DANIEL KEARVELL, "DHL EXPRESS": "In Romania there are reasons to be optimistic"

• Interview with Daniel Kearvell, Managing Director "DHL Express" România

The local market of international shipping services still offers more growth opportunities than neighboring countries, according to Daniel Kearvell, managing director of "DHL Express" România. Our country does also pose a number of challenges for business expansion, but they are part of the daily activity of the company, which has completed a series of investments aimed at improving efficiency, he said.

"DHL" Romania processes 3.5 million items each year. Last year, the average number of items processed daily was 15,000, up 16% over the previous year. In December, the number of daily shipments climbed 30 % compared to November, and during the last week of the year the number of daily calls received from customers was 72% higher than the year's daily average. December's average number of calls exceeded the daily average number of 2012 with 46%.

Reporter: How has the logistics services market evolve in recent years?

Daniel Kearvell: Our industry strongly follows the evolution of the development of the economy, as a whole. The difficulties of the years 2008 and 2009 have also been felt in our sector, we are the ones who transport goods produced in other sectors. Over the next two years, there has been a consolidation, and last year we reached a level close to the one before the outbreak of the crisis.

Our customers have asked for greater efficiency and a higher level of quality, and, as the market develops, the services that we provide are becoming increasingly better. If we look at the logistics services market at an international level, it had a relatively stable evolution in recent years, there have been no spectacular rises, diverging from the trends of the economy.

If we look at the statistics on exports and imports, the evolution of our business practically mirrors theirs.

Reporter: What impression did the Romanian market for logistics services give you?

Daniel Kearvell: In recent years, the big players have become stronger, while smaller companies have suffered a certain level of trouble, because of the economic situation. The international shipping, which is the line of business of "DHL Express", has experienced an increase in business volume. If you were to do a comparison with the pre-crisis situation, the big players are the same then and now, with slightly different market shares.

The future of the sector depends heavily on the development of small and medium-sized companies. Six-seven years ago, Romania was one of the most successful countries in terms of attracting foreign direct investments and the entry of large companies has had beneficial effects on our line of business, which has grown greatly in 2007 and 2008. Things have changed, however, in recent years and I believe that it's the SMEs that will be the source of future growth.

Reporter: Are you expecting new market entries in the coming years?

Daniel Kearvell: Barriers to entry in the market of international shipping are very high. To be able to compete with major companies, you need to have a network similar to theirs. For example, we are present in 220 countries and territories, and in Romania we have 42 locations. Our quality/price ratio is very attractive. To reach such a level, it takes investments and time. Because of that, in addition to the changes that some of our competitors are going through, we do not see significant changes when it comes to the number of players in the market. The big players in Romania are the same as those at of the international markets and I don't expect that to change in the coming years.

Reporter: How did "DHL" adapt to the new market conditions, caused by the financial crisis?

Daniel Kearvell: The strength of "DHL" in Romania is consistency. We have been present on this market for over 20 years, operating under the international brand. We outsource a very small part of our operations, which makes us almost unique in this regard. In the past two years, which were quite challenging for the sector, we have continued to invest in developing our own infrastructure. For example, last year we invested 2.5 million euros in the acquisition of over one hundred new vehicles. We have also increased the capacity of the aircraft of Arad and Cluj and we extended the network to the entire Eastern area of the country.

The priority for us is to continue developing our business. The efforts towards that goal have helped us to successfully overcome the challenges of the last few years.

Another competitive advantage we have comes from the long-term relationships we have with our customers. One thing that impressed me in my six months since I've come here, is that many of the customers I have visited have expressed their confidence in us, due to the fact that we have been together with them since their creation. This is a testament to our commitment to the Romanian economy and has allowed us to develop a strong network of clients.

In difficult times, many companies are choosing to reduce the quality of their services, but for us it is very important, which is why we have decided to continue investments, regardless of the economic climate. And this is reflected in the results that we have achieved in recent years.

Reporter: What are your expectations for this year?

Daniel Kearvell: In Romania there are reasons to be optimistic, there are sectors which we can generate solid growth this year. The market is still developing and, if you have a clear strategy, you can achieve results above the market median and the evolution of the economy. So the first objective is to develop the business.

The second is to continue with the investments. We expect this year to improve the times of arrival in and departure from Bucharest of our aircraft. We are present in a very competitive market, and the moment we begin to stagnate, this will be reflected almost instantly in the volume of business.

