Half Time Report Frank Appel (CEO); Melanie Kreis (CFO) 11 May 2017

Transcription

1 Half Time Report Frank Appel (CEO); Melanie Kreis (CFO) 11 May 2017 PAGE 1

2 STRATEGY 2020 HALF TIME REPORT 1 2 Strategy 2020 Half Time Report (F. Appel, CEO) A B C Group Perspective Divisional Agendas Digitalization / Innovation Strategy 2020 Cash Flow Considerations (M. Kreis, CFO) STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 2

3 STRATEGY 2020 HALF TIME REPORT 1 Strategy st Half On track and producing tangible results Strategy nd Half The roadmap is clear - we know what we want to achieve and how to get there Financial Targets We confirm our Strategy 2020 targets and guidance STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 3

4 STRATEGY 2020: VALID, ACHIEVABLE & IN FULL EXECUTION + + FOCUS CONNECT GROW As shown at 2014 CMD We focus on what has made us successful 1. Logistics as our core 2. Committed to the needs of our stakeholders & our planet 3. A family of divisions to further expand margins. We connect across the organization 1. One global team 2. Certified specialists for everything we do 3. Connected approach in operations, commercial, green solutions and shared services to achieve quality leadership & service excellence. We expend in new segments 1. Leader in ecommerce related logistics 2. Accelerate footprint shift towards emerging markets 3. Tap new market opportunities for organic expansion to achieve sustainable abovemarket growth Supported by our unchanged finance policy STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 4

5 STRUCTURAL MARKET TRENDS CONFIRMED AS IDENTIFIED IN 2014 As shown at 2014 CMD These actionable trends have further strengthened since 2014 and continue to set the framework for out strategic priorities STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 5

6 GLOBAL GDP GROWING, BUT BELOW HISTORIC TREND 7 GDP growth slightly slower than expected 6In % ~5% ~2% Global US Western Europe APAC BRICS Source: Bloomberg contributor composite, real GDP growth Emerging markets Well ahead of global GDP growth, close to ~5% expectation Mature markets Growing, but below ~2% expectation GDP growth tailwind so far slightly weaker than expected STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 6

7 SLOWER GDP GROWTH, DGF ISSUES AND DSC SELECTIVITY HAVE DRIVEN SLOWER GROWTH IN B2B MARKET SEGMENTS SO FAR Market growth assumption Air Freight +2-3% Ocean Freight +4-5% Market vs assumption growth Contract Logistics +5-6% Outlook AFR / OFR Recovering towards more normalized market dynamics DGF further catching up after underperforming in 2014/15 Contract Logistics Market expectation confirmed as outsourcing trend continues DSC to remain selective to keep focus on margin improvement Below Below Below DPDHL vs. market growth Below Below Below Growth contribution from B2B segments so far slower than expected STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 7

8 E-COMMERCE DRIVES EVEN STRONGER THAN EXPECTED GROWTH IN B2C MARKET SEGMENTS, ALSO SUPPORTING EXPRESS GROWTH Market growth assumption Parcel Germany +5-7% Parcel Domestic International +8% Market vs assumption growth DPDHL vs. market growth International Express +5-6% Above Above Below Above Above Above Parcel Germany Outlook Market growth expectation confirmed at +5-7% p.a. Parcel Germany aiming to grow at least in line with market International ecommerce - Parcel E-commerce will continue to drive strong growth in domestic and cross-border markets, at least in line with initial assumption Parcel Europe and DHL ecommerce to further leverage e- commerce growth through selective and flexible expansion Express Market growth in B2B driven by global GDP, with B2C as additional growth engine DHL Express will continue to balance TDI volume growth with disciplined yield management E-commerce contributes significantly to our growth momentum STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 8

9 SPECIFIC ACCOMPLISHMENTS ON THE WAY TO 2020 Goal Become #1 e-commerce related logistics provider More flexible cost basis for PeP Focus on sustainable profit growth Achieved Expansion of domestic and cross-border parcel activities across Europe and in selected international markets Leverage of B2C growth within TDI Express network without margin dilution New wage agreement and structure provide security and perspective for employees as well as more competitive basis for sustainable growth in Parcel Germany Significant advances made towards more streamlined, efficient and profitable organization in both DGF and DSC We have laid the groundwork for successful execution of Strategy 2020 STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 9

