DSV suffers in flat market

Europe is seeing “stagnating or falling freight volumes” causing DSV, the Danish logistics service provider, to see more or less no growth in revenue as compared to the same period last year at DK10,981m (€1,472m) combined with a sharp fall of 8.8% in earnings before interest and tax (EBIT) of DK509m(€68.2m) before exceptional items.

44% of DSV’s revenue is generated from its European road freight business and its sluggish performance depressed the results of the Group. DSV claimed to be gaining market share across Europe, yet volumes for the quarter year-on-year saw no growth. Revenue measured in Danish Krona fell 3.3% as compared to Q1 2012, however gross profit fell 4.6% as customers sought to drive down prices. This combined with what DSV described as a “clear trend towards smaller shipments” to drive-down EBIT by 6.5%. DSV also blamed fewer working days in the quarter as well as a severe winter.

The air and sea forwarding business saw a similar performance. Volume at sea freight forwarding grew by 2%, whilst air freight fell by 2% with both markets being either flat or falling. Gross profit over the year was fairly stable; although compared to Q4 2012 it was down 3.5%. Again, customers were looking to drive-down prices which it appears that DSV was unable to pass on to shipping lines. The air freight segment noted similar market conditions, however volumes, including from bigger customers, have fallen. Gross-profit per tonne is down 3.8% as compared to Q4 2012. Profits were also affected by integration costs on acquisitions leading to a fall in EBIT of 8%.

The contract logistics division, ‘DSV Solutions’, suffered the worst of all three business segments. Although DSV said the market was shrinking, revenues grew year-on-year by 4.1%. Of greater concern was the substantial year-on-year fall of 18.2% in profit. The company attributed the significant decline to pricing pressure from customers, a trend that DSV does not expect to ease in the near future.

Despite the underlying pessimism, DSV said that it expected profitability to recover in the next half of the year and it has commenced a new share buy-back programme.