DSV chief reticent on Schenker: the focus on growing market share
DSV focused on gains in market share, organic growth and making investors confident in its ...
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By Alex Lennane
Even a cursory glance at Deutsche Bahn’s 2023 results this morning suggests DB Schenker is an odd fit in a loss-making company highlighting German passenger rail fares.
Nevertheless, without Schenker, DB’s results are going to suffer.
It acknowledged the “ongoing significant positive contribution by DB Schenker, despite normalisation of freight rates” – normalisation meaning “significant reductions in freight rates in air and ocean”.
Schenker saw revenues fall from €27.6bn ($30bn) in 2022, to €19.1bn in 2023, down more than 30%, leaving adjusted ebit of €1.13bn, down from €1.84bn.
The drivers for that, said DB, were the drop in ocean freight rates and a “significant drop in air freight volumes” – down more than 13%, and which remained below 2022 levels all year. Ocean freight volumes in teu fell 6.6%, land transport shipments fell 1.9% and contract logistics fell more than 14%.
Schenker’s adjusted ebitda fell 24%, to €1.9bn, but the forwarder said it remained confident.
“While freight rates normalised across the industry, leading to an expected decline from the record highs of 2022, DB Schenker remains optimistic about the future. The logistics market offers excellent growth prospects, and the company is well-positioned to capitalise on these opportunities.”
Airfreight, it said, had been characterised by weakness, although in the second half, perishables and “low-priced e-commerce goods from Asia rose sharply”.
It said: “Due to the very dynamic increase in the e-commerce business, available air freight capacity was concentrated on a few connections in the last months of 2023 to and from Asia. Overall, this led to a regional imbalance in terms of available capacity, with correspondingly volatile developments in freight rates and revenues in the air freight market.”
Schenker, which said it had a base of some 400,000 customers, added that while it had no transport assets, it did operate a charter strategy on main tradelanes in air.
In maritime, rates continued to fall, with high inflation and interest rates “dampening demand”, while capacity increased “significantly” with newbuilds.
“These effects continued to put freight rates under pressure and, in some cases, pushed them below a cost-covering level. Burdens also resulted from the restricted navigability of the Panama Canal, as a result of water shortages in Central America, as well as attacks on ships in the Red Sea, and led to disruptions on the affected trade routes.
“In this difficult environment for container shipping, DB Schenker developed at a similar level compared to its competitors.”
Contract logistics was “impacted by economic slowdowns as well as inflation trends and longer lead times”, it said.
“Developments were positive in particular in the areas of electronics (5G, cloud, microchips), e-commerce (omnichannel), healthcare.”
It concluded: “DB Schenker’s vision is to be the world leader in integrated transport and logistics providers.”
But there was next to no mention of a sale.
Jochen Thewes, global CEO, commented: “Despite the challenging global market situation in 2023, we were able to demonstrate our strength as a company. Even after the normalisation of global freight rates in the meantime, we remain a reliable profit generator with very pleasing results and good opportunities for the future.
“Irrespective of a potential sale of DB Schenker, highest service excellence and full customer focus remain absolutely key for us. We are well-positioned in our industry and can look forward optimistically to 2024. This would not have been possible without the outstanding commitment and continued effort of our employees.”
Employee numbers fell some 5%, to 74,871, at Schenker as a result of lower transport volumes and “the implementation of efficiency programmes in contract logistics”.
One of Schenker’s gripes with DB ownership has been a limit to what it can invest. Net capital expenditure at Schenker stayed flat, at some €947m, just 12% of the group’s total net capex.
But Deutsche Bahn has been enjoying a little more capital expenditure, some €7.6bn in fact, up 16%, and a new record, indicating that its eyes are focused elsewhere than on freight forwarding.
CEO Richard Lutz explained: “But 2023 also marks a turning point; together with the German government, we launched the largest and most comprehensive capital expenditure programme since the German Rail Reform in 1994. No more running our rail infrastructure into the ground – it’s time to overhaul and modernise it from top to bottom.
“Thanks to the major increase in budgetary funding from the German government, we are able to make additional expenditures of roughly €30bn.”
The group ended 2023 with adjusted ebit down from €1.2bn in 2022, to -€964m. But it is more confident this year: it is forecasting an operating profit of about €1bn, on revenues of about €47bn. There was no mention of how Schenker’s results are incorporated into those figures – or if.
DB Cargo, meanwhile, which could reportedly be broken up into six divisions, saw revenue growth of 5.6% to €5.2bn, but adjusted ebitda rose to a loss-making €74m.
DB Schenker
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