AGENDA. Melanie Kreis, Group CFO DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 2

Transcription

1 London, 08 May 2018

2 AGENDA PeP update DSC update Express update DGFF update CFO update CEO update Frank Appel, CEO PeP John Gilbert, CEO DSC Ken Allen, CEO Express Tim Scharwath, CEO DGFF Melanie Kreis, Group CFO Frank Appel, Group CEO DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 2

3 PEP YOUR KEY QUESTIONS ON OUR WAY TO STRATEGY 2020 TARGETS 2020 targets Big Data Parcel Streetscooter Parcel Metro MAIL DECLINE International Profitability E-commerce EBIT margins Competition? Volumes? Last Mile B2B innovation labor markets efulfillment Tech Disruption B2C Parcel lockers digitalization PRICING E-substitution Wage Inflation Automation Amazon Macro trends Regulation DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 3

4 PEP AGENDA 1 PeP Germany: What's your view on volume / revenue of post and parcels in Germany? 2 PeP Germany: How do you manage costs / profitability? 3 Parcel Europe: Why did you expand your Parcel activities out of your home market? 4 DHL ecommerce: What activities are reported under ecommerce? DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 4

5 1. TOPLINE GERMANY: LETTER VOLUME DECLINE REMAINS IN EXPECTED RANGE Letter volume (in m pieces) Among lowest letter decline rates internationally 19, % CAGR 16,838 High quality standards despite cost control measures No large customer lost despite price increases since 2013 for regulated mail Digital product E-POST has reduced decline by 1% p.a. (2017: >1.1bn items, > EUR 600m revenue, 7% of letter volumes) Letter volumes also see strongly increasing support from small size e-commerce shipments Mail Communication & Dialogue Marketing t.o. EPost Digital transformation of Post through new digital service offerings (Dialogue Marketing, Post-ID) We confirm our assumption of average 2-3% decline DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 5

6 1. TOPLINE GERMANY: STANDARD LETTER STAMP PRICE DEVELOPMENT IS BASED ON REGULATED PRICE CAP 1) German standard letter price, in EUR cents No price increase headroom before % carried over to % +1.6% % % in ) Regulatory headroom 1) NEXT REVIEW: Expected by end of 2018 for the period starting January CPI - 1.8% CPI - 0.6% CPI - 0.2% CPI +5.8% 2) Price cap regulation 1) Average increase on basket of regulated products 2) from through ) estimated cumulative CPI: 1.7% Regulated stamp price increases allow to partly offset volume decline since 2013 DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 6

7 1. TOPLINE GERMANY: VIRTUOUS CIRCLE OF PARCEL GROWTH DRIVEN BY E-COMMERCE TREND Best Parcel Service Best quality B2C delivery Highest number and broadest choice of recipient solutions Sustained e-commerce growth DHL Parcel Germany: yoy volume growth 9.8% 9.8% 7.4% 7.0% 8.7% 9.3% 7.8% Network investments Continued investment in technology, automation, capacity and speed State-of-the-art sorting for >1m parcels/hour +6pp 39% 45% Market share expansion DHL Parcel Germany: market share We confirm our assumptions of 5-7% volume growth in Germany DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 7

8 1. TOPLINE GERMANY: PARCEL GERMANY GROWTH BASED ON GROWTH ACROSS A BROAD CUSTOMER PORTFOLIO Business Customers (B2X) Revenue growth CAGR Revenue 2017 DHL Parcel (in EUR bn) Revenue growth CAGR (in %) 7.4% 11.5% 4.1 Top accounts ( 250 companies) Medium accounts ( 17,000 customers) % 12.3% Small accounts ( 76,000 customers) % B2X Market DHL Parcel 7,4% B2X Market Growth driven by all e-commerce market segments DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 8

9 1. TOPLINE GERMANY, SUMMARY: GETTING TOPLINE GROWTH IN GERMANY, AS BASIS FOR OUR 2020 TARGETS Parcel Growth Pricing Mail Volume Decline E-Post DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 9

10 2. PEP GERMANY: DESPITE ONGOING MIX SHIFT, PEP GERMANY REVENUE IS STILL SKEWED TO POST BUSINESS PeP revenue, Germany 1) Revenue mix Germany, Post vs Parcels % 36% 76% 64% ) : Mail Division, : PeP excl. Parcel Europe and DHL ecommerce Post Parcel Parcel Post Behind overall revenue growth, cost management needs to reflect Post vs Parcel volume trends DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 10

11 2. COSTS GERMANY: REVENUE GROWTH IS DRIVEN BY DIVERGING VOLUME TRENDS WITH ACCORDING COST REQUIREMENTS Letter volumes are 14% lower vs 2010 while Parcel volumes are 68% higher 100 Letter and Parcel volume, indexed: -14% 68% How to adjust Mail network cost to the gradual step down in Mail volumes? How to calibrate Parcel network expansion to cater for sustainable e-commerce driven growth? How to manage costs in light of these diverging trends? DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 11

12 2. COSTS GERMANY: MAJOR ELEMENTS OF PEP COST STRUCTURE PeP 2017 P&L (in EUR m) Total revenues 18,168 Post 9,956 ecommerce Parcel 8,482 Purchased services, main drivers Transportation Reflecting Post vs Parcel volume trend Freight and Labor rates rising Third party labor German labor market tightening Total expenses 16,666 Purchased goods and services 7,190 Wage deals Germany (Salary increase, % yoy) Staff costs 8,317 Net other operating 804 Depreciation Flat DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 12

13 2. COSTS GERMANY: TO MINIMIZE IMPACT OF CONTINUOUS MAIL DECLINE, COST FLEXIBILITY HAS BEEN ONE KEY OBJECTIVE Joint Delivery helps to optimize delivery of declining mail volumes Revenue mix shift also reflected in delivery staff development ~50% of Parcel deliveries done through joint delivery with mail 93,400 +9, ,900-6, ,000 Delivery workforce Headcount, t/o Dedicated Parcel Joint Delivery Mail Delivery Joint Delivery of Parcels and Mail Dedicated Mail or Parcel Delivery Population density, increasing order Increase in dedicated Parcel and joint delivery drives net hiring since 2010, as a result of strong Parcel growth Mail volume decline is a given, so our focus has been on compensating measures in order to minimize the impact and allow Parcel to drive PeP growth DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 13

14 2. COSTS GERMANY: CONTINUOUS INVESTMENT IN AUTOMATION OF POST AND PARCEL NETWORK Pick Up + Unloading from trucks by staff into sorting centers Testing new supportfunctions to unload trucks automatically, e.g. bulk processing Degree of automation in sorting operations (82 Mail + 2 International Mail + 34 Parcel Centers) Standard Letters, 97% machine sorted and 90% sorted to delivery point sequence Large and Maxi Item Letters, 2/3 machine-sorted Conveyable parcels, 98% machine sorted Loading of Delivery vehicles by delivery staff Delivery E-Bikes & E-Trikes approx. 32,000 Packstations approx. 3,400 Mechanized Depots (79) Testing new support-functions for the delivery e.g. PostBot, Autonomous Streetscooter Post and Parcel network include high degree of automation to foster labor productivity DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 14

