Denmark based global forwarder and contract logistics operator DSV has had extensive changes of senior leadership amidst the ongoing challenging global market conditions in the first quarter. The new hands at the controls need to be steady with no sign in sight of the storm abating.
Small gains in revenue and EBITDA at the DSV Solutions contract logistics revenues offset falls in profits in its other two divisions, DSV Air & Sea and DSV Road. Overall revenues in the first quarter of 2024 were 6.4% down y-o-y to DKK 38,340m, and EBITDA was down 15.3% to DKK 5,032m.
Air & Sea Volumes Up – Revenues and Profits Down
As one of the world’s leading forwarders, DSV has been overexposed to the challenging market conditions affecting air freight forwarding and sea freight forwarding. Across the division, EBITDA was down 25.5% y-o-y to DKK 2,912m and revenue -13.3% y-o-y to DKK 22,716m.
In the quarter, both air and sea freight volumes handled by the Danish logistics giant grew – air was up 2.3% y-o-y to just over 335,000t and sea volumes up 8.2% to almost 637,000 TEU. Globally, air cargo has an oversupply of passenger aircraft belly space and too many dedicated air freighters in service, with no immediate sign of margins set to grow. This led to a 14.7% y-o-y drop in revenues for the Air segment to DKK 12,167m.
Though sea volumes freight grew in the quarter, revenues fell by 11.7% to DKK 10,549m for the segment. The shipbuilding boom brought about by the pandemic has increased global sea freight capacity and this is set to grow even more in 2024, leading to no sign of improving freight rates in the coming months. The Red Sea situation has impacted routing from East Asia to Europe, which has impacted costs but these have not translated to improved revenues or profits.
Road Volumes Down
Global overcapacity in long haul routes affected DSV far more than regional road freight. The company has said that its volumes were down overall in the quarter. This is likely affected by the ongoing road freight recessions in the US and EU, brought about once again by overcapacity in the markets. Revenues were up 3.3% to DKK 10,425m and EBITDA down by 1.1% to DKK 703m.
DSV Solutions – a Marginal Bright Spot
The contract logistics arm of DSV, DSV Solutions has seen gentle revenue and EBITDA growth, though EBIT at constant currency was down 8.8% y-o-y. The company is growing its global warehousing capacity but is facing under-utilisation of its existing capacity including temporary and expected reduced occupancy and its new sites.
Even with these issues, the division still managed a revenue growth of 6.5% y-o-y to DKK 5,989m and EBITDA up 5.6% to DKK 1,314m.
New Leadership Amidst Stormy Conditions
During the quarter there were extensive leadership changes at the top of the company. Jens Lund took over as CEO, and Brian Ejsing stepped into his old role as Chief Operating Officer. As part of ongoing succession plans, Lund announced that each of the three divisions will now have a CEO, COO and CCO.
The changes took place among quite adverse market conditions that are unlikely to improve in the coming months due to global overcapacity in supply chains. Steady management in the stormy conditions is required to ensure the company minimizes losses.
Author: Richard Shrubb
Source: Ti Insights
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