10 STRATEGY 2020: PERFORMANCE VERSUS EBIT TARGETS SO FAR EBIT, EUR m 2013 base 1) 2020 targets (CAGR 13 20) CAGR PeP 1,286 ~3% 3.9% DHL 2,002 ~10% 6.3% EXP 1, % DGFF % DSC % CC/Other (% of Group revenue) 0.8% <0.5% 2016: 0.6% Group 2,865 >8% 6.8% 1) As previously communicated: adjusted for 2013 EBIT of ~EUR 60m from transfer of assets from DHL to PeP, effective on Jan 1, 2014 PeP, Express and Supply Chain fully on track, Group so far held back by DGFF STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 10

11 WE FOCUS ON WHAT HAS MADE US SUCCESSFUL TO FURTHER EXPAND MARGINS Asset intensive: Express and PeP + Asset light: DGFF and DSC EBIT Margin 1) EBIT margin 1) 8.1% 4.4% 11.0% 8.6% 2.7% 4.1% 2.1% 1.8% Q PeP Express Q Q DSC DGFF Q ) Rolling 12 month EBIT margins, DGFF adjusted for NFE write-off in Q Group margin of 6.1% is up +250bp since 2010; +110bp since 2013 STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 11

12 WE FOCUS ON OUR PLANET MAKE SUSTAINABILITY A COMPETITIVE ADVANTAGE 2050 TARGET ZERO EMISSIONS - 30% REDUCTION ALREADY ACHIEVED IN 2017 STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 12

13 WE CONNECT ACROSS THE ORGANIZATION TO ACHIEVE QUALITY LEADERSHIP AND SERVICE EXCELLENCE Employees certified Certified International Specialist DHL Express Certified Supply Chain Specialist DHL Supply Chain Certified International Forwarder DHL Global Forwarding Certified Freight Specialist DHL Freight PeP Expert Post ecommerce Parcel Certified Logistics Professional CC / GBS / CSI 100% 40% 50% 95% 20% 50% Crossdivisional ecommerce sales team Vendor-neutral efulfillment We are a diversified, Certified, family of divisions STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 13

14 GROW: WE EXPAND IN NEW SEGMENTS TO ACHIEVE SUSTAINABLE, ABOVE MARKET GROWTH Domestic Delivery GROW PRIORITY #1 Become the leader in e-commerce related logistics + X-Border Delivery Own presence With partners Significant progress in expanding our e-commerce logistics leadership position STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 14

15 TAPPING NEW E-COMMERCE LOGISTICS OPPORTUNITIES: E-FULFILLMENT DHL Vendor-neutral E-fulfillment Seamless Logistics Management Quality Fulfillment, Worldwide Transactional pricing Fast and Flexible Shipping Customer Benefits Significant overall cost savings through partnership for fulfillment and shipping Quality improvement, control over branding, packaging and inventory data Decreased shipping time through best-in-class supply chain technology and fulfillment Using the full range of our cross-divisional experience and assets allows us to differentiate in e-fulfillment and provide unique customer benefits STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 15

16 STRATEGY 2020 HALF TIME REPORT 1 2 Strategy 2020 Half Time report (F. Appel, CEO) A B C Group Perspective Divisional Agendas Digitalization / Innovation Strategy 2020 Cash Flow Considerations (M. Kreis, CFO) STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 16

17 PEP: PERFORMANCE RECAP Parcel growth driving PeP revenue and EBIT growth Revenue, EUR m 18,000 16,000 Parcel Revenue Post Revenue PeP EBIT EBIT, EUR m 1,800 1, revenue mix 14,000 12,000 10,000 8,000 6,000 4,000 1,600 1,500 1,400 1,300 1,200 Parcel 42% Post 58% 2,000 1, ,000 We have reached the inflection point where Parcel growth outstrips Postal decline and we resume absolute EBIT growth while investing in international expansion STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 17

18 MINIMIZING IMPACT OF CONTINUOUS MAIL DECLINE: COST FLEXIBILITY IS THE KEY OBJECTIVE Joint delivery helps to optimize delivery of declining mail volumes ~50% of Parcel deliveries done through joint delivery with mail Joint Delivery of Parcels and Mail Dedicated Mail or Parcel Delivery Population density, increasing order Revenue mix shift also reflected in delivery staff development 93,400 +8,000 +5,400-3, ,700 Delivery workforce Headcount, t/o Dedicated Parcel Joint Delivery Mail Delivery Increase in dedicated Parcel and joint delivery drives net hiring since 2010, as a result of strong Parcel growth New wage structure provides competitive basis for sustainable growth in Parcel Germany Mail volume decline is a given, so our focus is on compensating measures in order to minimize the impact and allow Parcel to drive PeP growth STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 18

