Lower freight volumes bring DSV profit down
Transport and logistics giant DSV has seen its profits slide from the record highs of 2022, due to lower freight volumes and gradual normalisation of the freight markets. Profit for the first nine months of the year stopped at 9.4 billion Danish Krone ($1.3 billion), slipping some 31.8 per cent from the 13.8 billion Danish Krone ($1.98 billion) achieved in the first three quarters of 2022.
According to the company, the financial results did not match the record earnings of the previous year, as expected. Gross profit was down 15.1 per cent and EBIT before special items was down 30.6 per cent (in constant currencies).
For the first nine months of 2023, revenue amounted to DKK 114.2 billion, compared to DKK 184.4 billion last year. In constant currencies, revenue declined 36.2 per cent compared to the same period last year. In the third quarter alone, revenue declined 38.1 per cent.
Jens Bjørn Andersen, Group CEO, remained positive in his comments, saying, “In markets characterised by soft freight volumes and declining rates, we delivered solid results during the first nine months of 2023. The results reflect our flexible business model and, not least, our dedicated employees, who continue to deliver good customer service and efficiently manage our capacity. A real recovery in global freight volumes does not seem to materialise in 2023, but based on the performance so far, we raise the lower end of our 2023 EBIT guidance.”
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Air & Sea sees profit drop
The Air & Sea division operates a global network specialising in the transportation of cargo by air and sea. The division offers both conventional freight forwarding services and tailored project cargo solutions.
In a market characterised by reduced volumes and significantly lower freight rates, the division saw a 24.5 per cent decrease in gross profit and a 35.7 per cent decrease in EBIT before special items for the first nine months of 2023. The decline was in line with expectations, and both profit margins and the absolute level of earnings for the division remained strong, according to the company.
The global air and sea freight markets saw a decline in demand in the first nine months of 2023. This decline was mainly a result of the broader macroeconomic slowdown, a shift in consumer behaviour (from goods to services) and actions to reduce inventory levels.
In Q3 2023, the freight markets saw a gradual improvement in volume growth compared to the first half of 2023. However, this was mainly due to weaker comparative figures from Q3 2022, and not an underlying improvement in demand in 2023.
DSV’s air volumes declined 19 per cent in the first nine months of 2023. The weakest performance was seen in export volumes from APAC, mainly within the categories of retail, high-tech and industrials.
As more passenger planes have returned to the market, more belly-space cargo capacity has become available. In combination with weak demand, this has led to overcapacity and declining air freight rates. During Q3, this was partly offset by higher fuel prices.
DSV’s sea freight volumes were down 8 per cent in the first nine months of 2023, but only down by 4 per cent in the third quarter of 2023. The weakest growth rates were recorded on export volumes out of APAC. As a result of lower demand, reduced congestion and the introduction of new capacity, sea freight rates have largely returned to pre-pandemic levels across all major trade lanes.
In the first nine months of 2023, we estimate that DSV’s volume development – especially for air freight – was below the general market. In a highly competitive market, this underperformance can be attributed to our pricing discipline and focus on high-yield cargo.
Looking forward, the company has narrowed its full-year outlook, altering its expected EBIT from 17 billion – 18.5 billion Danish Krone ($2.3 billion – $2.6 billion) previously to 17.5 billion – 18.5 billion Danish Krone ($2.5 billion – $2.6 billion).