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DSV could make more job cuts if its Air & Sea unit is unable to beat the market after underperforming in the first half, with revenues down 36% year on year, and ebit down 32% to Dkr9.37bn ($1.38bn).

Announcing a “solid financial performance”, CEO Jens Bjorn Andersen noted in this morning’s earnings call that DSV had shed some 2,000 white collar workers, or 6% of staff in the Air & Sea division since H1 22, as it tried to cut costs in a low-yield and volume market. (With staff accounting for 70% of costs, DSV is also eyeing technology to reduce numbers. He added: “AI could really move the needle going forward.”)

“We have an underperforming market in air, and we have plans to get back to growing faster than the market. Our results were impacted by our focus on high-yield verticals.

“If you protect yields, you can see negative volumes, and that’s the way we’ve always done it; we put profit over growth.”

(Kuehne + Nagel, meanwhile, reported air ebit down 65%, while in sea it was down 47%, but added that it had “taken market share in sea”. Overall H1 ebit was just shy of DSV’s, at $1.3bn)

Mr Andersen underlined recent market intelligence which noted that forwarders were lowering prices in a bid to retain volume. He said: “We are seeing some behaviour in the market which is not super-rational. We want to stay away from that.”

He added that of DSV’s 500,000 customers, “any sizeable customer will dilute yields”.

“We can maybe accept a slightly lower yield than in the past. But loss-making business is not why we go to work at DSV. We won’t do that.”

He added: “We have a deliberate policy not to participate in trends where rates are at breakeven or loss-making. It’s hard for clients to leave us, but if they get a fantasy offer, they feel an obligation because of the savings. But customers will return to DSV.”

He said the company was planning a different strategy in the second half, hoping to grow volumes.

“We have an assumption that we will get back to a better performance growth-wise, and we are comfortable with that. But there is a trade-off; it could have the consequence of yields going down.”


Mr Andersen said perishables had seen positive growth, but “yields were only a fraction of what we want”, adding: “We expect yield to decline, the question is what volume will develop.”

He said: “We monitor the efficiency of Air & Sea closely…. If we don’t see an improvement in volumes, we will re-address the cost base and do the necessary. The natural consequence of no growth is that cost shrinks in line with volume.”

He noted that parts of the airfreight market, which had long-term capacity commitments, would prefer to take cargo at almost any cost rather than fly half-empty, and that meant DSV had focused on the spot rate.

“But when these lease agreements end, we will get into a more normalised market,” he said.

DSV was closer to the rest of the market on sea, only “a couple of percentage points down”. The transpacific, “under pressure”, and transatlantic were the weakest markets, but “Asia-Europe is doing quite nicely”.

“I hope we will get into positive territory on volume growth in H2.”

Ocean also saw positive growth in hi-tech and capital equipment, he said.

“It’s the continuation of the trend that customers are deliberately moving from air to sea, which we also advise as part of their decarbonisation efforts.”


Air & Sea division

Road, said Mr Andersen, was “rock solid”, provided a “great result”, which saw DSV make market share gains.

In Solutions, there were lower activity levels, due to fewer volumes and weak exports from Asia Pacific, but “margins are comparable to anything in the industry”, he noted.


Gross profit by division

As others in the market have noted, DSV had little insight into inventory levels. Mr Andersen said: “I wish we had valid statistics on inventory, the transparency is always low. But we expect levels to gradually normalise; our utilisation of warehouses is down a little bit.”

The DSV executives were at pains to note that smaller shipments was not necessarily a bad thing, noting: “Associated services are more or less the same regardless of the size of the shipment.”

Meanwhile, technology, and the China + 1 sourcing strategy were both benefits.

“In Solutions, we earn money for storage and money for activities. The level of automation and complexity has increased, and we can create more value for our customers on services,” said Jens Lund, COO.

And new sourcing countries were “all countries where DSV has a strong foothold. It makes thigs more complex, which is better for us”.

DSV upgraded its full-year guidance, with ebit before special items now expected to between Dkr17,000m and Dkr18,500m, up from Dkr16,000m-Dkr18,000m, but it noted uncertainty. “Updated guidance is … based on a couple of scenarios … based on yield versus volume.”

Mr Andersen said: “July is always depressing, and August is impacted by the holiday season. It’s hard to forecast. But tenders have been a positive experience, and we may gain a little bit of market share.

“Sometimes there is a three- to four-month delay from a tender, especially with larger customers. So let’s see how it goes in H2. If we are in positive territory it would be really, really nice.”

And what of DSV’s usual growth strategy, M&A? He said: “We have specific names [in mind], as we have had for the past 20 years. Some are not for sale, some might be. We are ready if the opportunity arises, from a financial and operational point of view.

“There is no particular geography, we like ones with a global reach. If we do find companies with a similar structure [to those we’ve bought before], we’d love to engage with them.”

You can see Loadstar Premium’s analysis here, and DSV’s financial results in full here. You can compare with K+N here.

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