News / Demand crash wreaked havoc in Q4 for both DSV and CH Robinson

© Pressmaster |

CH Robinson and DSV may be different kinds of businesses, but they both experienced a poor fourth quarter – as well as offering lacklustre (or perhaps, dull) earnings calls.

DSV preferred to focus on its record results in full-year 2022, with group sales of $38.8bn, for a $2.6bn profit, and $3.7bn ebit.

Group CEO Jens Bjørn Andersen noted “it was the best ebit this company has ever seen. We can be happy, we can be proud” – although he quickly corrected himself to add that DSV was also “humble”.

He admitted that yields were going down, and the fourth quarter saw revenues fall 15% on Q3, while ebit fell 27%. Year-on-year Q4 revenues fell 16% and ebit fell 7%.

Poor demand would lead to cost cuts, advised Mr Andersen, while inflation would see fees going up.

“We will do what we can to adjust our cost base in Air & Sea and the other divisions to align our cost base with lower volumes.”

However, COO Jens Lund added that the company would be “cautious” about headcount.

“There will be normal staff turnover, but there is a lag of two to three months, and we have to be certain if we are reducing capacity.”

Mr Andersen indicated that he also wanted to attract more volumes – which could, of course, come at a price. He added: “Air & Sea is very, very strong. We have great competencies and high service levels. We are stronger than ever.

“We need to go out, grow volumes and take market share.”

He also noted that “the company would remember” which suppliers helped during the capacity crisis – and which hadn’t. He said: “The market dynamics have changed. We need to stay loyal to the shipping lines that supported us. The ones that helped us back then are the ones we will help now.”

Mr Andersen added: “We didn’t carry anything over into 2023 from 2022, in terms of agreements with carriers priced in a previous market. It’s all aligned, we start the year priced at [current] market conditions.”

On the break-up of the 2M Alliance, he said: “We have talks with each individual carrier, so we don’t expect it to impact our business.”

In air, Q4 volumes fell about 16%, in line with the market – but Mr Andersen warned this year could see a rate war.

“We carried 368,000 tonnes, so we were still busy, and had a reasonable yield. There was no real peak season, we’ll have to see how it develops in 2023.

“Air yields have dropped at a slower pace. We expect a continuation of the decline, and we will see some overcapacity. There is a risk of irrational pricing behaviour if you are sitting on under-utilised assets.”

Poor volumes were mostly down to customers’ higher inventory levels, he said, adding: “That is one reason volumes were down, also because air freight is the most expensive mode of transport. Air is more volatile, we expect sea to be less volatile.”

He concluded that 2023 could see “some tailwinds from higher yields, but some headwinds from volumes”. He added: “In H2, yields will have stabilised and then we’ll get higher growth.”

In Road, revenues rose about 17% in the full year, versus 2021, and were broadly flat year on year in Q4. Ebit for the year rose 10% to $295m. In Solutions, ebit rose 52%, to $400m.

On M&A, DSV said it continued to watch the market and there was “no limit” on the size of any deal. Mr Andersen said: “We go into 2023 full of optimism on the M&A side. We can’t promise, but our 25-year strategy to grow through acquisition is intact … and has achieved value for shareholders. Why stop that now?”

Overall, for 2023, Mr Andersen said: “We see nothing that concerns us of any substance.”

Meanwhile, in the US, CH Robinson had to explain why it fired CEO Bob Biesterfeld on new year’s day: “misaligned operating costs” was, apparently, the answer.

Interim CEO Scott Anderson told investors the company was “in transition”.

He explained: “We’re increasing our focus on delivering a scalable operating model to lower our costs, improve the customer and carrier experience and foster long-term profitable growth through cycles.

“The current point in the cycle is one of shippers managing through elevated inventories amid slowing economic growth, causing unseasonably soft demand for transport services.

“At the same time, prices for ground transport and global freight forwarding are declining, due to the changing balance of supply and demand.

“While the correction in the freight forwarding market was certainly expected, the speed and magnitude of the correction, in only two quarters, was unexpected, with ocean rates on some tradelanes already back to pre-pandemic levels. As a result, our operating costs were misaligned.”

CFO Mike Zechmeister added: “The normalisation, if you call it that, has surprised us a bit…and so I think in that process, we found ourselves with cost structure that didn’t match the business. And so we are in the process of kind of rightsizing that cost structure.

In Global Forwarding, higher inventory levels saw demand soften, with “significantly reduced import prices for ocean and airfreight”, said Mr Zechmeister. Q4 adjusted gross profit fell 39% year on year, with ocean forwarding down 43%, to $89m, and air down $33m, or 51%.

But the company said it was proud of its global forwarding business, which had enjoyed “a leap forward” during the pandemic and would continue to grow, said Mr Zechmeister.

“Despite the soft market, the forwarding team continues to add new customers and diversify our industry verticals and tradelanes. In Q4, approximately 50% of our AGP from new business was generated from tradelanes other than the transpacific.”

As part of its bid to reduce costs, a CHRW reorganisation will see net annualised costs savings of $150m by Q4 23. Some 650 staff were cut in November, and staff expenses were expected to be 7% lower in mid-2023 than a year earlier.

“As we continue to make progress on delivering a scalable operating model, we expect our headcount to decline as productivity improves,” said Mr Zechmeister.

The company added it was looking forward to a new CEO, to accelerate rather than change the business.

“Our core strategy of building out our operating model, I think, is solid,” said Mr Anderson. “Obviously, new eyes in terms of a new CEO will give some perspective to that as well. But, strategically, we are absolutely in a spot with global supply chains becoming more complex to be a go-to partner in the future. So this is not a shift in strategy, this is really a shift in sort of accelerating performance and moving at a faster pace.

“We’re looking for an experienced operator with sharp strategic thinking, someone who really can take Robinson to the next level. I think the next 10 years are going to be the most exciting for the company.”

(Our Premium coverage of DSV and CH Robinson can be read, respectively, here and here.)