Exclusive Interview With Tim Scharwath, Chief Executive Of DHL Global Freight: Logistics Industry Has Been Accustomed To The Slow Rebound Of Global Freight Demand After The "Bumpy" Epidemic.

[post logistics era of logistics change]

In an exclusive interview with the twenty-first Century economic report, Tim Scharwath expressed optimism about the global freight market this year. He believes that the logistics industry has experienced many important events, and has great resilience to disasters and economic fluctuations. It is not worried that the industry will be greatly affected. Moreover, he pointed out that demand in different regions is being restored according to different rhythms.

After COVID-19, not only people's physical and mental needs are restored, but also the global economy needs to be restored and restarted. This menacing epidemic has brought about many geopolitical and economic challenges, and has also raised concerns about the reshaping of all sectors of the epidemic.

Recently, DHL global freight chief executive Tim Scharwath conveyed an optimistic attitude in his exclusive interview with the twenty-first Century economic report. He said that the logistics industry had experienced many important events, and it had great resilience to disasters, economic fluctuations and so on. He was not worried about the huge impact of the industry. Moreover, he pointed out that the demand of different regions was recovering at different paces. DHL would keep up with demand adjustment measures, such as May 19. On the same day, it launched the first myDHLi platform to realize the full coverage of freight mode. Tim Scharwath told reporters that Deutsche Post Group (DHL) will still insist on completing the strategic investment of digital five for 2 billion euros in the past five years.

DPDHL has the courage to make such a decision. Recently, DPDHL group has just handed in its first quarter earnings report. The results show that the group's revenue increased by 0.9% to 15 billion 500 million euros, and all five business segments achieved profits in the first quarter of 2020.

Epidemic impact is limited.

Twenty-first Century: COVID-19 has great impact on the economy. What kind of impact does it have on your company's business? I saw the Q1 earnings data of DPDHL, and the profit fell sharply. I wonder what the impact of global freight volume and profits will be.

Tim Scharwath: Despite the significant impact of the new crown pneumonia epidemic, Deutsche Post DHL maintained a profitable growth in the first quarter of 2020. Revenue grew by 0.9% to 15 billion 500 million euros, and pre tax profit (EBIT) was 592 million euros. After adjusting the negative impact on the epidemic related to the epidemic (210 million euros) and the negative impact of the group's adjustment of the StreetScooter strategy (234 million euros), the group's operating profit was about 1 billion euros. After adjusting for non recurring items, the result was about 200 million euros higher than last year.

The decline in the first quarter was due to "frozen" logistics in China, which affected most of our revenue and business volume in most of February and March. If we adjust the non recurrent effects of the previous year, we can see that 2020 has increased compared with 2019.

Twenty-first Century: the epidemic has a great impact on your company and other logistics companies. How long do you think the impact of COVID-19 will last? In response to this common challenge, what measures are you going to take to deal with it? Which of these measures are biased towards short-term responses and which may be long-term considerations?

Tim Scharwath: I don't have a magic crystal ball, tell me what to do next. It is difficult to predict what will happen this year and next year, so we can only formulate different strategies or solutions according to different quarters.

For example, our first quarter strategy is not suitable for the second quarter, because the situation in the second quarter has changed, as we saw in China, the total freight volume in China declined in the first quarter, but the second quarter has gradually improved. The same situation also occurred in North America and Europe. In the first quarter, they did not have much impact, but the second quarter. At present, in a relatively poor situation, as Europe and North America slowly open up the market next year, we believe that the second quarter and the third quarter of Europe will gradually improve.

How do we respond to the resurgence of different regions and different tempo? First of all, we should make quick decisions and maintain sufficient capacity to meet the requirements of our customers. So we are now working hard to provide corresponding solutions for our customers. We must let freight transport work properly.

But now I can't predict whether the next economic development is u, V or W. Many politicians and economists are predicting that I am just showing signs of slow recovery, so we are optimistic about the future and believe that the next performance or situation will be better and better. Besides, we have prepared corresponding strategies for various uncertain situations that may arise in the future.

It is difficult for airlines to change goods.

Twenty-first Century: some economists believe that COVID-19 may bring geopolitical and economic upheaval. Do you think the impact of COVID-19 on the logistics industry will profoundly change the logistics industry? What will the new rules of the game look like?

Tim Scharwath: it is hard to predict what will happen. But one thing I can say is that the logistics industry has been used to dealing with difficult situations, such as the 2003 SARS, the volcanic eruption in Iceland, and the earthquake in Japan. There are always bumps on the road, but we always try to get through it. In the freight industry, we have been very adaptable to deal with all kinds of crises.

To rebuild the logistics industry, changing the freight business is not easy, because you need local talents, and you need a reliable network to handle any situation.