15 2. PEP PROFITABILIY, LOOKING BACK: SUCCESSFUL EBIT TURNAROUND ALONGSIDE REVENUE MIX SHIFT Efficient infrastructure in place Highly automated mail and sorting capabilities Use of joint delivery to leverage Postmen for Parcel delivery in rural areas Strong, established cost culture combined with high focus on delivery quality Significant investment in Parcel expansion starting in Germany, now also abroad Successful management of volume volatilities, in particular Parcel peak season Post Revenue Parcel Revenue EBIT Pep track record: EBIT decline stopped and growth phase successfully initiated DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 15

16 2. PEP PROFITABILIY, LOOKING FORWARD: WHAT WE NEED TO ADDRESS TO DELIVER ON OUR TARGETS Ongoing and new challenges Improvement areas Support ongoing strong Parcel growth At ~8% growth, continuous significant increase in absolute volume every year (>100m additional parcels / year) Tight markets (availability and rates) for labor and transport Manage ongoing, steady Post volume decline Even slow erosion over time eventually drives significantly lower volumes E-commerce volumes have different packaging / volumetric format than standard letters Wage rates and other factor costs increase despite adverse volume trend Maintain continuous investment towards capacity extension and automation Increase labor productivity to counter wage inflation Calibrate pricing volume balance Drive next step change in Post network to mirror lower levels of mail volumes Adapt production and associated transport processes to the increase in e-commerce volumes Reflect cost increase in pricing in accordance with regulatory framework Will take necessary steps to ensure delivery on 2020 targets DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 16

17 2.PEP GERMANY PROFITABILITY, SUMMARY: CONTINUATION OF GROWTH PATH TO BE SUPPORTED BY NEW INITIATIVES Cost inflation (incl. Wages) Productivity gains Natural attrition + Joint delivery New actions vs. new challenges needed to maintain successful PeP balance in Germany on way to 2020 targets Cost of Parcel expansion Mail Volume Decline Parcel Growth Pricing E-Post DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 17

18 3.PEP: LOOKING BEYOND GERMANY Cost inflation (incl. Wages) Productivity gains Natural attrition + Joint delivery All while investing in our next additional EBIT growth driver, PeP International Cost of Parcel expansion Mail Volume Decline Parcel Growth Pricing E-Post International Expansion DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 18

19 3. PARCEL EUROPE, MOTIVATION: ADDRESSING A UNIQUE STRUCTURAL GROWTH OPPORTUNITY Only 8.8% of retail is online in the EU most EU markets are <7 parcels/capita vs 30 expected by e: 30 parcels/ capita Today's parcels/ capita ~1-2 parcels/capita ~7 parcels/capita ~15 parcels/capita ES IT PL FR AT CH NL UK GE E-commerce as % of retail 1) Additional European annual B2C parcel volume in 2025 compared to 2016, excl. Germany (2016: 2.5bn parcels; 2025: 6.9bn parcels) ~4.5bn additional parcels will be sent within Europe by 2025 DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 19

20 3. PARCEL EUROPE, AMBITION: #1 IN EUROPEAN CROSS-BORDER B2C TOP 3 IN DOMESTIC OPERATIONS Transformation Czech Republic Poland Netherlands Luxembourg Sweden Spain Portugal CLUSTER 1: >20% p.a volume growth Parcel Union Norway Denmark Finland Baltics Hungary Slovenia Green field market entry Slovakia Austria Merger and acquisitions France: Relais Colis UK: UK Mail Belgium Ireland Romania Bulgaria Croatia Average of selected countries 18 Growth as-is 12 Growth expected in 2013 Market growth exceeded expectations by ~50% Parcel Europe aims for mid-to-high single digit EBIT margin (5-8%) DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 20

21 4. DHL ECOMMERCE PORTFOLIO: FULFILLMENT, X-BORDER AND DOMESTIC DELIVERY DHL ecommerce, Product Portfolio Domestic delivery Cross-border delivery Fulfilment Service offering End-to-end domestic B2C delivery and returns International rangedefinite B2C delivery & returns solution Multi-site fulfilment network providing global distribution solutions Domestic delivery Fulfillment Integrated e-commerce logistics Cross-border delivery Characteristics Pick-up, sort, delivery and returns Alternative delivery options High operations and customer service quality Range of transit times Fully-landed cost calculation Commercial or postal customs clearance Connects to the domestic networks globally Multi-user facilities Transactional pricing Integration with top e-commerce platforms and marketplaces End-to-end visibility World-class customer service ENABLING SERVICES IT & Integration Solutions Shipment Value Protection Current footprint Origin countries: 220+ destination countries Targeted e-commerce logistics offerings outside Europe DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 21

22 PEP: AMBITION FULLY FOCUSED ON GROWTH TOWARDS 2020 TARGET AND SETTING BASIS FOR FURTHER GROWTH BEYOND THAT 2017 PeP EBIT: EUR 1,502m; 2020 target: EUR ~1.7bn PeP revenue & EBIT, in EUR m EBIT guidance, EUR : ~1.5 bn 2020: ~1.7 bn Post Revenue Parcel Revenue PeP EBIT Since 2012 low point, EBIT up EUR >400m, all while investing in Parcel expansion DPDHL GROUP CMD 2018 PEP PRESENTATION MAY 2018 PAGE 22

23 AGENDA PeP update DSC update Express update DGFF update CFO update CEO update Frank Appel, CEO PeP John Gilbert, CEO DSC Ken Allen, CEO Express Tim Scharwath, CEO DGFF Melanie Kreis, Group CFO Frank Appel, Group CEO DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 23

24 DSC YOUR KEY QUESTIONS ON OUR WAY TO OUR 2020 TARGETS Distribution Center B2B B2C 3PL Returns Differentiators Robotics Omnichannel Delivery What do you do? Reverse Logistics efulfillment Blockchain fully automated warehouse topline growth drivers Margin Pressure? What are your sources of growth? X-Border Strategy 2020 Website Integration Competition DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 24

25 DSC AGENDA 1 What is DSC doing - especially in the e-commerce space? 2 What role does tech disruption play in the supply chain industry? 3 Where does DSC stand on its 2020 targets? 4 Why is Supply Chain an interesting industry for DPDHL? DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 25

26 1. DSC BUSINESS MODEL SUPPLY CHAIN SOLVES THE COMPLEXITY PROBLEM WHO WE ARE WHAT WE DO HOW WE GENERATE PROFIT HOW WE DIFFERENTIATE Warehousing Value added services Transport The world s largest 3PL Solve the complexity problem in our customers supply chain By creating efficiency for our customer and ourselves all along the value chain By our logistics expertise, geographical spread, skilled workforce, digital applications, industry expertise DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 26

