European forwarding and logistics group DSV has raised its overall outlook for 2017 after reporting strong third-quarter results led by spectacular growth in the operating profit of its Air & Sea freight forwarding division.
Commenting on DSV's global performance in the quarter at a conference call earlier today, CEO Jens Bjørn Andersen, said: “The EBIT result is what drives us - the growth in absolute earnings - and that grew in constant currencies, by 34.4% to be exact, with good growth in all of the three divisions - Air & Sea, Road and Solutions.”
Focusing on the Air & Sea division in particular, he noted: “These are a really impressive set of numbers. Really, really strong on all parameters. I think we can say it basically speaks for itself when you grow your earnings at 49.4%. That's something for our teams to be very proud of and I know that they are.”
He claimed DSV’s forwarding operations were now “back on track to grow in line, or faster, than the market” following the completion of the integration of UTi, which DSV acquired in January 2016.
Andersen added: “Three months ago we said that the end of Q2 had been strong and we have seen that momentum carried through into Q3.”
DSV’s Air & Sea division reported a 3% increase in sea freight volumes in the third quarter compared to the same period last year, a result it said was in line with the market. DSV saw the strongest development in exports from the Europe-Middle East-Africa (EMEA) region. Ocean volumes were up 7% in the first nine months compared to 3-4% for the market.
Meanwhile, DSV’s Q3 air freight volumes increased by 12% in Q3, also in line with the market, with growth mainly driven by strong Asia Pacific and EMEA exports. Year-to-date volumes showed an increase of 11%, again largely in keeping with the market.
“With a large part of the UTi integration completed, the organisation has intensified its focus on sales and gaining market share, which is reflected in the Group's performance in Q3 2017 with growth picking up,” reported DSV. “This positive trend is expected to continue in the coming quarters.”
Net revenue for DSV’s Air & Sea business rose by 13.9% to DKK 9.044 billion ($1.43 billion)
However, gross profit per unit in DKK was down around 3% for sea freight and 4% for air freight compared to the third quarter last year.
“The decline was mainly due to exchange fluctuations, particularly in US dollars,” said DSV. “However, 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.”
Operating profit for the division (EBIT) before special items increased by 49.4% in constant currencies in Q3 2017 to DKK 903 million.
DSV said the positive development was largely due to “the continued successful integration of UTi's activities” with growth driven “by regions and countries where UTi had a strong performance, in particular North America, China, South Africa and Germany”.
For the group as a whole, including its Road and Solutions businesses, operating profit before special items increased by 34.4% in Q3 to DKK 1.313 billion, while net revenue was up 11.7% to DKK 18.735 billion.
DSV's financial outlook for 2017 has been revised upwards with expected EBIT before special items now in the DKK 4.7-4.9 billion range from the earlier forecast of DKK 4.5-4.7 billion.
The upgrade is partly due to the faster than expected realisation of integration synergies during 2017.