New IT solutions the best hope to rebuild 'smashed' UK supply chains
IT solutions offer the best return to “normality” for forwarders, after Brexit “smashed apart” once-streamlined ...
Despite the dramatic decline in passenger numbers last year, a fourth-quarter surge in freight volumes helped mitigate the decline in Danish ferry operator DFDS’s profitability.
“Passenger results were wiped out by the pandemic,” chief executive Torben Carlson said, referring to a 93% year-on-year decline in numbers, “but we also saw how resilient our freight business is.”
Fourth-quarter freight volumes on its North Sea routes were up 16%, and 17% on cross-Channel services, attributed to pre-Brexit stockpiling, while Baltic and Mediterranean routes both saw 7% growth.
“We are glad to have Brexit finally behind us because the uncertainty it created has gone, although the long-term effect on the UK economy remains uncertain,” Mr Carlsen said.
The group recorded fourth-quarter revenues of just under Dkr3.8bn ($619.7m), a year-on-year decline of 6.8%, while quarterly ebitda was almost unchanged at Dkr769m.
Full-year revenues came in at just under Dkr14bn, a drop of 15.8% on 2019, while full-year ebitda declined 24.8% to Dkr2.74bn.
And Mr Carlsen said that the group had seen costs go up since the beginning of the year, which had combined with a widely reported step drop in cross-Channel trade during January.
“Teething issues? We have seen a little more than that, with increased empty running and increased need for extra equipment which both raise costs. The integration between the customs systems and ours, and the customers’ need to declare the correct information have caused big operational challenges.
“We have employees who have worked 40 days non-stop on this,” he said, adding that its seafood business in Scotland had to temporarily “ask customers not to come to us”.
He said it was difficult to determine the cause of the drop in UK ferry freight volumes in January, how much could be attributed to the previous month’s stockpiling and how much to the customs problems.
“It’s difficult to split the water on this, but the decline was actually a bit less than we expected given how much stockpiling was done in December. There may be some exports from the UK which have been impacted, while we think that most imports haven’t been affected by the teething problems.
However, he said there could be renewed issues in July, when the UK border controls are due to be implemented.
“But hopefully not as bad as January. For the EU, it is not so critical if goods from the UK cannot arrive, but for the UK it is very critical if goods cannot arrive from the EU. So, we expect customs will work to make sure it is not as bad as it was in January.”
While attention is now largely focused on what is likely to happen to its cross-Channel and North Sea services into the UK, this month also saw DFDS launch a new service between Dunkirk and Rosslare, bypassing the UK landbridge, which it said had reached 100% utilisation.
“There is currently very high demand for the Ireland-France service, but we need to see what the long-term viability of the route will be once the border situation on the Channel normalises, once the UK has put its border controls in place in July.
The group has forecast 2021 revenue growth of 20-25% and a Dkr3bn-3.5bn ebitda.
Capex this year is expected to be up to Dkr2.8bn, as a result of the first payment of the acquisition of HSF logistics, as well as financing two newbuild ferries which are due to be delivered this year.