27 1. DSC BUSINESS MODEL SUPPLY CHAIN E-COMMERCE EXPOSURE IS COMPLEX Seamless Integration Distribution Center Returns Digital Infrastructure Competition B2B B2C Robotics efulfillment Omnichannel Delivery Reverse Logistics Logistics Synchronization Go Global Customer Personalization Website X-Border Packaging Global Order Orchestration Narrowly defined, DSC runs 100+ dedicated B2C e-commerce fulfillment operations, which is approximately ~20% of divisional revenues In a wider sense, the vast majority of consumer and retail business is e-enabled as is our Automotive, Technology and Life Science & Healthcare business DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 27

28 2. TECH DISRUPTION? AUTOMATION & DIGITALIZATION AT DHL SUPPLY CHAIN Digitalization in key operational processes Automated Storage and Retrieval Systems Collaborative Stationary Robots Vision Picking Surveillance with Drones Location/Tracking via Internet of Things Smart Scanning/ Smart Watches Automated Pallet/ Tugger Automated Picking Robots Processes to be automated: Automated Put-away Assisted Manual Picking Machine Picking Assisted Co-Packing Automated Support Processes DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 28

29 2. AUTOMATION & DIGITALIZATION AT DHL SUPPLY CHAIN VIDEO LOCUS ROBOTICS DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 29

30 TARGETS WE ARE ON THE ROAD TO ACHIEVE DSC STRATEGY 2020 FOCUS CONNECT GROW Drive standardization and reduce complexity Create an effective organization globally Shift the portfolio 1. Improvement of underperforming business 2. Operational standardization 3. Commercial standardization to increase efficiency. 4. Efficient and effective functions 5. Consistent and lean organization globally 6. Culture and mindset shift to enable change. 7. Value added services 8. Global sectors and products 9. Geographical shift to address attractive segments. Strategy 2020 plan well underway with major portfolio moves completed for Focus & Connect Global sector and product teams taking advantage of our platform to Grow into 2020 & beyond DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 30

31 TARGETS STRONG PROGRESS ALONG STRATEGY 2020 OBJECTIVES FOCUS CONNECT GROW Drive standardization and reduce complexity to increase efficiency Create an effective organization globally to enable change Shift the portfolio to address high margin segments Labor productivity Overhead development Focus sectors: Automotive, Life Sciences & Healthcare 1), Technology EBIT per FTE in EUR CAGR Indirect cost in EUR CAGR -1.4% +5.8% Revenue in EUR +5.8% CAGR ) Excluding NHS Supply Chain DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 31

32 4. DSC GROUP CONTRIBUTION LIMITED ASSET INTESITY DRIVES ATTRACTIVE AND RISING ROCE DHL Supply Chain: ROCE and EBIT margin, % 50% 40% 30% 20% 10% 6% 0% 5% 4% 3% 2% 1% 0% 51,5% 39,3% 24,4% 7,9% 13,9% 17,6% Target EBIT Margin 3,9% 1,8% 3,1% ) ROCE excl. GW 1) ROCE incl. GW EBIT Margin 1) Divisional ROCE: EBIT / Rolling 12m net segment assets (Business Operating Assets + Goodwill) Focus on Strategy 2020 initiatives provides sustained growth in EBIT, EBIT margin and ROCE. EBIT margin moving into the target band accompanied by strong & improving return profile. DPDHL GROUP CMD 2018 DSC PRESENTATION MAY 2018 PAGE 32

33 AGENDA PeP update DSC update Express update DGFF update CFO update CEO update Frank Appel, CEO PeP John Gilbert, CEO DSC Ken Allen, CEO Express Tim Scharwath, CEO DGFF Melanie Kreis, Group CFO Frank Appel, Group CEO DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 33

34 DHL EXPRESS YOUR KEY QUESTIONS ON OUR WAY TO OUR 2020 TARGETS top line growth expectation? B2C profitability? Competitive Advantage? Market Share Express vs. Parcel? Last Mile Yield TDI B2B vs. B2C Pricing Discipline? exposure to e-commerce Cyclicality? Fuel Surcharge Automation Disruption Volume Growth Differentiators Regional Trends ROCE Refleeting Growth Capex DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 34

35 EXPRESS AGENDA 1 How do you consistently grow your TDI business? 2 How is ecommerce impacting your business? 3 How do you see future profitability? 4 What are your capex requirements? DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 35

36 The Most International Company in the World

37 1. TOPLINE GROWTH REVENUE GROWTH DRIVERS AT DHL EXPRESS FOCUS ON TDI IS KEY VOLUME GROWTH DRIVERS GROWTH ACROSS THE ENTIRE NETWORK 2017 Revenue distribution 0% 3% 12% 7% Global and regional GDP / trade development for classic B2B verticals Strong structural e-commerce growth emerging in TDI, serving the premium B2C segment Growth strongly diversified by region and vertical, reflecting leading global network 78% TDI TDD DDI DDD ACS / Others TDI is the premium end of the logistics industry 5-6% market growth in a normal environment TDI market leadership gradually expanded DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 37

38 1. TOPLINE GROWTH TDI INDUSTRY: PORTER S FIVE FORCES ANALYSIS THREAT OF NEW MARKET ENTRANTS BARGAINING POWER OF SUPPLIERS Transport including virtual airline (40% of cost) securing capacity at high quality Workforce (29%) is spread over the entire globe and mainly frontliners; access to all markets for network experts Fuel cost (7%) recovered through fuel surcharge Others (24%) Only three global players Quality brand names High capital req s / asset intensive network vs. RIVALRY AMONG COMPETITORS 2016 TDI global market shares 38% 29% 22% Market places, tech companies (last mile) and major domestic players other 11% THREAT OF SUBSTITUTE PRODUCTS OR SERVICES BARGAINING POWER OF BUYERS 2.7 million customers Top 1,000 customers account for 30% of revenue Rapidly increasing international e-commerce consumer base Industry habit of annual general price increase based on global inflation, service quality and security improvements Postal / EMS Freight Forwarders 3D Printing On-/ Nearshoring DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 38

39 1. TOPLINE GROWTH FOCUS ON TDI IS OUR KEY TO SUCCESS Leading global network & insane customer centricity & certified employees = consistent strong TDI growth and market share expansion DHL EXPRESS, TDI SPD YOY TDI, GLOBAL MARKET SHARE 10,2% 9,4% 8,4% 7,8% 8,7% 7,6% 9,9% 8,1% 9,6% 7% 11% 30% 6% 12% 34% 22% 11% 1 38% 23% 22% 29% 26% 29% Q Q DHL Fedex UPS TNT 1) includes 4% TNT DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 39

40 1. TOPLINE GROWTH FOCUSED YIELD MANAGEMENT GENERAL PRICE INCREASE TENDER REVIEW BOARD RED AND YELLOW CARDS SURCHARGES SHIP TO PROFILE Setting the right price and enforcing it ensures a successful yield management DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 40

41 E-COMMERCE FOCUS POWER UP YOUR POTENTIAL Good progress in countries PUYP, organization structure Make sure the website health check is applied in front of customers. Make uncomfortable people comfortable 3PV E-Commerce platforms: make sure your ESS teams are aware of the latest developments. Regional IT team to drive focus to local ESS teams.

