DSV upgrades 2017 expectations on the back of solid Q3 growth

DSV has gone from strength to strength, judging by its Q3 results reported today. Continuing on from its solid performances in Q1 and Q2, EBITDA in Q3 was up 24.6% year-over-year. This led to a net profit for the period of DKK* 826m, up 49.6%. For the first nine months of the year EBITDA was up 35.5% and profits were up a staggering 100.1% at DKK 2,237m .

Year-to-date comparisons are effected by DSV’s UTi acquisition, completed at the end of January 2016. Nonetheless, it is evident that the acquisition has been good news so far. The Danish company said that the integration had progressed faster than expected and that it is now intensifying its focus on gaining market share. Volume growth in its air (+12%), sea (+3%) and road (+4%) segments do not suggest any such gain was made in Q3, but that it is at least keeping up with the market.

Net revenues totalled DKK 18,735m for the quarter, up 8.9%. For the first nine months of the year, growth of 11.5% was accomplished, or 12.4% on a constant currency basis.

This top line growth followed that of its Air & Sea division (up 9.2%). The forwarding segment also achieved EBITDA growth of 37.6%. It reported that APAC and EMEA exports aided its air freight volumes. EMEA volumes were also strong for its sea freight section. However, both its GP/tonne and GP/TEU margins were weaker overall.

The decline was partly due to exchange rate fluctuations, but DSV also reported that “due to high volume growth in the market, certain trade lanes have been impacted by lack of capacity for air freight, especially out of Asia. In combination with a competitive pricing environment this has resulted in a temporary margin squeeze.”

Tight capacity has also been a feature of the road freight markets in which it operates. Its Road segment reported revenue growth of 5.7% and EBITDA growth of 3.9%. Gross profit margin dropped 0.5 percentage points to 17.0%.

Its contract logistics business, Solutions, produced revenue growth of 10.6% and EBITDA rose by 4.1%. Again, gross profit margin dropped, in this case by 4 percentage points to 23.4%. DSV attributed pricing pressure from customers and higher operating costs to the decrease.

Despite these margin pressures, the results are certainly positive. Q3 was strong enough for DSV to upgrade its operating profit expectation range for 2017 by around DKK 200m. With a sizeable proportion of the UTi now acquisition integrated, DSV can focus on solidifying and improving its market position.

Source: Transport Intelligence, October 26, 2017

Author: Andy Ralls





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