19 DHL PARCEL EUROPE: ONE PARCEL NETWORK FOR EUROPE 22 countries One network Own presence With partners DHL Parcel Connect One product STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 19

20 DHL ecommerce: OUR PRODUCTS AND NETWORKS DHL ecommerce capabilities based on three core pillars Global, multi-site efulfillment Current network: US, Mexico, India, Hong Kong, Australia, Germany Domestic B2C delivery and returns Current network - US, Chile - India, Thailand, Malaysia International day-definite delivery and returns Currently servicing 220 countries from 11 origin countries (US, Canada, Mexico, Hong Kong, Singapore, China, India, Australia, Japan, New Zealand, Malaysia) STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 20

21 EXPANDING OUR INTERNATIONAL E-COMMERCE FOOTPRINT Selected domestic assets combined with global cross-border delivery and vendor-neutral efulfillment Parcel Europe One Parcel network for Europe Domestic Delivery & Cross-Border Cross-Border Origin Multi-user, vendor-neutral efulfillment facilities In-bound/Out-bound Sorting Distribution Center/Central Hub DHL ecommerce Selective, expanding footprint in the Americas and Asia-Pacific Quick and selective international expansion of e-commerce logistics in and outside of Europe STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 21

22 PEP: ECONOMICS OF INTERNATIONAL PARCEL EXPANSION BUILD FILL EARN Before Strategy 2020 Hamburg Berlin Munich Today Revenue International ecommerce - Parcel EUR m 1,623 1, % CAGR 1,975 2,241 Strong revenue growth driven by e-commerce trend and portfolio expansion EBIT contribution by 2020 will also depend on trajectory of further portfolio expansion Positive but not yet significant EBIT contribution in Building profitable international Parcel capabilities to establish sustainable, profitable e-commerce growth STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 22

23 PEP: CONCLUSION & MANAGEMENT PRIORITIES 1 We focus On expanding our parcel activities, driven by e- commerce, while managing the postal decline We differentiate Through our expertise, innovation and diversified customer base We grow Profitably as the global e-commerce logistics leader PeP fully on track to deliver on ~3% EBIT CAGR target STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 23

24 EXPRESS: PERFORMANCE RECAP 11.0% 10.1% 10.2% 7.9% 8.7% 9.2% 1,548 1,391 1,260 1,110 1, TDI SpD EBIT, EUR m EBIT Margin Focus on TDI Steady growth in both TDI as a % of revenues and in TDI shipments per day B2B continues to grow driven by global GDP, with B2C as an additional growing TDI vertical Global TDI market leadership further expanded based on unique international network and customer centricity Focus on Yield Strong discipline on yield management Supporting sustained growth in both EBIT margin and absolute EBIT Our focus on TDI and yield lead to sustained EBIT and EBIT margin growth STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 24

25 EXPRESS: FOR OUR INTERNATIONAL NETWORK, X-BORDER B2C IS A PROFITABLE GROWTH DRIVER Portion of B2C TDI shipments has increased over time We grow B2C profitably because 90% of the KPIs perfectly suit our network >10% 1) 1) >20% SpD Volume growth drives better utilization of existing network WpS Lower weight per shipment Our TDI product is attractive to e-tailers because we offer Unparalleled global door-to-door network Fast customs clearance Flexible delivery options Highest service quality & customer service 1) Indications based on medium to large B2C customers of top 30 countries RpK First mile Hub sort Airlift Last mile Higher RpK related to lower WpS More pieces per stop at pickup Better utilization of existing infrastructure, with high degree of conveyables Better utilization of existing capacity, with lower WpS being advantageous Residential delivery to private households X-Border e-commerce has developed into an important TDI vertical and profitable growth driver STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 25