42 E-COMMERCE FOCUS WHITEPAPERS & ENABLERS RELEASED: January 2017 RELEASED: February 2018

43 Global-e enables retailers to sell globally in a localised manner through providing an end-to-end solution for them, opening up sales opportunities in new markets globally with a consistent, yet fully localised customer experience, and a simple, risk-free transaction for the retailer. LOCALISED BROWSING LOCALISED CHECKOUT LOGISTICS MARKETING & INSIGHTS RISK MANAGEMENT AND REGULATION

44 2. E-COMMERCE E-COMMERCE IS A PROFITABLE GROWTH DRIVER FOR DHL EXPRESS Portion of B2C TDI shipments has increased over time We grow B2C profitably because 90% of the KPIs perfectly suit our network >10% 1) >23% 1) SpD Volume growth drives better utilization of existing network WpS Lower weight per shipment RpK Higher RpK related to lower WpS We treat B2C/e-commerce shipments as a TDI vertical applying the same yield discipline using B2C requirements to enhance the overall TDI service and capabilities equipping our sales force to effectively sell to e-commerce customers engaging in partnerships to grow cross-border e-commerce 1) Indications based on medium to large B2C customers of top 30 countries First mile Hub sort Airlift Last mile 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 DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 44

45 3. PROFITABILITY EBIT GROWTH AND MARGIN IMPROVEMENT IS A COMBINATION OF SEVERAL FACTORS 1. Topline revenue management Yield initiatives such as GPI, red-yellow-card, ship to profile, B2B and ecommerce growth PROFITABLE GROWTH TRIANGLE 2. Leverage Aviation Network Cost per Kilo (CpK) Efficiency in air network through scale effects and active fleet management improving CpK 3. Efficiency in Ground Operations Operations Cost per Move (OCPM) Efficiency measures include Gemba walks, hub automation and IT investments EBIT growth is driven by adding the right volumes at the right price to a calibrated and efficient infrastructure DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 45

46 RESULTING IN CONTINUOUS EBIT GROWTH AND EBIT MARGIN EXPANSION EBIT EURm Rolling 12m EBIT Margin % % 12.2% 12% % % Q Q w/o IFRS16 impact 8% 6% 4% 0% Continuation of EBIT growth will remain a combination of topline growth and further gradual margin improvement DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 46

47 4. CAPEX CASH GENERATION CONSISTENTLY ABOVE CAPEX SPEND AND THE GAP IS WIDENING Express OCF vs gross capex, in EUR m % 25% Express, ROCE % % 10% And we consistently earn more on the capex we spend 286 5% OCF Gross Capex 0% Disciplined growth investment has led to simultaneously improving cash generation and ROCE DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 47

48 4. CAPEX WHERE DOES IT GO? Express capex split, , In EUR m Other (incl. gateways and service centres) Transportation Equipment HUB Operations 286 Aviation In order to exploit the growth opportunity, capex spend flexes according to demand across the steps of the entire network DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 48

49 4. CAPEX AIRCRAFT INVESTMENTS HAVE SUPPORTED TOPLINE GROWTH AND MARGIN DEVELOPMENT DHL Global Network Change Dedicated Network Flights (per day) Capacity (flown tons per day) +3.8% CAGR +9.2% CAGR Weight Loadfactor +1.1% Weight Loadfactor - TDI +4.2% Cost per Kilo (CpK), Dedicated Flights After Fuel and FX adjustment (non-fuel adj: -3.5%) CpK, Commercial Air Lift, % CAGR -4.8% CAGR Carbon Efficiency Index -2.8% CAGR (improvement!) Targeted capacity additions have allowed to drive strong TDI volume growth while generating operating leverage / economies of scale DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 49

50 4. CAPEX INTERCONTINENTAL FLEET: USE REPLACEMENTS AS OPPORTUNITY TO MOVE TOWARDS HIGHER OWNERSHIP STRUCTURE Dedicated fleet (w/o feeders) 2010: ~150 planes 2017: >200 planes : fleet expansion Expansion based on successful virtual airline model gradual shift in mid-sized, regional segment from leases to ownership Today: well balanced fleet regarding ownership and maturity ownership structure of intercont fleet still more tilted towards leases Outlook: intercont replacements by new, owned planes Considering gradual replacement of older intercont planes by acquisition of new aircraft first delivery expected in 2019 Besides that, further fleet expansion to be carefully considered in line with market growth expectations Owned Lease Planed intercont plane replacements are capacity-neutral, but with significant cost, efficiency and flexibility benefits DPDHL GROUP CMD 2018 DHL EXPRESS PRESENTATION MAY 2018 PAGE 50

51 Dedicated intercontinental and interregional networks 250 AIRCRAFTS 500 AIRPORTS 22 MAJOR AIR HUBS

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53 AGENDA PeP update DSC update Express update DGFF update CFO update CEO update Frank Appel, CEO PeP John Gilbert, CEO DSC Ken Allen, CEO Express Tim Scharwath, CEO DGFF Melanie Kreis, Group CFO Frank Appel, Group CEO DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 53

54 DGFF YOUR KEY QUESTIONS ON OUR WAY TO STRATEGY 2020 TARGETS Tech Start-Ups Blockchain Margin DriversSimplify Industry Development Market Share Volumes How long does it take? Benchmark? Cylicality Industry Consolidation Slow Incumbent? IT renewal Gross Margins Growth Business? Tech Disruption! Is DHL the best owner? Synergies? M&A e-commerce DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 54

55 DGFF AGENDA 1 Why is Forwarding an interesting industry for DPDHL? 2 Structural changes: is tech disruption a problem for Forwarding? 3 What role does DGFF play for DPDHL? DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 55

56 1. FORWARDING INDUSTRY CHARACTERISTICS AND DYNAMICS Since 2015, the top 10 global forwarders have gained 3 ppts of market share and after years of subdued growth, the overall market is currently expected to show solid growth Global freight forwarding market size and forecast ( m) The Top 10 forwarders account for 44% of the total market m EUR CAGR 4.1% Global Growth Growth rate 18% 15% 12% 9% 6% 3% 0% DHL GF Kuehne & Nagel DB Schenker Expeditors Sinotrans Panalpina DSV Bollore Nippon Exp CEVA 5,2% 4,6% 3,8% 3,5% 3,5% 3,1% 2,6% 2,3% 7,0% 7,9% Source: TI Global Freight Forwarding 2017, 2015 DGFF is the leading global forwarder in a fragmented, growing market DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 56

