Deutsche Post AG, or should we say, DHL Group, delivered a Q3 earnings call that, at first glance, appeared remarkably unremarkable. Amidst a backdrop of global economic uncertainty and a freight market desperately trying to find its equilibrium, DHL painted a picture of steady resilience. Their free cash flow guidance remained strong, fueled by disciplined cost management and a surprisingly robust start to the pre-Christmas peak season. But beneath the surface of this seemingly "boring" report, there lies a hidden signal, a whisper of a story that might have escaped the scrutiny of seasoned analysts.

The story revolves around DHL Supply Chain, the often-overlooked sibling in the DHL family, quietly building an empire of its own. While Express, the group's golden goose, grapples with volume declines and fuel surcharge headwinds, Supply Chain continues its steady ascent, delivering its 11th consecutive quarter of year-over-year EBIT growth. This consistency, a testament to the division's strategic positioning, raises a tantalizing question: is DHL Supply Chain on the verge of becoming the group's next billion-euro EBIT powerhouse?

The evidence, though subtle, is compelling. DHL Supply Chain's organic revenue growth, a healthy 5% in Q3, is backed by a steady stream of impressive new business wins. The division's pipeline is overflowing, a clear indicator that the structural tailwinds of logistics outsourcing are propelling their growth. Omni-shoring, that buzzword echoing through corporate boardrooms, is driving customers into the arms of DHL Supply Chain, seeking a partner who can navigate the complexities of diversified and resilient supply chains.

This trend is reflected in DHL's own commentary. They highlight the "strong new business wins" and acknowledge the "structural tailwind towards more logistics outsourcing," particularly in the "China Plus One" markets, with Mexico leading the charge. These statements, seemingly innocuous, hint at a dynamic shift in the logistics landscape, with DHL Supply Chain poised to capitalize on this transformation.

Now, let's delve into the numbers. DHL Supply Chain's Q3 EBIT clocked in at €182 million, a respectable figure, but far from the billion-euro threshold. However, their first half EBIT reached €500 million, putting them on a trajectory that, if sustained, could result in a billion-euro EBIT for the full year. This, of course, is contingent on a strong Q4 performance, no easy feat given the prevailing economic conditions.

However, DHL's overall confidence in its free cash flow guidance (€3 billion for 2023) suggests that they anticipate robust earnings from their more resilient divisions, Supply Chain included. Furthermore, their updated medium-term guidance (€7-8 billion EBIT by 2025) hints at substantial growth contributions from other divisions besides Express. While they haven't explicitly outlined divisional contributions, Supply Chain's consistent performance and strong pipeline make it a prime candidate for driving this growth.

DHL Supply Chain EBIT Growth

The following chart tracks DHL Supply Chain's EBIT growth over the past three quarters. It's based on available data and projections for Q4 to visualize the potential for reaching €1 billion in EBIT.

Could we be witnessing the birth of a hidden billion-euro champion within DHL Group? The evidence is compelling, but the story is still unfolding. One thing is certain: DHL Supply Chain is a division to watch, a potential dark horse in the race for logistics dominance.

"Fun Fact: Did you know that DHL was founded by three entrepreneurs, Adrian Dalsey, Larry Hillblom, and Robert Lynn, who literally hand-carried shipping documents on flights between San Francisco and Honolulu? This audacious approach, a testament to their entrepreneurial spirit, laid the foundation for a global logistics giant."