26 EXPRESS: WE ARE THE MOST GLOBAL INFRASTRUCTURE INVESTMENTS SUPPORT SUSTAINABLE EBIT GROWTH Examples LEJ Hub expansion CVG New flyer sort and ramp expansion EMA Hub upgrade Upgrade Southern Hub Upgrade BRU Hub Upgrade South Asia Hub (SIN) Upgrade TYO Hub and new gateway 123 DHL Hubs/Gateways Capital investment into hubs and automation drives service quality, customer satisfaction and success. We invest and grow EBIT margins simultaneously STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 26

27 EXPRESS: CONCLUSION & MANAGEMENT PRIORITIES 1 We focus On driving profitable growth through TDI expansion, with x-border e-commerce as an additional growth engine We differentiate Through our insanely customer centric culture and investments into our hub network and automation We grow We are investing for growth while further expanding our operating margin Express contribution towards ~10% DHL EBIT CAGR fully on track STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 27

28 DHL SUPPLY CHAIN PERFORMANCE RECAP EBIT, EUR m EBIT and EBIT margin development % 2013 CAGR +9.1% % EBIT margin 6 % 4 % 2 % 0 % ROCE (incl. Goodwill) development +400BP 14% 15% 13% 18% Asset mix year-end 2016 (100% = EUR 3.1bn) Intangible Assets (mainly customer lists) Operating Assets (mainly fixed assets) Goodwill 13% 14% 73% DHL Supply Chain with its assetlight business expanded its ROCE and entered the EBIT margin target band STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 28

29 DSC: STRONG PROGRESS ALONG STRATEGY 2020 AND OUR EARNINGS GROWTH MODEL Sales Revenue Gross profit EBIT GROW FOCUS CONNECT Shift the portfolio to address high margin segments Focus sectors: Automotive, Life Sciences & Healthcare 1), Tech Drive standardization and reduce complexity to increase efficiency Labor productivity Creating an effective organization globally to enable change Overhead development Revenue, EUR CAGR EBIT per FTE, EUR CAGR Indirect cost, EUR CAGR +5% +9% -2% ) Excluding NHS Supply Chain STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 29

30 DHL SUPPLY CHAIN - #1 IN GLOBAL CONTRACT LOGISTICS Americas ~50,000 Employees 13 Countries Europe ~66,000 Employees 21 Countries Middle East &Africa ~6,000 Employees 9 Countries Asia Pacific ~25,000 Employees 14 Countries DHL Supply Chain presence Other DPDHL Group operations Largest warehousing provider with >25m sqm* Present in more than 50 countries Global revenue leader with EUR 14bn in 2016 ~1,500 customers across the globe * Including owned, leased and operated space STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 30

31 DHL SUPPLY CHAIN A POWERHOUSE IN E-COMMERCE LOGISTICS e-commerce for Supply Chain is more than B2C delivery DSC serves B2C and B2B e-commerce channels Omnichannel fulfillment is standard practice Besides pure e-tailers, traditional enterprise is transitioning rapidly to e-commerce Vendor-neutral e-fulfillment with DHL ecommerce New international business model meets high customer demand IT We roadmap are the contract re-defined logistics in early partner stages for of Strategy Bricks AND 2020 Clicks, across all sectors STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 31

32 DSC: CONCLUSION & MANAGEMENT PRIORITIES 1 We focus On achieving our 2020 margin targets by driving greater levels of scalability and standardization We differentiate Through our global presence, leading expertise and innovation capabilities We grow By targeting higher margins and shifting our portfolio along sector, geographic and product lines Supply Chain contribution towards ~10% DHL EBIT CAGR fully on track STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 32

33 DGFF: PERFORMANCE RECAP Revitalize core business and re-empower our people In progress Initiation of recovery of GP + Conversion Ratio and EBIT Margin + Gradual & modular IT improvements In progress Absolute DGF GP and % GP-to-EBIT Conversion DGFF Operating EBIT and Rolling EBIT Margin EUR m 2,655 2, % 16.9% 2,399 2,434 2, % 9.7% 5.1% EUR m % % ) 1) 2015 EBIT adjusted for EUR -353m one-offs Operating improvement to continue as we recover former levels of profitability in a normalizing market environment STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 33

34 DGF: CUSTOMER SATISFACTION AND EMPLOYEE SURVEY SCORES ARE PROOF POINTS OF SUCCESSFUL TURNAROUND MOMENTUM Revitalize core business and re-empower our people DGF customer satisfaction score DGF, Employee Opinion Survey 1) 2) Active leadership Employee engagement ) No survey held in 2013 We have re-established our service quality, with customer scores improving in all regions ) Overlap of previous and updated Group-wide questionnaire in 2015 Key indicators confirm reinforced commitment STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 34