International trade has always had great room for development. No matter what happens, the logistics industry has always been a source of vitality. Logistics people are fully capable of dealing with any change.

Twenty-first Century: Although the Chinese market has recovered and rebounded after March, the demand for other products from Europe and America is not high except for medical supplies. Quite a lot of Chinese foreign trade enterprises feel chill. Is this reflected in your nearly two months' business volume? Can you tell us about the volume of DGFF business in China in the early April and early May? How do we perceive the implications behind the changes in China's business data?

Tim Scharwath: we can not disclose data in April and May, nor provide country segmentation information. I can only say that China's demand is still high.

On Sunday, I was walking along the Rhine river. Only 1/3 of the people on the road were getting better. Other countries, such as Spain and Italy, have a long way to go back to "normal", and some American states are slowly opening up. I think there will be demand on the continent that is opening up. With the release, people will go out for a walk and spend. Of course, I don't know if the demand will be as high as before.

Globally, we see strong growth, especially in the food and health care sectors. In addition, because of its own cargo plane, Deutsche Post DHL is proving to be one of the few carriers in the world that still can transport emergency supplies. Transport capacity may still be very tight. That's why we need to plan quarterly.

Twenty-first Century: when it comes to transport capacity, the profit margin of the air transport business has increased because of the tight freight. But since April, a large number of airlines have modified the passenger aircraft into the freight market and added more cargo routes. The supply capacity of the air transport market has greatly increased, and the profit margin is likely to be reduced. Are you worried about the Q2 profit situation? Are there any countermeasures?

Tim Scharwath: passenger flights are converted into cargo flights, which we call "ghost flights" because no one is sitting. Such things will not be normal, but short-term behavior, because airlines need to keep the aircraft in the air, help pilots keep their licenses, and prevent aircraft maintenance and quality checks.

But if you think about it, you can't put the cargo on the seat of the passenger plane. There are no big doors on these planes to push the pallet into. The only way is to bring the package by hand, so the utilization ratio of these planes can not be compared with that of cargo. They can support specific markets at a special time, such as personal protective equipment, but can not carry large packages of goods, so they can not transport goods for long.

So I am not worried that this will change the supply of market capacity, nor worry about profits. I am worried about the decline in market demand. We always strive to find the best solution for our customers and provide them with long-term and medium-term support. Our job is to give them a sense of security so that they can deliver the goods to the places they need.

Adhere to digital investment

Twenty-first Century: the COVID-19 epidemic has caused many companies to have very tight cash flow. Even German companies such as Lufthansa are at risk. Do you have the same concerns? Will your group's "2025 strategy" complete the Euro 2 billion investment as scheduled? How much is this digital project helping the global freight business?

Tim Scharwath: we are not worried about the cash situation in 2020. I believe we will continue to do well.

In the first quarter, our operating cash flow rose to 750 million euros, compared with 252 million euros in the same period in 2019. This proves that the group has a good financial position even during the epidemic period. In the first quarter of 2020, the Group invested 453 million euros in all sectors.

As part of the "2025 strategy", achieving excellence in the digital world has begun. We will continue to push this agenda in the next 5 years. We will continue to invest digitally as a whole, but I can not disclose how much of the 2 billion euro will be invested in global freight. However, we have been promoting the digital strategy for some time. For example, MyDHLi is an important part of our digital strategy.

Although the digital process is accelerating and things are connected at a high speed, customers still want to make everything easier and clear, and our tools can solve this problem well. In order to meet customer needs, we created this one-stop platform to combine online quotation and booking services with freight tracking, document acquisition and data analysis. In this way, we have not only created a 360 degree visualization service, but also created a solid foundation for customers to manage logistics services anytime and anywhere. We firmly believe that digitalization is conducive to the convenience and optimization of the daily business of shippers and freight service providers. In particular, the unpredictable and challenging period resulting from the development of the new crown pneumonia epidemic will further accelerate the digitalization process of the industry. This is the significance of Digitalization for us. It is also the driving force behind the strategic development of the group in 2025.

Twenty-first Century: a company in China has added international courier service to "rookie wrap", which is much cheaper than you and other express companies. This company shares the five largest companies in China's express business. Now it takes half the price to grab the DHL and UPS's international express business. Do you notice this new rising competitor? Are you worried about robbing your customers and businesses? Will it become a competition for you?

Tim Scharwath: we can not comment on competitors or specific companies. But over the years I've been working in the freight industry, people have been discussing whether the express business will enter the freight business. Freight forwarders live in fear and fear that express will control the whole market. However, if this happens, it will happen long ago. Just because business models are so different, that's why it never works. So I am not worried in general.

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