Norbert Dentressangle shows signs of suffering in bad market

Norbert Dentressangle came down to earth with a small bump over the past half-year. Previously able to return market-defying growth, the French-based logistics service provider has seen its sales shrink slightly over the past six months.

The company’s half-year results saw turnover fall by 0.1% year-on-year after the inclusion of acquisitions, whilst underlying growth was down 0.5%. Profits were hit more substantially with EBITDA (Earnings Before Interest, Depreciation and Amortisation) down 5.1% and operating profit, hit by heavy depreciation, down 14%.

Unsurprisingly, the part of the business that was most significantly impacted was the road freight operation. This division saw its volumes fall 3% year-on-year and margins weaken from 3% to 2.6%, producing an operating profit of €23.8m. Norbert Dentressangle blamed the falls on full truckload operations which are more exposed to industrial customers compared to its pallet network.

In contrast, its now sizeable contract logistics business saw turnover increase by 4% to €897m, an underlying growth of 2.5%, citing new business in its traditional markets of Western Europe as well as in Russia where it has created a chilled products operation for Danone. In addition, Profits rose by 3% on stable margins of 3.6%.

However, the company’s nascent freight forwarding capability did not prosper in the first half of 2013, with sales down 6.2% and a loss of €0.6m.

Comparing Norbert Dentressangle with DSV- which reported not dissimilar numbers earlier in the week- shows two apparently well-managed companies making limited progress in a tough European road freight market. The conditions encountered in the likes of Spain, France and Italy are likely to be a lot worse than the Northern European economies which are seeing some macro-economic growth; even so it is unlikely that such businesses will have particularly exciting prospects. The situation in contract logistics appears slightly different with Norbert Dentressangle in particular illustrating that focused medium-sized providers may be able to grab market share from bigger global rivals.

Both DSV and Norbert have the ability to use their financial leverage to grow into new markets, in contract logistics in particular, but both companies need to do this profitably in regions and market segments outside their comfort-zone. In the case of Norbert Dentressangle, its new freight-forwarding operation has yet to achieve this.