Three forwarders vary in their response to tough market

air freight forwarding

A clutch of 3PLs released their half-year results over the past week including DSV, its future partner Panalpina and CEVA, now part of CMA CGM. The market for forwarders has been tough, but the companies have reported differing results.

As is so often the case, DSV was the best performer. Revenue over the half-year rose by 5% to DKK40.058bn (€5.37bn) whilst operating profit measured in terms of Earnings Before Interest and Tax (EBIT) saw an underlying increase of 9%. It is noticeable that business slowed down in the second quarter, with underlying sales increasing by just 2.4%.

The best performance of the different businesses within DSV was the forwarding ‘Air & Sea’. Despite quite small increases in volume of 1% in air and 5% in sea, it saw ‘underlying’ operational profits climb by 13.5%. The two other divisions, ‘Road’ and ‘Solutions’ both saw profits grow by 3% on moderate demand levels.

In contrast DSV’s future partner, Panalpina, had what appears to be an unusual second quarter, with Panalpina CEO Stefan Karlen commenting that “after it was announced that Panalpina and DSV would join forces, our competitors went more aggressively after our business in the second quarter, but we stood our ground”. The result was a fall in profits measured in EBIT of 5%. Volumes in its Air Freight division rose by 5%, however a particular problem was that automotive related business fell denying Panalpina of more profitable business. Ocean Freight divisional volumes fell by 3%, however the business reversed last years losses and made a profit of CHF5.5m (€5m).

CEVA, now part of CMA CGM, took a brutal fall in air freight volumes of 14.2% whilst ocean freight fell by 5.7%, however revenue per tonne in air freight rose, presumably due to the weakness of freight rates. Sales also fell in contract logistics due to loss of customers and the impact of the downturn in the automotive sector. Overall, as far as can be told from CEVA’s complex accounts, revenue was down 3.4% and the company made a loss of US$70m for the six months.

Judging by these half year numbers the market in freight forwarding is tough, with air freight market shrinking in some areas. However, it is also noticeable that this also opens up opportunities to drive down costs and expand margins if the forwarder is agile enough.

Source: Transport Intelligence, August 1, 2019

Author: Thomas Cullen