DSV suffers slightly in very flat market

DSV’s above average profitability has been squeezed over the first half of this year by poor market conditions, particularly in Europe, but the falls have been modest and DSV continues to grow in parts of its business.

The Danish-based logistics service provider saw revenue fall by 1.4% year-on-year after stripping out the effect of acquisitions. In accountancy terms, the company increased its sales to DKK22.39bn (€2.9bn), whilst profits, in terms of EBIT (Earnings Before Interest and Tax), rose to DKK1.16bn (€151m). Stripping-out exceptional items, profits fell by 3.9%.

In the sea and air forwarding business, which accounts for 41% of revenue and 51% of profits, sea freight forwarding saw volumes 3% higher year-on-year for the first six months with stable gross-profit margins, whilst air freight fell 3%; although the gross-profit margin improved. The sum of this was a fall in revenue by 1% and a fall in EBIT of 7.2%.

In the road freight forwarding business – which is solely based in Europe – DSV expanded its sales to DKK11,466m which represents an underlying fall of 1.9% compared to the same period last year, whilst EBIT fell by 1.7%. However, DSV managed to increase tonnage by 1% in a market which shrank slightly. The company stated that competition in the market is fierce; nevertheless gross-margins were stable.

Similarly, in the contract logistics ‘Solutions’ business DSV saw a slight rise in demand of 2% over the half year. Revenue before acquisitions increased by 5.7% and EBIT increased by a respectable 7.1%, but the rise in profits was largely attributed to better costs management with pricing in the market weakening.

DSV is continuing its share buy-back programme, but the outlook for growth is hardly inspiring, with all of its markets expected to have shrunk or show no growth except for sea freight forwarding. Despite the market squeeze, DSV remains more profitable than most of its competitors and appears to be successfully growing by acquisition. Bearing in-mind its fairly robust finances, the company might seek to accelerate its purchases – particularly outside its core European markets – in order to compensate for lack of growth.

Danish Krone 1= €0.13/US$0.18