Exceptional results at DSV seem to have become normal. The most recently released results for the first quarter of 2022 continues this state of affairs.
Revenue is up 77% year-on-year, whilst “EBIT before special items”, which is presumably operating profit, is 103.9% higher. The ‘GIL’ acquisition from Agility had some impact.
All parts of DSV did well but the freight forwarding division, ‘Air & Sea’, did especially well. Revenue for the business rose 94.1% year-on-year, gross profit was up 73.6% and Earnings Before Interest and Tax (EBIT) doubled with a 108.5% increase. Part of the reason for this performance is that markets remain disrupted. In terms of air freight volumes handled, DSV’s organic growth was only 2% year-on-year over the quarter although the acquisition of GIL led to a 22% increase. DSV states that market growth overall was zero. Yet they comment that “gross profit yields benefitted from the general market situation” as well as that the “scale benefits from the GIL integration”. The picture was similar in sea freight where the company said there was “negative market growth in Q1-22, due to a mix of congestion, Covid-19 lockdowns in China and lower demand”. Yet gross profit per tonne rose from DKK4,905 in Q4 2021 to DKK 5,904 in Q1 2022. Again, DSV ascribes this positive situation to the “general market situation”.
The position of the contract logistics ‘Solutions’ business was not quite as strong but it still saw very substantial improvements in profits. On the back of a 66.5% rise in revenue, EBIT (Earnings Before Interest and Tax) jumped 194.4%. Operating margins are now 12.8%, which for a contract logistics operation is impressive. DSV ascribe the success of Solutions to “high utilisation of capacity and continued consolidation into large, multi-client campuses”. They claim that they are gaining market share.
Even the road freight business did well, with a 25.9% increase in revenue and a 23.3% rise in EBIT. Interestingly DSV said that alongside higher “activity” and better cost disciple the business experienced “tight capacity/increasing rates due to EU mobility package, Ukraine crisis and diesel prices”.
DSV is making so much money that it is buying its own shares back, which is surprising for a company focused on acquisitions. Admittedly part of the reason for DSV’s profitability is the exceptional state of so many logistics markets. However, DSV remains highly skilled at exploiting the opportunities presented to it.
Source: Transport Intelligence, 28th April 2022
Author: Thomas Cullen