News / DSV falls behind in airfreight as it tries to maintain profit

© Timon Schneider

DSV’s third-quarter results were somewhat overshadowed by its huge deal to provide construction logistics for Saudi project NEOM. However, it said it had “solid results”, with gross profit for its nine months down 15% and EBIT down 30.6%, “which was expected”.

Revenue for Q3 was DKK35.3bn ($5.02bn), or DKK114.25bn for the nine months, while profit was DKK2.8bn for the quarter, down from DKK4.8bn, and DKK9.6bn for the year to date.

Its Air & Sea division took most of the focus on today’s earnings call, as it admitted it had fallen behind the market. Air & Sea saw EBIT decease 35.7%. DSV reduced its Q3 cost base by about 11%, year on year, as it cut staff numbers by around 1,600 this year, mostly from Air & Sea, it said.

Gross profit from air for the quarter was down 31.7%, to DKK3bn, while from sea it fell 27%, to DKK3.1bn. It said it had a 21% year-to-date decrease in yields in air and a 19% decrease in volumes – but it expected yields in air to fall further.

“We’ve probably not seen the bottom of yields yet in airfreight, and we probably won’t see growth until 2024,” said CEO Jens Bjorn Andersen.

“It’s a bit worse than the market,” he admitted, “because we go for profit and growth”.

“But we are closing the gap. It’s a super, super competitive market. [Forwarders] are operating [their] own capacity at rates that are not possible for us to attain – we are not in the business of moving freight at a loss.”

He added that airfreight yields had been impacted by new contracts.

“It’s a reflection of some of the contracts from last year being renegotiated, so yields would drop. We have reached a level where the lion’s share has been renegotiated and that’s part of the yields we are seeing now.”

Sea saw an 8% drop in volumes and a 20% fall in yields, YTD, but the company was optimistic about the sector. It said: “We will see a positive development on sea freight. Year on year, we are only down about 4%, more or less in line with the market. Sea freight yields are reaching a plateau and we hope to see growth in volumes.”

In Road, DSV admitted it was having problems with its transportation management system, which would lead to delays. COO Jens Lund said: “There are some capabilities we need to deliver to optimise. We couldn’t make necessary progress with the vendor on this. The product is not capable of delivering hat we need in order to succeed. This will slow us down.”

Road, where DSV said LCL had been better than expected, in part due to it pushing the product more and partly because of smaller shipments, saw Q3 revenues fall 10%, t0 DKK9bn, with gross profit down just 1%, to DKK1.9bn, and EBIT up 1.4%, to DKK522m.

DSV was fairly optimistic about Q4. “We can see inventory levels coming down, which should lead to some support in sea volumes. We are in positive territory year on year, and we are confident,” it said.

Based on its performance in the first nine months of this year and its expectations for Q4, DSV narrowed its full-year outlook for 2023 to an EBIT of between DKK17,500 and DKK18,500m.