircraft and container ship space to post a 3.7% increase in operating margins, up from 3.4% in 2019.

The outlier, as it has been in the past, was DHL Supply Chain, its contract logistics arm. Revenue dropped 7% to $15.2 billion, while EBIT fell 53% to $523 million. The unit was hit by a collapse and subsequent slowing recovery in business-to-business traffic due to the impact of the COVID-19 pandemic.

DPDHL executives said Tuesday they are seeing the start of a turnaround in B2B activity heading into 2021, a trend that will benefit its Supply Chain, Global Forwarding and Express units.

In midafternoon trading in the U.S. Tuesday, DPDHL shares were up nearly 3.5% to $53 a share.