News / DSV 'won't be distracted' by huge logistics project in Saudi Arabia

You can’t deny DSV’s ambition: in the absence of a big M&A deal, it has announced that it will exclusively provide the logistics for NEOM, a region the size of Belgium being developed in north-west Saudi Arabia on the Red Sea.

The project will include cities, ports, research centres and more in what is being billed as a “living laboratory” for a “new future”.

DSV won a tender for the job last year and, with NEOM, is setting up a joint-venture, of which it will own 49%, with a total funding commitment to 31 December 2031 of $5bn, of which DSV’s share will be €2.45bn. NEOM will not be reflected in DSV’s financial reporting.

The JV will provide end-to-end supply chain management, development and investment in transport and logistics assets and infrastructure, as well as the delivery of goods.

The market will be open to competition after construction logistics ends at the end of 2031 to be replaced by non-construction logistics. NEOM will be taking on the risk and has guaranteed a return on investment.

“This is a significant growth opportunity for DSV, in a large ambitious programme,” said its  CEO, Jens Bjorn Andersen, in the Q3 earnings call this morning.

COO Jens Lund explained that DSV had been invited to tender by Saudi in the second half of last year.  He said: “Several parties were involved, but we don’t know who. We assume some of the larger players were invited, as you need significant capacity … and presence in Saudi Arabia and the region, which we had through GIL.”

It’s a huge job, he added. “When you start operations in the desert you have to establish infrastructure. We’ll need logistics facilities. We will have to invest at the beginning, and when it matures we can push volume through. The first five or six years we will invest quite heavily.”

Despite the vast size of the project, Mr Andersen said DSV wouldn’t be distracted from its core business – or its M&A strategy.

Asked whether it could still manage the integration of a large company such as DB Schenker, he said: “The strategy of DSV is unchanged on acquisitions. We like to grow organically, like with NEOM, but we also like to partake in the consolidation of the industry. NEOM won’t prevent us from doing largescale acquisitions.”

However, DSV will take “strong members from the team and deploy [them] in NEOM,” said Mr Lund.

No mention was made of Saudi Arabia’s human rights record and different cultural values, but Mr Andersen said the JV would be bound by DSV’s ethical principles and code of conduct.

And DSV shareholders won’t lose out, he claimed, explaining: “Shareholders will expect a return on a continual basis, which will involve a cost to NEOM with a margin. It should be fairly straightforward to deliver.”

DSV has exclusivity until the end of 2031, after which “it will be operational and we’ll have a benchmarking exercise every five years. We will construct it and then, when people live there, there will be a need for normal logistics”.

Mr Lund acknowledged the major project would need chartered capacity. He said: “There is no 3PL market, so we will have to invest in capacity and then other players can come in and we can go back to being a 3PL.” He added that NEOM’s plan was to bring in most shipments by rail.

He noted that this type of project was “exceptional, rather than a norm for DSV” in the future, adding: “Not many countries have the capacity to run such a project. But it can set an example for other projects on how much of the cost base was contributed to by logistics.”