35 DGF: LABOR PRODUCTIVITY TURNAROUND CONTINUED IN Q1, HOWEVER OFFSET BY GP PRESSURE AFR, Q1 yoy change OFR, Q1 yoy change Volume (ton) Volume (TEU) 13.9% 0,2% -10.6% 2.3% 2.5% 6.4% FTE FTE 1) 1) 0.4% -5.1% 3.9% 2.5% -0.2% 0.2% Labor productivity (ton/fte) Labor productivity (TEU/FTE) -0,2% -5,7% 9.6% -0.3% 2,8% 6.1% Q Q Q Q Q Q ) FTE on average, incl. temporary staff & overtime STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 35

36 DGF IT RENEWAL: IMPORTANT RE-ORIENTATION INITIATED WITH STRATEGY 2020 October 2015: Decision taken to stop NFE and launch alternative plan Best-of-breed, step-wise approach adopted under IRR (IT Roadmap and Renewal) Multiple initiatives underway focusing both on short- and long-term benefits involving both business process and IT enhancements Focus on leveraging proven, commercially available solutions; combined with selected existing applications In Jan 2016: Selection of Cargowise One (CW1) as preferred option for new TMS; pilots starting in 2017 IT renewal roadmap clearly defined STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 36

37 OPERATIONS SALES DGF: IT RENEWAL ROADMAP APPROACH LEGACY SYSTEMS CRM Tool Maintain/Upgrade CRM Legacy Quote tool 1 Legacy Quote tool 2 Legacy Quote tool 3 Legacy System Legacy System Legacy System Harmonized Quotation Tool Online Quotation Tool EDM (US) Legacy Transport Management System LOGIS EDM Global Roll-out Transport Mgmt System (proof of concept) Pilot Roll Out Maximize scope of use, integration, automation Legacy Legacy Legacy Legacy Operational Irregularities Management Shipment Visibility Tools A lower-risk approach to a more streamlined and integrated future STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 37

38 DGF: NEW GLOBAL TMS TO ENTER IN PILOT PHASE Prep/Pre-Config Entry Criteria Prototype Entry Criteria PoC Configuration Entry Criteria PoC Operation Entry Criteria Pilots Entry Criteria Prep/Pre-Config Prototype PoC Configuration PoC Operation Pilots Today May 2016 Aug 2016 Nov 2016 DGF Global system Q DGF specific DGF Global base Start of PoC ready for full-scale Start of system system ready for operations country pilot Rollout configuration PoC Configuration with interfaces to key DGF systems IT TMS roadmap implementation re-defined about in early to move stages into of Strategy pilot phase, 2020 in line with planned roll-out by 2020 STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 38

39 DGF: WE ARE MARKET LEADERS IN SIZE AND SCOPE Europe Americas ~8,000 Employees 36 1) Countries 395 2) Locations ~9,000 Employees 49 1) Countries 203 2) Locations Middle East &Africa ~2,000 Employees 59 1) Countries 47 2) Locations Asia Pacific ~9,000 Employees 37 1) Countries 256 2) Locations DGF Present Other DPDHL operations Regional Head Office Present in more than 190 countries Chile Uruguay ~30,000 highly qualified employees >2.0m AFR export tons transported 2) >3.0m TEUs transported 2) New Zealand 1) Including agent countries 2) as of 2016 STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 39

40 DGFF: CONCLUSION & MANAGEMENT PRIORITIES 1 We focus On profit improvement while executing the step-bystep implementation of our IT renewal plan We differentiate Through our size, scope, service quality and commitment towards our customers We grow In line with market volumes while continuing to improve GP/EBIT conversion towards benchmark DGFF positioned to catch up on its contribution to 2020 targets STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 40

41 HALF TIME REPORT STRATEGY Strategy 2020 Half Time report (F. Appel, CEO) A B C Group Perspective Divisional Agendas Digitalization / Innovation Strategy 2020 Cash Flow Considerations (M. Kreis, CFO) STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 41

