Deutsche Post unit, DHL, is said to be looking at shedding its troubled freight forwarding division either by spinning if off in some form of strategic joint venture, or outright sale with Japan Post highlighted as a potential suitor, according to a Reuters report.
The air and ocean forwarding units would be included in this move, with the land freight forwarding unit likely kept, the report noted citing an un-named source. An outright acquisition of the entire forwarding divison has been estimated to be worth around US$5 billion.
This would then let the DHL group to focus on its mail and express business, without the burden of the loss-making forwarding arm. The beleagured DHL Global Forwarding division has been struggling of late, no better illustrated than by last year’s failed experiment with a new IT system known as the ‘New Forwarding Environment’, which saw a US$388 million write-down, which resulted in a 71 per cent drop in third-quarter core earnings to $222 million.
In a rare admission of failure the company said it had simply been “overwhelmed” by the botched IT rollout. The fiasco saw a number of senior executives leave the company, including CEO Roger Crook.
“The unit has had massive margin problems of late, among others, due to IT (information technology) troubles, so it’s natural that Deutsche Post is mulling ways to turn it around”, Reuters quoted the un-named source as saying.
Japan Post, which last year bought Australian freight firm Toll Holdings, has been cited as one possible buyer, although one analyst Payload Asia spoke to suggested this was unlikely as the US$4.63 billion Toll acquisition would be the focus of Japan Post’s attention for the near future.
The German firm’s chief financial officer, Larry Rosen, said in August last year that the freight forwarding unit would not be put up for sale, with Rosen telling Reuters at the time: “It’s an important part of our logistics business. We have a good future with this business.”
The freight forwarding unit lost $379 million in the third quarter of 2015 compared to the same period of 2014 where it made a profit of $80 million. The forwarding arm’s profit for the full year in 2014 fell 39 per cent to $331 million on sales of $17 billion, which was nearly 27 per cent of the group’s sales.