57 1. FORWARDING INDUSTRY AFR MARKET OUTLOOK REMAINS SUPPORTIVE, AFTER STRONG % Global AFR market growth expected in ) AMNO 1.4m 1.6m 3.2% 1.2m 4.0% EURO 0.8m 4.1% MENAT 2.5m 4.7% 2.9m 5.2% 0.5m 2.7% APAC 1.5m 3.7% 2.6m 4.4% AMNO 2018e Size (m tons) Growth Americas % APAC % Europe % 4.3% AMLA SSA 4.6m 5.2% MEA 1-1.4% size in mn Tons Growth 17-18e Above Global Growth Below Global Growth 1) Source: Seabury Market Data DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 57

58 1. FORWARDING INDUSTRY E-COMMERCE IS A DRIVING FORCE BEHIND WORLD TRADE, ESPECIALLY AIR FREIGHT E-commerce Market Size by Key Regions, e CAGR e m tons (CAGR ) 17.8% Global market CAGR +11.7% +12.5% AMNO 1.82 Western Europe 1.40 Middle East 0.10 AMNO 2.83 Western Europe 2.24 ASPA 2.20 Middle East 0.33 ASPA % +24.1% Source: Global Supply Chain Intelligence (GSCi), HSBC Global Research Freight Forwarding Nov 2017 e-commerce volumes have become a new AFR market driver DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 58

59 1. FORWARDING INDUSTRY OFR MARKET OUTLOOK VOLUME FOR MAIN TRADE LANES % Global OFR market growth expected in ) 2017e, in mteu 2017e-2021e CAGR, in % 7.6 mteu 3.5 mteu +0.7% +1.2% NORTH AMERICA Incl. MEXICO 1.7 mteu +0.9% 11.9 mteu +1.6% FAR EAST 15.8 mteu +0.9% NORTH AMERICA Incl. MEXICO 3.5 mteu +1.3% 2.0 mteu 1.7 mteu EUROPE +0.7% +1.3% Incl. MED 7.0 mteu 7.0 mteu LATIN 35.1 mteu +0.9% AMERICA +0.9% 0.2 mteu +3.1% INTRA ASIA +3.0% excl. Oceania 4.5 mteu LATIN AMERICA 1) Source: Seabury GLOBAL CONTAINER TRADE 2017e mteu +2.3% CAGR 2017e-2021e +2.8% OFR expected to grow mid-term, mainly driven by Asian tradelanes DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 59

60 2. TECH DISRUPTION? THE LIFECYCLE OF A SHIPMENT IS A COMPLEX PROCESS Forwarding is more than brokerage of transport, it is managing all the steps along the way Goods to be shipped Quotation Process Plan route & organize shipment Take control of goods from customer Create documents for export compliance & customs Manage transport to port/airport Consolidation Manage loading & export process Ensure goods are shipped Ensure shipment stays on track Billing & payments Transport to warehouse or final destination Manage documents for import compliance & customs process Accept delivery at port/airport Success in Forwarding is built on experience, customer relationships, processes and in some aspects, such as consolidation, is also a function of scale DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 60

61 2. TECH DISRUPTION? INNOVATION AND TECHNOLOGY INVESTMENT ARE KEY TO SUCCESS Technology will simplify and accelerate many steps in the forwarding process Goods to be shipped On-line Quotation Tool Saloodo! On-line freight brokerage platform App-based tracking tools IT System Upgrades App-based tracking tools Ocean View real-time tracking platform IT System Upgrades App-based tracking tools IT System Upgrades The innovations we are implementing today and accelerating in the future will allow us to exploit our strengths particularly in terms of customer relationships DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 61

62 3. DGFF CONTRIBUTION SIMPLIFY STRATEGY IS AIMING TO CLOSE THE GAP TOWARDS BENCHMARK PROFITABILITY 30% 25% Benchmark Conversion Ratio Range 20% 15% DGF EBIT/GP Conversion DGFF EBIT Margin 10% 5% 0% Mid-term target No structural barriers we have the right combination of people, business model, processes and IT renewal to achieve benchmark conversion ratios over time DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 62

63 3. DGFF CONTRIBUTION DGF IT RENEWAL ROADMAP UPDATE LEGACY SYSTEMS CRM Tool Upgrade CRM SALES Legacy Quote tool 1 Legacy Quote tool 2 Legacy System Legacy System Harmonized Quotation Tool Enhance Customer Portal Legacy Quote tool 3 Legacy System Online Quotation & Booking OPERATIONS Legacy Transport Management System LOGIS Legacy EDM (US) Legacy Transport Mgmt System (POC) EDM Global Roll-out OFR Pilot Operational Irregularities Management AFR Pilot OFR Roll Out AFR Roll Out Maximize scope of use, integration, automation Legacy Legacy Shipment Visibility Tools Significant progress/completed; now business as usual Initiated and demonstrating progress; further rollout ongoing Significant progress has been made across all initiatives, further rollout on-going DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 63

64 3. DGFF CONTRIBUTION WE HAVE A CLEAR PLAN TO MOVE FORWARD AND ARE EXECUTING ON IT 1 Adherence to a set of clear business rules along three areas: Mindset and behavior Roles and responsibilities Steering and incentives 2 3 Structural cost reductions on all levels IT Renewal Roadmap (IRR) DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 64

65 3. DGFF CONTRIBUTION FORWARDING IS AN ASSET-LIGHT AND HIGH RETURN INDUSTRY DHL Global, Forwarding, Freight: ROCE, GP and EBIT margin, % 50% 44,1% 53,8% 45,3% 40% 30% 20% 10% 22.6% 23,50% 7,9% 9,7% 23,7% 6,0% ROCE excl. GW DGF GP Margin ROCE incl. GW 1) 1) 5,0% 5.0% 2,7% 3,2% 2,1% EBIT Margin 0,0% ) ) Divisional ROCE: EBIT / Rolling 12m net segment assets (Business Operating Assets + Goodwill), 2) Adjusted for 2015 write-off Steady GP margins show that DGFF business quality remains at benchmark levels. Simplify strategy aims to unlock benchmark conversion and EBIT margin levels DPDHL GROUP CMD 2018 DGFF PRESENTATION MAY 2018 PAGE 65

66 AGENDA PeP update DSC update Express update DGFF update CFO update CEO update Frank Appel, CEO PeP John Gilbert, CEO DSC Ken Allen, CEO Express Tim Scharwath, CEO DGFF Melanie Kreis, Group CFO Frank Appel, Group CEO DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 66

