DSV Q12024 earnings down 26% on lower rates

DSV reported a 26 percent decline in adjusted earnings at DKK 2.5 billion ($350 million) for the first quarter of 2024 on six percent drop in revenue at DKK 38.3 billion ($5.4 billion).

Jens H. Lund, Group CEO, DSV says: “In a normalising market, we are off to a good start, delivering strong financial results in the first quarter of 2024, and I am particularly satisfied that we are gaining market shares in all three divisions. We have also completed the leadership changes, the organisation has settled, and together with the new and experienced leadership team we will concentrate our efforts on executing on our strategy, with particular focus on our customers.”

Air & Sea
The air & sea division reported a 11 percent decline in revenue at DKK 22.7 billion ($3.2 billion) on lower average freight rates (on higher volumes). While air freight revenue was down 15 percent at DKK 12.2 billion ($1.7 billion), sea freight revenue was down 12 percent at DKK 10.5 billion ($1.5 billion)

Although spot rates are higher than last year, the average contract rate for the current period is lower compared to the same period last year, the update added.

Operating profit (EBIT) was down 27 percent at DKK 2.6 billion ($364 million) in a market driven by soft volume growth and normalised yields.

"For air freight, focus was on optimising our European routings and developing the gateway infrastructure. Air volumes increased 2.3 percent in Q12024 to 335,213 tonnes compared to the same period last year, mainly owing to strong development in export volumes from APAC. The air freight market is impacted by continued high growth in e-commerce volumes from China, driving both market volumes and rates up. Adjusted for the above and perishables impact, we estimate that our addressable market is growing by low single digits."

Air freight capacity continues to increase due to more passenger travel, which generates more available belly capacity, the update added. "Combined with more freighter capacity compared to pre-pandemic, this has led to overcapacity in the air freight market. During 2024, we expect that some of the excess capacity will be offset by retirement of old aircrafts."

In the first quarter of 2024, DSV’s sea freight volumes increased 8.2 percent to 636,544 TEUs compared to the same period last year. "The strongest growth rates were recorded on export volumes out of APAC. The rerouting of ships around the Cape of Good Hope in response to the Red Sea crisis led to increased freight rates in the quarter. The additional voyage time of approximately 10-14 days ties up some capacity. Nonetheless, the sea freight market continues to be impacted by significant incoming capacity. We estimate that the market grew by mid-single digits in Q12024."

NEOM update
In October 2023, DSV announced an exclusive logistics joint venture to provide logistics services for the projects in the NEOM region. "The project is mobilised and ready to go live in Q2 as planned," the company says in the management commentary after announcing the Q1 results. "The timing of investments in the joint venture will depend on the progress of the individual projects in NEOM. Based on current plans, we expect the joint venture activities to ramp up over the next 3-4 years. The joint venture will have a positive impact on the DSV network, and we expect a return on the invested capital in line with our financial targets. Human rights policies in line with DSV principles will be an integrated part of the joint venture, and we will report on this when we go live. So far, we have had no issues during the mobilisation phase."

New buyback
DSV has announced a new share buyback of DKK 1 billion ($140 million), and will run till July 23, 2024.

2024 outlook
DSV has maintained its 2024 outlook with operating profit (EBIT) before special items expected to be in the range of DKK 15-17 billion ($2.1-2.4 billion).