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In a market with declining volumes, DSV reports good Q1 2023 results and strong cash flow. Gross profit fell 11% while EBIT before special items slid 28% compared with extraordinarily strong results in the same quarter last year
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Asia Pacific led the gross profit drop in most regions with lower export volumes having a significant impact. The Middle East was the only region that saw gross profit growth in Q1
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DSV’s air & sea division’s EBIT in Q1 2023 dropped 31% due to lower freight volumes than in Q1 2022, solutions posted a similar decline in EBIT on reduced activity, while the road division was positive, with results on par with that of Q1 2022
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DSV expects global trade volumes to improve gradually in the coming quarters and stands by its full-year EBIT guidance range of DKK 16 billion to 18 billion for 2023
DSV Group reported “a good” first quarter with strong cashflow despite profit dip in a competitive market environment, as weak demand led to declining freight volumes.
Releasing its first-quarter 2023 financial results on April 27, the company said gross profit fell 11.4% fall to Danish krone (DKK) 11.39 billion (US$1.68 billion) and EBIT (earnings before interest and tax) slid 28.2% to DKK 4.67 billion from DKK 12.88 billion last year.
Owing to a significant drop in net working capital, the group reported a strong DKK4.9 billion adjusted free cashflow despite profit dip that was on par with last year‘s level.
Global trade volumes were hit by the general macroeconomic slowdown and reduced inventory levels in the first quarter of 2023. This led to lower freight volumes and falling rates, especially for air and sea shipping – although this was compensated by continued strong gross profit yields.
“As anticipated, the demand for transport services and freight rates declined during the first quarter of 2023. Nonetheless, we achieved good results and strong cash flow in all our business areas by providing good customer service and efficiently managing our capacity,” Jens Bjorn Andersen, DSV Group chief executive.
“We expect that global trade volumes will improve gradually in the upcoming quarters, and we stand by our full-year EBIT guidance for 2023.”
DSV said it is maintaining its outlook for 2023, namely, operating profit (EBIT) before special items in the range of DKK 16-18 billion, an effective tax rate of about 24.0%, and an assumed volume decline of up to 5% in the air and sea market for the full year 2023.
The group issued on April 27 a separate company announcement about the launch of a new share buyback program of up to DKK 4.5 billion that will be concluded no later than July 24, 2023.
With the freight markets having largely normalized following disruptions and capacity constraints in 2021 and H1 2022, the group’s air & sea revenue contracted in Q1 2023 due to lower volumes and lower average freight rates compared with the same period last year.
DSV said its road and solutions business also experienced reduced activity during the quarter, but the decline in the road unit’s activity was offset by increased average freight rates and higher fuel surcharges compared with the same period last year.
The air & sea’s lower gross profit was primarily due to reduced activity. Gross profit per unit remained relatively strong in Q1 2023, backed by the division’s pricing discipline and focus on higher-yield cargo.
“As the freight markets continue to normalize, we expect gross profit yields to gradually decline in the coming quarters,” DSV said.
Road achieved 3.2% gross profit growth for the quarter, driven by good performance on the international market, while solutions’ gross profit was on par with last year’s despite challenging market conditions.
The group’s gross margin was 27.8%, up from 21.1% a year ago, mainly due to strong gross profit yields in air & sea despite the lower freight rates. EBIT before special items hit DKK 4.2 billion, compared with DKK 6.5 billion last year.
DSV said the reduced EBIT was mainly due to lower gross profit being in line with full-year expectations.