42 STRATEGY 2020 IS DESIGNED TO CONTRIBUTE TO BOTH, GLOBALIZATION AND DIGITALIZATION GLOBALIZATION DIGITALIZATION Increased emerging markets footprint Accelerating impact of automation Growth in e-commerce boom market New business models emerging Global growth trends well addressed Technologic development offers huge opportunities to exploit and explore In addition: Zero-emission logistics by 2050 STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 42

43 NEW TECHNOLOGIES DRIVE BIG OPPORTUNITIES TO EXPLOIT AND EXPLORE: INNOVATION IS THE SOLUTION DHL Trend Radar Identifying trends Assess potential industry impact Gauge relevance time horizon Feeding into group and divisional pipeline & strategy In order to stay ahead of the curve, we have to be creative and willing to self-disrupt STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 43

44 DIGITALIZATION OFFERS FUNDAMENTAL OPPORTUNITIES TO IMPROVE AND EXPAND CURRENT BUSINESS PORTFOLIO Technology exploitation i Business exploration I Apply digital technology in our existing business footprint to deliver superior customer experience and increase efficiency Grow into future logistics verticals by incubating ideas and investing in new business models Culture and Capabilities Digitalization also requires adaptation of corporate culture and capabilities STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 44

45 TECHNOLOGY EXPLOITATION: ROBOTICS & AUTOMATION MULTIPLE ROBOTICS PILOTS Collaborative robots for packing & kitting Autonomous trolleys for warehouse automation Task-to-person robots for picking assistance STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 45

46 TECHNOLOGY EXPLOITATION: DRONES & UAV MULTIPLE DRONE PILOTS For parcel delivery, also directly to Parcel Locker for automated delivery Within warehouses for inventory management and stock-taking Around warehouse perimeter, for security and incident management STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 46

47 TECHNOLOGY EXPLOITATION: BIG DATA DATA ANALYTICS APPLICATIONS Usage of internal data and automated machine learning algorithms allow to improve efficiency, increase revenue and reduce costs Some real-life examples: Predictive analytics as basis for greater customer loyalty, lower churn and thereby additional orders (PeP, DGFF, EXP) Automated classification of shipments helps to improve delivery performance and customer satisfaction (EXP) Forecasting seasonal / daily volumes to improve asset utilization and workforce planning (DGFF, PeP, DSC, EXP) STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 47

48 BUSINESS EXPLORATION: DISRUPTIVE DIGITAL TECHNOLOGY SALOODO! FREIGHT PLATFORM Connects shippers and transport providers on demand through digital freight platform Fast and reliable way to manage road freight within Germany or from Germany throughout Europe A dynamic transport quote calculator assists transport companies to make competitive quotes for each shipment STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 48

49 BUSINESS EXPLORATION: EMISSION FREE DELIVERY DHL STREETSCOOTER Development Timeline: Commitment to own e-vehicle Acquisition of Streetscooter GmbH First vehicles in delivery use Expansion of production, also for external customers 2500 Streetscooters in daily operating use Production capacity to be increased to 20,000/y STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 49

50 STRATEGY 2020 HALF TIME REPORT CONCLUSIONS 1 Global Macro and strategy The economic background and our industry assumptions strategy remains valid & achievable Divisional recap and priorities Divisions on track: executing strategy while growing EBIT and margins - DGFF still catching up Financial KPIs and Cash Flow Strong, improving cash generation allows healthy balance of growth investments and shareholder returns We confirm our 2020 strategic targets and guidance STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 50

51 STRATEGY 2020 HALF TIME REPORT 1 2 Strategy 2020 Half Time report (F. Appel, CEO) A B C Group Perspective Divisional Agendas Digitalization / Innovation Strategy 2020 Cash Flow Considerations (M. Kreis, CFO) STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 51

52 STRATEGY 2020: FOCUS TOPIC CASH FLOW Focus on cash flow generation Continue to improve visibility and consistency in elements of EBIT to OCF conversion Effective capital allocation Maintain stringent decision making process on capital allocation to maintain healthy balance between growth investments and shareholder returns Commitment to Finance Policy Free Cash Flow drivers support confirmed Finance Policy STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 52

53 IMPROVED OCF GENERATION CREATES BASIS FOR BALANCED INVESTMENT INTO GROWTH AND SHAREHOLDER RETURNS EUR, cumulative ) ~9.9bn +1.6% ROCE increase ~5.2bn Increasing dividend: FY16 up +31% vs FY13 ~3.0bn Excess liquidity, basis for first-ever SBB program in 2016/17 ~1.5bn Operating cash flow 1) Adjusted for EUR 1bn pension funding in 2016 Net capex spend STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 Dividend Excess liquidity PAGE 53