67 GROUP CFO YOUR KEY QUESTIONS ON OUR WAY TO STRATEGY 2020 TARGETS M&A spend Capital Allocation IFRS16 International Expansion USD Finance Policy Pensions Free Cash Flow OCF Dividend Taxes CAPEX/SALES Shareholders Returns SBB Big Data Hedging FX NPV Provisions IRR GBP EBIT margins innovation Working Capital DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 67

68 CFO AGENDA 1 2 What is your capital allocation process and ROCE profile? How do you see FCF going forward? 3 How do you see the tax rate development beyond 2018? 4 What is your FX exposure? 5 How do you feel about your balance sheet and extraordinary returns? DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 68

69 1. CAPITAL ALLOCATION DISCIPLINED GROWTH INVESTMENT HAS LED TO RISING RETURNS 16% 14% 12% ROCE 11,1% 11,6% 12,3% 11,9% 11.6% 1) 14,1% 14,7% IFRS16 Group ROCE WACC 2) ROCE rebased for IFRS16 10% 8% 8,5% 6% 4% 2% 6,8% Gross capex 2,000 1,000 Gross Capex, EURm 0% E 0 1) 2015 EBIT adjusted for NFE-write off; 2) Group ROCE = Group EBIT / (Total assets current liabilities) Although IFRS 16 implementation means that absolute return numbers will change, we remain committed to unchanged capital allocation discipline and sustained growth of all return metrics DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 69

70 1. CAPITAL ALLOCATION - RETURN METRICS HAVE INCREASED SIGNIFICANTLY MORE THAN CAPITAL INTENSITY Growth Rates Indexed to 100 Group, FY 2017 (average increase ) ROCE: 14.7% (+113bp p.a.) EBIT MARGIN: 6.2% (+37bp p.a.) CAPEX/SALES: 3.8% (+19bp p.a.) ) 2015 EBIT adjusted for NFE-write off Increased investments support absolute EBIT growth as well as return metrics DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 70

71 1. CAPITAL ALLOCATION CAPEX DECISION PROCESS, DIVISIONAL SPLIT AND GUIDANCE Strategy 2020 Half Time Report London 11 May 2017 Q4/FY17 results 7 March 2018 DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 71

72 1. CAPITAL ALLOCATION CAPEX BY DIVISION WHERE DOES IT GO? PeP (2017 Capex, EUR m) EXPRESS (2017 Capex, EUR m) 1,049 EXAMPLES 666 EXAMPLES Other Gateways Service Centers Other StreetScooter Post IT Partner outlets Vehicles Hubs & Gateways Leipzig Hub Brussels Hub East Midlands Hub Cincinnati Hub Parcel International Market entries/expansion Sorting center expansion Madrid Hub Ground Hub Mexico Parcel Germany 50k sorting center Mechanized depots Aviation Aircraft purchases/ Air Hong Kong transaction Aircraft maintenance Most investments support e-commerce driven growth in Parcel and Express networks DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 72

73 1. AVIATION NETWORK STEERING APPROACH UNCHANGED OPPORTUNE TIMING TO SHIFT INTERCONT TOWARDS MORE OWNERSHIP How we look on own vs lease: Asset Intensity Significant benefits of Buy vs Lease for intercont replacements Cost (operation&ownership) SIGNIFICANT SAVINGS Savings reflect lower cost over lifetime & fuel efficiency, driving >50bp margin improvement potential Expect EUR ~ 0.2bn incremental capex in FY18 Financed by separate debt vehicle no burden on excess liquidity Cost Position Asset intensity NO CHANGE No difference in asset recognition under IFRS 16 Flexibility Flexibility OPERATIONAL BENEFITS Better flexibilty to match supply capacity to demand changes Higher reliability and fuel efficiency of new planes are most relevant on intercon fleet given most intense utilization Using balance sheet strength to unlock further structural Express margin potential DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 73

74 2. FCF GENERATION SIGNIFICANT PROGRESS ON CASH FLOW GENERATION in EUR m CAGR OCF: 10% OCF 1,927 2,371 2,244 2) 2,994 3,040 FCF: 22% NET CAPEX: 11% 3,444 2) 3,439 2) 3,792 2) EBIT growth has driven sustained increase in Operating Cash Flow Providing funding for investment in future growth, in particular in Parcel and Express While simultaneously driving improved Free Cash Flow generation Use of OCF: Net Capex Other 1) FCF 1) Includes net M&A and net interest; 2) Adjusted for pension funding (2012: EUR 1bn, 2016: EUR 1bn, 2017: EUR 0.5bn) and non-recurring items (FY 2015) DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 74

75 2. FCF GENERATION - EBIT GROWTH IS AND REMAINS THE MOST IMPORTANT FREE CASH FLOW DRIVER CASH FLOW STATEMENT EBIT Depreciation Change in provisions Working capital Income taxes Net capex Redemption of lease liabilities Net M&A FCF EXPECTED TREND MAIN DRIVERS Group EBIT guidance, 2018: EUR ~4.15bn; 2020: EUR >5bn Step change due to 1 st time application of IFRS 16 in 2018, thereafter 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 Further modest yoy increases based on growth opportunities, excluding debt-financed Express intercont fleet renewal NEW due to 1 st time application of IFRS 16 in 2018 (offsetting change in depreciation) 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 DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 75

76 3. TAXES P&L TAX RATE AND CASH TAXES PAID EXPECTED TO INCREASE 25% 20% 15% P&L tax rate Main difference between P&L tax expense and cash taxes paid arise from deferred tax assets 10% 5% 0% In EUR m Cash taxes paid No additional tax loss carryforwards to be capitalized as deferred tax assets in Germany in 2018 Not yet capitalized tax loss carryforwards amount to EUR 6.4bn, most of it in the US Cash taxes paid will increase in line with anticipated growth in profitability P&L tax expense P&L tax rate expected to reach mid-to-high 20% range by 2020 DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 76

77 4. FX EXPOSURE - FX MOVEMENTS ARE PART OF BEING THE MOST GLOBAL COMPANY IN THE WORLD CZK, MYR USD Other positive exposures Other larger currencies with positive exposure (e.g. GBP, JPY, KRW, AUD, PLN, RUB, SEK, MXN) USD Block 1) (CNY, HKD, INR, TWD, THB, SAR, AED, PHP, VND) FX effects are mainly translational EUR appreciation => lower revenue and EBIT Direct USD exposure actually more than offset by USDcorrelated block => USD depreciation = positive standalone, but in practice most often offset by FX movements in the USD block More than 50% of FX effects in 2017 came from outside of the big currencies Ultimately, FX volatility is unavoidable and best managed by the business We do only opportunistic hedging (e.g. Brexit) Difficult to model FX externally due to the many cross currency dependencies Net Short FX Exposure Net Long FX Exposure 1) Currencies with a correlation to the USD above 75% DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 77

