DHL plans more than $360M in infrastructure investments

Mike Parra, DHL Express Regional CEO, joined Yahoo FInance Live to break down how DHL plans more than $360M in infrastructure investments

Video transcript

- Shipping volumes are skyrocketing all around the world and shippers are upping their investments to try to keep up with demand. Who better to talk about it than Mike Parra, DHL Express Regional CEO. Thank you for joining us. And I understand that you're investing $360 million in the Americas to be able to meet that demand. Can you tell us a little bit about what you're doing?

MIKE PARRA: Yeah, thank you. First of all, thank you for having us. We're excited. Obviously, with the growth that we had seen in the space of B2C and B2B e-commerce, we actually saw 33% more shipments in quarter one of 2021 this year. This is across my region, which is Canada down to Argentina. But just alone in the US, we saw 41% growth quarter one this year versus quarter one of last year.

So that's triggered an investment plan for us of $360 million in the Americas where the predominant investment is really going to be in the US. Over $200 million of that is going to be in the US alone.

- Mike, you mentioned that 41% growth that you saw in the US in just the first quarter. Has that growth been sustained for the second quarter and what are you seeing I guess, as we head into the second half of the year?

MIKE PARRA: Yeah, it has been. I mean, if you recall back in quarter two of last year, we really saw a B shaped recovery. So our lowest point was in April. And then we blasted off from there and we've never come down since then. So the numbers are sustaining in quarter two. Obviously, we're going into a release of our earnings here shortly. But what I will say is that it will be pretty close to the same. So it sustained itself and we don't see it slowing down at the moment.

And with the return of potential COVID, either through this new variant and folks being back into lockdown, you'll see back to that mad rush of wanting to order online and having goods continue to be delivered to their home. So at the moment, we see it as a steady flow, at least for now.

- Tell us about shipping prices. What are your costs? Are they increasing? And then do you have the ability to pass those costs on? What are your pricing power?

MIKE PARRA: Yeah, so, really where you've had a pricing change has been on the lack of commercial airline space and we were the world's largest user of commercial airline capacity as we're in 220 countries globally in the world. So we had to put on additional capacity and then go out and purchase additional cargo capacity. We've passed on a small portion of that, basically to cover our costs through what's called an emergency security surcharge. And that's the only thing we've done. We've not increased our rates outside of that. We just passed on that surcharge.

- Mike, the $360 million investment that you were talking about in order to meet that demand, when we talk about job creation here in the US, how many jobs do you estimate that could potentially create over the next couple of years?

MIKE PARRA: Thank you for asking that. Because one of the decisions that we took in 2020 was while this was going on, we didn't Furlough or lay off a single employee at DHL Express in the Americas. We actually added 3,000 new jobs last year. And as part of this plan and the growth that we have going on, our plan is to add 2,600 new jobs this year in 2021, so adding 5,600 jobs just in the last 24 months.

- I wanted to ask you about your earnings because DHL announced today that the group EBIT, that's earnings before interest and taxes more than doubled compared to the previous year. Tell us about that and also what's the company's outlook?

MIKE PARRA: Well, I think from an outlook perspective the outlook is bright, as bright as our colors are and yellow, is what I would say. All of our business units are doing very well and we positioned ourselves to be in this position really from a post-pandemic area. It's something that we've been building on as part of our 2025 plan that we have as an organization. So overall, every division is performing well. We've seen in our division alone, we've seen a jump in the B2B and B2C space and our business to business is growing now faster year on year than it was the year before. So providing a high degree of service, that security, having our own capacity.

And what I say about we prepared ourselves, back in 2019, we went out and purchased 14 Boeing 777 aircraft, which we just took delivery of aircraft number 14 this past week. And we also had the right to purchase eight additional 777 wide body aircrafts, which will put either on the transcon or on the intercon network for ourselves and we've executed those eight as well and put the interest to buy those. So we believe we're well positioned from a capacity perspective, which is also supporting the growth that we've been seeing, the ability to maintain that capacity, and the outlook that's coming from our customers.

And it's interesting. We have traditionally seen customers go from a just in time and now what we're hearing is just in case. And there's this word that we're using at DHL, which is called, FORO, F-O-R-O, and as we're talking with our customers, we're hearing about this "fear of running out". So we're well positioned, and right now we're basically planning for our peak season, which is forthcoming.

- Fear of running out, I like that. Kind of ties into our housing market discussion. Mike Parra, thank you for stopping by. DHL Express Regional CEO.