54 EBIT TO OCF BRIDGE EBIT EUR m 2,865 2,965 2,411 3,491 CHANGE IN + D&A - 1) TAXES CHANGE IN W/C OCF PROVISIONS - + = 1) 3,444 3,439 2,989 3,040 1,665 1,337 1,381 1, ) 2016 provision change and OCF adjusted for EUR 1bn pension funding EBIT growth is and remains the most important OCF driver STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 54

55 OCF: TOTAL CASH OUT FOR PENSION PLANS DECLINING, AS EXPECTED Defined contribution (DC): Cash out = staff costs in EBIT EUR m Civil servants (in GER) Hourly workers and salaried employees mainly outside GER Expected trend Steady decline: 50% cost reduction expected by 2027 due to civil servants going into retirement Slight increase reflecting business growth and selected shifts from DB to DC plans Defined Benefit (DB): Staff costs + Change in 1) provisions Hourly workers and salaried employees Cash out with declining trend, reflecting demographics and 2012/16 pension funding Change in provisions (Cash out in excess of EBIT) Current service costs (in staff costs) 1) Cash Out = benefit payments + employer contributions = staff costs + change in provisions, excluding one-offs STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 55

56 OCF: OTHER PROVISIONS DEVELOPED IN LINE WITH EXPECTATIONS, WITH NO CHANGE IN TRENDS EXPECTED EUR m Trend, as expected 1) OUTLOOK: drivers intact, trends expected to continue Other employee benefits 1, Further down reflecting net utilization Restructuring provisions US restructuring provisions further tailing off Technical reserves Increase with business growth Postage stamps Lower as letter volumes continue to decline Tax provisions No significant change expected Miscellaneous provisions No specific trend expected Total 3,635 2,821 Further decrease, although decelerating 1) IR Tutorial, Pension and Provisions Accounting, April 2013 STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 56

57 OCF: MAINTAIN TIGHT MANAGEMENT OF WORKING CAPITAL ON OUR GROWTH PATH Key WC drivers: Receivables (DSO) & payables (DPO) Divisional business models and payment mechanisms differ DPO-to-DSO gap widened, with positive contributions from all Divisions Days Group payment terms evolution DPO DSO 2016 vs days +3 days WC HAS REACHED VERY EFFICIENT LEVELS Group WC change, in EUR m Main objectives going forward: Keep WC increase below sales growth Improve overall OCF forecasting and reduce seasonality EUR m Working capital requires relentless focus. Nevertheless, expect slight increase, although below sales growth as we continue our growth path STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 57

58 OCF TO FCF BRIDGE = 1) OCF NET INTEREST NET CAPEX NET CASH M&A FCF 1) EUR m 2,989 3,040 3,444 3,439 1,669 1,345 1,724 1, ) 2016 provision change and OCF/FCF adjusted for EUR 1bn pension funding -1,204-1,550-1,929-1,701 OCF increase allows to balance growth investments and rising shareholder returns STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 58

59 CAPEX: RECENT HISTORY AND OUTLOOK Increase driven by investments in B2C national/international Capex, EUR m Slight upward trend Low levels 2017 peak, from new business + reflecting minimal plateauing thereafter + + still remains mostly = capital intensity asset light 902 GROUP CAPEX 590 PeP Express Global Forwarding, Freight FY 2013 FY 2014 FY 2015 FY 2016 FY 2017e FY 18e-19e Supply Chain FY 2017 guidance EUR ~2.3bn FY projection Slight increase vs ) 2016 provision change and OCF adjusted for EUR 1bn pension funding STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 59

60 CAPEX BY DIVISION WHERE DOES IT GO? 2016 Capex, EUR m 902 Other 590 Vehicles Other Post Parcel International Parcel Germany Hubs & Gateways Aviation 55 Other Facilities IT 328 Other IT Transportation Warehousing PeP Express DGFF DSC We invest in infrastructure and improving customer service and satisfaction to foster sustainable profit and cash flow growth STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 60

