DSV profit jump helped by currency

DSV

The results for first half of 2015 show net revenue up by 8.2% year-on-year, with gross profit increasing by 9.7% for the half-year and 5.6% for the second quarter. Before exceptional items H1 operating profit was up 16%, at DKK1.45bn.

The driver of this performance has been DSV’s freight forwarding business and especially its air freight forwarding business. This saw a 10% increase year-on-year in tonnage shipped for Q2 and an 8.9% increase for H1 over the first half of 2014. The result was a 17.4% increase in gross profit and an increase in gross profit per tonne of 7.8% year-on-year. Performance in sea freight was not as great but it still saw a year-on-year increase of 2.9% in TEUs for the half-year and a rise of 16.6% in gross profit over the same period. The reservation around the financial numbers is that they have been heavily influenced by currency volatility, with DSV stating that “improved profit per unit is mainly driven by currency translation”. Overall EBIT before special items climbed by 25.7% in the first half of the year with profit margin hardening by 1.3% to 8%.

Unsurprisingly the road freight business was more subdued, however it still managed to grow volumes by 4% in a market experiencing minimal growth. The division saw hardening margins and EBIT up 8.6% at DKK479m for the half year.

The contract logistics ‘solutions’ business is less happy with a 7% increase in net revenue for the half year but EBIT falling by 8%. This appears to be due to start-up costs at new customers in Q1, with profitability recovering in Q2.

This set of results from DSV does look impressive, however caution should be applied due to what the company describe as “tail winds from currency translation”. None-the-less DSV does appear to have grown volume without too great a loss of profitability in the air freight forwarding market. DSV’s previous record suggests that the tight management grip that characterises the company will sustain this performance.