78 5. TURNAROUND IN CASH GENERATION HAS PUT US INTO POSITION TO FINANCE GROWTH INVESTMENTS AND SHAREHOLDER RETURNS in m EUR 1,669 1, ) 484 1,927 1) ,444 1) 1,432 1, FCF more than covering (rising) dividend payment since 2013 Cash Flow turnaround mainly driven by EBIT growth Tailing off of provision outflows (esp. US domestic Express restructuring) Increased CF focus and management incentives Sustainable FCF performance is basis for continued investments in organic growth and attractive shareholders returns in line with our Finance Policy FCF Dividend payment 1) Adjusted for pension funding (2016: 1bn, 2017: 0.5bn); 2) Adjusted for pension funding (EUR 2bn) and non-recurring items DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 78

79 5. SHAREHOLDER RETURNS FINANCE POLICY: PRINCIPLES & COMMITMENT FULLY CONFIRMED FINANCE POLICY Target / maintain rating BBB+ - BBB+ remains the right target rating - Current status: at/above target - Balance sheet headroom to be partly used for aircraft replacement in EXP Rating Fitch Moody's Long-term Short-term Outlook BBB+ F2 stable A3 P-2 stable 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) - Full commitment and delivery - Allows to well reflect operating performance improvement in shareholder return - Read as: around 50% - Fully committed to return excess liquidity to shareholders - No fixed timelines or treshold - Pension fundings actually debtfunded consequently, eliminated as cash use for excess liquidity DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 79

80 AGENDA PeP update DSC update Express update DGFF update CFO update CEO update Frank Appel, CEO PeP John Gilbert, CEO DSC Ken Allen, CEO Express Tim Scharwath, CEO DGFF Melanie Kreis, Group CFO Frank Appel, Group CEO DPDHL GROUP CMD 2018 CFO PRESENTATION MAY 2018 PAGE 80

81 GROUP CEO YOUR KEY QUESTIONS ON OUR WAY TO STRATEGY 2020 TARGETS ROCE Group structure Growth profile Dividend Macro trends MAIL 2020 targets E-commerce Tech Disruption Big Data Sell DGFF? FCF CAPEX Sell DSC? efulfillment excess liquidity? shareholder return Finance Policy Parcel M&A? digitalization Differentiators? B2C Wage Inflation Resilience Streetscooter EBIT margins innovation Capital Allocation labor markets DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 81

82 CEO AGENDA How important is e-commerce for DPDHL? How much macro risk or tailwind is there for DPDHL? Any big M&A or changes in the group structure? So, will you make your 2020 targets and how? What does this all mean for shareholder returns? What s next: Digital disruption or opportunity? DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 82 6

83 1. E-COMMERCE WE ARE THE GLOBAL LEADER IN E-COMMERCE LOGISTICS Market and innovation leader in Parcel Germany DHL Parcel Europe network covering 26 countries Global cross-border mass market delivery by DHL ecommerce PeP EXP DHL Express offers premium TDI delivery to 220 countries/territories X-Border e-commerce vertical is a profitable growth driver for DHL Express Multi-national network of vendorneutral efulfilment based on PeP & DSC capabilities DSC DGF E-commerce growth drives overall international trade, especially Air Freight demand B2C and B2B supply chains are going online & omnichannel DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 83

84 1. E-COMMERCE UNIQUE SET OF CAPABILITIES ACROSS THE GROUP, COMBINING STRENGTHS OF EACH EACH DIVISION Domestic and Cross-Border Delivery Warehousing/ Fulfillment Segment Premium (Time definite, same day) Deferred (Day definite) Economy Multi-user Dedicated Delivery profile: Price Delivery profile: Speed $$$ 0 3 days $$ 1 8 days $ 9 15 days Close to demand with low volumes per customer Central location with high volumes per customer Product type Express Post - ecommerce -Parcel Supply Chain Global Forwarding, Freight Supply Chain DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 84

85 1. E-COMMERCE GROWTH IS DRIVEN BY A BROAD CUSTOMER BASE Leading Online Market Places Traditional Brick&Mortar moving online Strong Global and Local Brands Many small, fast-growing shops, brands & marketplaces No single customer represents over 2% of group revenues DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 85

86 1. E-COMMERCE DISRUPTION? DPDHL HAS EVOLVED SUCCESSFULLY IN HIGHLY COMPETITIVE MARKETS PeP Fully deregulated local market characterized by strong competition DSC Fragmented market where 3PL only serves 15% of total logistics demand The key is customer centricity EXP Asset intense, concentrated market with high barriers to entry DGF Fragmented market demands expertise, strong customer relationships and scale Every day in every division we have to prove our right to win. The key to success is customer centricity & innovation DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 86

87 1. KEY ELEMENTS OF E-COMMERCE Customer Centricity Dynamic, structural growth Differentiated markets Strong Opportunity DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 87

88 2. MACRO GROUP PORTFOLIO STRONGLY DIVERSIFIED IN TERMS OF TOPLINE DRIVERS AND MANAGEMENT OF BUSINESS CYCLES Low Growth High B2C Parcel Express Post Supply Chain B2B Express DGFF Low Exposure to GDP High Well balanced and diversified portfolio of businesses and their respective drivers DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 88

89 2. MACRO HOW CYCLICAL ARE WE? SUMMARY OF OUR SOURCES OF GROWTH STRUCTURAL GROWTH: ~20% 2017 Group revenue CYCLICAL: ~45% Structural e-commerce growth in B2C delivery DHL Parcel B2C Express DHL ecommerce DGFF B2B Express Tied to growth in international trade Long-term contracts, outsourcing drives GDP+ market growth DSC Legacy letter volumes subject to e-substitution RESILIENT GROWTH: >20% Post STRUCTURAL DECLINE: ~15% Ongoing shift towards growth segments EBIT and cash flow performance furthermore supported by structural cost and profitability measures DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 89

90 GROUP STRUCTURE: ALL DIVISIONS FINANCE THEIR OWN GROWTH CAPEX AND CONTRIBUTE TO FREE CASH FLOW & DIVIDEND EUR m OCF Capex OCF vs Gross Capex by Division, PeP Express DGFF 2000 DSC All divisions are self-financing and contribute to Group shareholder return DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 90

91 3. GROUP STRUCTURE ALSO ALLOWS TO REAP SYNERGIES BETWEEN DIVISIONS #Strong Brands: #Customer Solutions & Innovation (CSI) # Certified # # Unique global capabilities, in particular in e- commerce logistics # Vendor-neutral efullfillment PeP-DSC #Asset share last mile PeP Express #Air Capacity Sales EXP-DGFF #Shared Services: - Procurement, insurance, fleet, real estate - Finance - IT - HR All Division benefit from being part of a strong DPDHL Group DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 91