61 HOW DO WE DECIDE ON CAPEX? CAPITAL ALLOCATION PROCESS Strategic fit of strategic initiatives with Group's overall strategy (as defined by Corporate Board) based on e.g. Provide a differentiated offering to customer Priority of targeted matrix cells Fit to DPDHL capabilities Clearly addresses identified trends and business needs Strategy Focus of DPDHL lies on following financial targets Profitable growth Evaluation criteria Overall risk profile based on Sunk investment until proof of concept Cash generation Exit/residual cost Capital efficiency Financial KPIs best reflecting our financial targets Financials Risk Sensitivity of business case assumptions Other key risks NROI as high-level ranking/prioritization factor NPV as key optimization factor EBIT as control/reporting factor STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 61

62 CREATING VALUE FOR STAKEHOLDERS BY INVESTING FOR GROWTH ROCE vs WACC 20.0% 17.9% 17.9% 17.2% 19.5% 16.0% 12.0% 8.0% 13.4% Spread of ROCE vs WACC widening 4.0% ROCE (adj. for 1-offs) ROCE WACC (Internal View) ROCE = LTM EBIT / (Average LTM Business Operating Assets + Goodwill) We create value for all stakeholders through targeted growth investments STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 62

63 SUMMARY FREE CASH FLOW DRIVERS Cash Flow Statement Expected trend Main Drivers EBIT Depreciation Chg in provisions WC Income taxes Net capex Net M&A FCF Group EBIT guidance, 2017: EUR ~3.75bn; : >8% CAGR Gradual increase reflecting capex spend Total provisions still expected to come further down through net utilization. Cash-outs expected to trend flat to slightly down yoy Increasing as business grows but strong focus on working capital management Increase reflecting EBIT growth Plateauing around current levels. Further small yoy increases possible subject to growth opportunities, but no further significant step up expected Remains opportunistic & bolt-on Expect to generate excess liquidity every year (FCF > dividend payment) EBIT increase allows to balance growth investments and rising shareholder returns STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 63

64 WE COMMIT TO OUR UNCHANGED FINANCE POLICY FINANCE POLICY Dividend of EUR 1.05 for FY2016 Target / maintain rating BBB+ Dividend payout ratio to remain between 40 60% of net profit (continuity and Cash Flow performance considered) Excess liquidity will be used for share buybacks and/or extraordinary dividends and/or potential additional pension funding (if not by other means) Underlying Payout Ratio 1) EUR 1.05 EUR 0.85 EUR 0.85 EUR 0.80 EUR 0.65 EUR 0.70 EUR % 58% 53% 49% 50% 46% 48% Dividend payments of EUR ~1.27bn to DPDHL shareholders on May 04, % 40% 1) Adjusted for Postbank effects as well as non-recurring items when applicable STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 64

65 CFO CONCLUSION: STRATEGY 2020 FCF DRIVERS Half Time Performance 2020 Goals for the second half Sustained EBIT Growth momentum flowing through to cash generation Significant investments in growth opportunities Commitment to current Group structure Commitment to shareholder returns regarding dividend growth and excess liquidity utilization!!! Continue to deliver on EBIT and cash flow generation Further refine visibility and planning & controlling to support growth agenda Maintain balance between shareholder returns and growth investments STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 65

66 STRATEGY 2020 HALF TIME REPORT Strategy 2020 Half Time Report (F. Appel, CEO) Strategy 2020 Cash Flow Considerations (M. Kreis, CFO) Conclusion Half Time Report (F. Appel, CEO) STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 66

67 INVESTING TO CREATE SUSTAINABLE GROWTH AND VALUE We are delivering EBIT and Cash Flow growth We invest significantly to fully utilize our sustainable growth potential whilst generating attractive shareholder returns We continue to innovate and exploit & explore digital opportunities On track to deliver on 2020 strategic targets and guidance STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY 2017 PAGE 67

68 DPDHL INVESTMENT PROFILE Global Powerhouse of Logistics Clear Strategic Direction Our roadmap for margin and profit improvement Sustainable Growth Momentum Unique position for e-commerce Increasing margins and returns Divisional self-help agendas Investing For Growth Innovation, quality & customer centricity Delivering attractive returns Committed to FCF growth and improving shareholder returns STRATEGY 2020 HALF TIME REPORT LONDON 11 MAY

69 Half Time Report Frank Appel (CEO); Melanie Kreis (CFO) 11 May 2017