News / DSV and K+N see margins squeezed hard in third quarter

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Two of the largest global freight forwarders, DSV and Kuehne + Nagel, have reported Q3 results that indicate similar pressures on margins – although the Danish 3PL appears to manage the squeeze better.

A strong performance from K+N’s sea freight division saved the Swiss group from a quarter of year-on-year decline.

The group’s ocean division experienced a year-on-year gross revenue surge of 31.7% in Q3, hitting CHF2.9bn ($3.35bn), a marked contrast to first- and second-quarter dips of 27.1% and 4.5%, respectively, leading to an 8.5% increase in ebit, at CHF256m.

And K+N’s contract logistics arm posted a 2.3% gross turnover increase, to CHF1.26bn, for an 18% ebit upturn, to CHF57m.

Air and road were unable to turn increased gross revenues into profits, however. Airfreight recorded a 17% revenue uptick, to CHF1.9bn, but an 11.8% ebit decline to CHF120m, while a 1.1% increase in gross road revenue, to CHF980m, generated just CHF22m of ebit, down 15.4% year on year.

However, the strong quarterly showing in sea freight was able to offset these declines, and group-wide revenue was up 17%, to CHF7.1bn, for a 2% quarterly ebit increase to CHF455m.

CEO Stefan Paul said: “Our strategic streamlining by removing the regional structure is beginning to bear fruit. We’ve also reached an important milestone with seamless migration to the cloud of our sea and air logistics transport management system.”

For the first nine months, on a year-to-date basis, the numbers, however, are ominous: sea freight down 25.4% compared with the first nine months of 2023; air down 23.1%; and road down 26.1%, and all taking serious hits on profits recorded as ebit – although contract logistics was up 2.5%.

Over at DSV, which runs air and sea activities under one banner, a near-30% year-on-year increase in revenue, to DKr28.4bn ($4.1bn) left ebit for the quarter just 0.6% down on where it sat this time last year, at DKr3.7bn.

Its road division also saw marginal declines in quarterly ebit, down 1.6% to DKr514m, following a 9.8% climb in revenues to DKr9.9bn.

Experiencing the strongest ebit growth over the course of Q3 was its contract logistics offering, Solutions, which was up 8.9%, to DKr636m, driven by a 19.5% surge in revenue to more than DKr6.6bn for the three-month period.

Compared with K+N, DSV will be happy with the lower, though still substantive, year-to-date earnings drops, with Air & Sea down more than 16%, to DKr8.7bn.

While both Road and Solutions ebits remaining up on the first nine months of 2023, Road recorded a marginal 0.7% uptick, to DKr1.5bn, and Solutions  earnings for grew 2.98%, to DKr1.8bn.

However, DSV CEO Jens Lund told analysts today: “The market has developed in a direction where our customers have pushed prices down, and we have pushed the prices down to the many sub-contractors we use, with the result that some have gone out of business.

“The effect of that is that prices are going to go up, because capacity has been taken out and our customers are going to have to pay more. There will be some difficult conversations in the fourth quarter, but we need a model that ensures our hauliers can continue to exist.”