92 3. GROUP STRUCTURE M&A: NO NEED FOR TRANSFORMATIONAL DEALS EUR m Net M&A, % 40% 20% 0% ROCE, DHL Forwarding, Freight and DHL Supply Chain 53,8% 51,5% 44,1% 45,3% 39,3% 24,4% DGFF ROCE* DSC ROCE* WACC: 8.5% * Divisional ROCE = EBIT/Net Segment Assets excl. Goodwill, DGF adjusted for 2015 write-off Opportunistic, bolt-on strengthening of portfolio, but no big shifts needed/wanted DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 92

93 TARGETS CONFIRMED AND IN PROGRESS EUR bn 2020 target Implied CAGR 1) Actual CAGR Group > % 6.9% PeP ~ % 4.0% DHL ~ % 6.6% 2) CC/Other ~-0.35 flat flat 1) Adjusted for EUR 150m expected positive EBIT effect from IFRS16 as of FY18 2) By Division: Express +12.5%, DGFF -11.2%, DSC +5.9% 2020 EBIT targets confirmed as announced in March, incl. IFRS 16 effect : PeP and Express outperformance has offset DGFF weakness : Expected acceleration in Group EBIT growth reflects planned DGFF turnaround Executing our strategy in order to deliver on our 2020 EBIT targets DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 93

94 TARGETS WHAT S NEEDED TO DELIVER Divisional agendas continue to have clear priorities on path to 2020: PeP: continue revenue mix shift towards parcel - while optimizing German network set-up Express: keep TDI flywheel going, supported by targeted capex DGFF: Simplify plan to deliver gradual improvement in EBIT/GP conversion DSC: continue executing its Strategy 2020 to drive margin into target corridor & accelerate growth While at the same time setting base for the next S-curve beyond 2020: Building out capabilities for digitalization opportunities: technology, incubations, people, culture & agility Continue expanding international e-commerce footprint: efulfillement, Parcel International Commitment to 2020 targets will not prevent us from looking & preparing beyond DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 94

95 5. IMPROVED OCF GENERATION ALLOWS HEALTHY BALANCE BETWEEN GROWTH INVESTMENTS AND SHAREHOLDER RETURNS , cumulative , cumulative in EUR bn Group dividend Net capex ,4 Excess liquidity 5,1 First-ever SBB program in 2016/17 FY17 dividend up +44% vs FY13 3,9 8,4 Group ROCE +240 bp ( ) Operating cash flow 1) 1) Net capex & dividend spend Operating cash flow Net capex & dividend spend 1) Adjusted for debt-financed pension fundings (EUR 2bn in 2012, EUR 1bn in 2016, EUR 0.5bn in 2017) DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 95

96 5. SHAREHOLDER RETURNS DPDHL GROUP FINANCE POLICY MAIN PRINCIPLES CONFIRMED AND EXECUTED UPON FINANCE POLICY Dividend of EUR 1.15 for FY2017 Target / maintain rating BBB+ Underlying Payout Ratio 1) 1,05 1,15 Dividend payout ratio to remain between 40 60% of net profit (continuity and Cash Flow performance considered) 0,65 0,70 0,70 59% 58% 53% 0,80 0,85 0,85 49% 50% 46% 48% 52% 60% 40% Excess liquidity will be used for share buybacks and/or extraordinary dividends Dividend payments of EUR ~1.4bn to DPDHL shareholders on April 27, ) Adjusted for Postbank effects as well as non-recurring items when applicable DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 96

97 6. DIGITALIZATION OWNING TOMORROW REQUIRES NEW HORIZONS Technology Exploitation i Business Exploration I Culture and Capabilities DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 97

98 i Small i use cases Car Trunk Delivery Mobile delivery address for parcels UAVs / Drones Inventory mgmt., remote last-mile delivery Data Analytics Turning data into process improvement Augmented Reality Smart glasses improving efficiency in warehousing Sawyer Collaborative robot for co-packing EffiBOT Fully automated robot trolley DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 98

99 I Big I test case: Streetscooter Creating & implementing new ideas DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 99

100 STREETSCOOTER HISTORY Foundation StreetScooter GmbH Acquisition of 100% stake by DPAG Rollout CO2-free Mail Delivery Rollout CO2-free Parcel Delivery Sale 3rd Parties Start of development electronic delivery vehicles Production Work Industrial production Work L Prototype Work XL DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 100

101 STREETSCOOTER PRODUCT PORTFOLIO Work 20 kwh Work 40 kwh Work L 40 kwh Prototype Work XL Top speed: Total load capacity: 85 km/h 720 kg Top speed: Total load capacity: 85 km/h 585 kg Top speed: Total load capacity: 85 km/h 895 kg E-bikes & E- trikes Range: 113 km Range: 232 km Range: 205 km Battery: 20 kwh Li-ion Battery: 40 kwh Li-ion Battery: 40 kwh Li-ion 100% electric, 100% emission-free, tough everyday commercial vehicle DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 101

102 DPDHL GROUP More than 5,500 StreetScooter Work and Work L in use Over 6,500 charging points installed More than 3,000 e-bikes and e-trikes in use Annual production of around 20,000 vehicles planned mid-term Continuous improvement (e.g. autonomous driving) DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 102

103 STREETSCOOTER SUMMARY Semi-automated small series production, experience and product development competence Allows for faster, customized and cheaper development of tailormade e-vehicle solutions Market leading position with broad range of electric mobility options in highly attractive segments Material growth opportunities through increased penetration in existing and new market segments Agile and innovation-driven culture R&D capacities to develop new product offerings with short timeto-market as network partners are organized in Lead Engineering Groups DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 103

104 INNOVATION DRIVES VALUE FOR OUR CUSTOMERS, EMPLOYEES AND INVESTORS A great family of great divisions PeP Express Global Forwarding, Freight Supply Chain + Corporate Incubations OPPORTUNITY: Productivity gains, optimization and renewal of existing business model through Small innovations New business models build on unfair competitive advantage Small i Small i Small i Small i Big I DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 104

105 DPDHL INVESTMENT PROFILE TODAY 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 DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 105

106 DPDHL GROUP TOMORROW: REAP FULL BENEFITS OF E-COMMERCE AND DIGITALIZATION OPPORTUNITIES Globalization & E-commerce Globalization: basis of our long standing B2B business and position as most international company in the world E-commerce: emerging B2C business driven by consumers increasingly shopping online from abroad boosting boosting Digitalization Digitalization: accelerating impact of technology boosting globalization and e- commerce as well as efficiency and productivity Key strategic question: How can digitalization best help us to drive revenue and quality up and cost down? - How to maximize profit potential from the e- commerce opportunity? - How to realize maximum efficiency/ productivity gains? Key strategic advantage: We are the leading company in a highly attractive growth industry - Today we can leverage technologies that have not been available before - Today we are attracting talents that would not have joined us before DPDHL GROUP CMD 2018 CEO PRESENTATION MAY 2018 PAGE 106