Prospects for growth don't depend on our wishes alone, but also on what our customers want from us. SMEs, whose importance to us I've already mentioned, want to bring their products to market as quickly as possible and we want to be able to satisfy this desire as well as possible.

Compared with other countries in the region, I believe that, in Romania, "DHL" is better positioned see growth in the period ahead.

Reporter: Taking into account the business generated by the various segments of customers, which were the sectors that have experienced a collapse, because of the economic conditions?

Daniel Kearvell: An important element that you need to keep in mind is that about 70% percent of Romania's exports go to the European Union (EU), which makes us dependent on their consumer demand. An area that has been affected is the automotive sector, for which demand is very low. Also, the banking sector, which is influenced by the international situation.

There are, however, sectors that recorded growth as well. The textile industry is in an uptrend, a fact reflected in rising volumes and the number of new customers coming from this area. One area where Romania has a high potential is that of cutting-edge technologies. In addition, there are a few projects for investment from multinational companies, the effects of which should become visible this year. And, as a person who recently came to Romania, I see great potential in tourism.

The most important source of growth is, as I have already mentioned, SMEs, companies that get set up from scratch and which want to penetrate international markets.

Reporter: Can SMEs offset the drops occurring at the level of large companies?

Daniel Kearvell: Only partially. Out of our portfolio of clients, more than 30% of our customers are multinational companies. They continue to represent a key area for us. There are also sectors and companies that can generate growth, in particular in areas where Romania has proved to be a reliable partner. Looking into the future, all the companies that depend on external demand and, in particular that from the EU, should expect no more than a slight increase, not a spectacular one. This applies to Romanian and foreign companies, big and small alike.

Reporter: The sale of "Cargus" to "Abris Capital" has brought a new competitor for "DHL Express". How do you expect this deal to impact the activity of the company?

Daniel Kearvell: "Cargus" is not a direct competitor of "DHL". Our activity in Romania consists, for the most part, of international shipping. "Cargus" is a very strong player in the domestic market. Customers who turn to us for domestic services have done so for international services as well. Our attention is focused on the core business, specifically international shipments. Since "Cargus" focuses on the domestic market, there will be no competition between us.

We intend to continue the partnership with "Cargus", and we will continue to share some shipping centers, but the lines of business are distinct, and the sale of "Cargus" will allow us to focus all our efforts on the core activity.

Reporter: If you were to compare Romania with the countries in which you have previously worked, what similarities you notice?

Daniel Kearvell: In Romania we have to face the challenge of bringing the packages to their destination, due to the snow. In Qatar, where I previously worked, there are similar challenges, but they come in the summer, when the temperatures are very high. Our people successfully deal with both situations, which says a lot about their motivation. So the challenges are similar, but the geographical conditions are very different.

Romania is a big country which has mountainous landscapes, but our network that we have, and the relationship that we have with the authorities are very good, allowing us to be market leaders. 90% of our shipments are cleared through customs upon arrival. We also have a very good partnership with "Tarom".

Another challenge that you meet here is the quality of land transport infrastructure, but in recent years, progress has been made in that regard, through the opening of some highway segments and the rehabilitation and expansion of roads. A positive element is that there is room to improve the business, because there are regions which are difficult to reach, but on which we have to focus on, because that's where growth may come from.

Qatar is a small country which is going through a period of major growth. It has significant energy resources. The population has the highest standard of living in the world, in terms of GDP/capita. It does have specific challenges, which it has to deal with, challenges related to infrastructure development. The situation in Romania is rather similar to that of Russia, a country which I worked in for seven years.

In this industry, every day is a challenge, because you may experience unforeseen elements. Because of that, we must be prepared to deal with any situation.

Reporter: Are you planning to make any acquisitions in Romania in the near future? Are you are interested in the "Romanian Post Office"?

Daniel Kearvell: No. "Romanian Post Office" is working in a different line of business, which is of no interest. The only things we are interested in acquiring in the coming period are new customers and partners. In November last year, we managed to attract a hundred new customers.

We intend to focus on developing the business in our basic area of expertise, where we are very well positioned, without letting ourselves get distracted by peripheral areas. If we allow our attention to be distracted, it would be detrimental for us.

At the level of Central and Eastern Europe, Romania is to "DHL", one of the markets with the greatest growth opportunities, and we intend to capitalize this potential.

Reporter: Thank you!