DSV cash flow strong but profit down in first half

• DSV cites adapting to soft market conditions through its asset-light business model

• Gross profit fell 14.2% y-o-y while EBIT before special items dove 31.6% y-o-y

• The company has upgraded its 2023 outlook but expects air & sea division gross profit to decline

DSV reported strong cash flow in the first half even as gross profit fell 14.2% year-on-year to Danish kroner (DKK) 22.72 billion (about US$3.37 billion).

Cash flow amounted to Danish kroner (DKK) 8.14 billion (US$1.2 billion) after adapting to soft market conditions by leveraging the company’s asset-light business model.

EBIT (earnings before interest and taxes) before special items dove 31.6% y-o-y to DKK9.38 billion. Still, DSV said the numbers were still better than pre-pandemic levels.

The company described its performance as “solid” and its cashflow strong in the face of declining shipping rates and weak demand. In the previous two years, rates had risen to record highs as demand for shipping surged amid a boom in e-commerce due to the pandemic.

“In Q2 2023, we delivered a solid set of results across all three divisions, and a strong cash flow. The demand for transport and logistics services is soft, and during the first half of 2023, we had demonstrated our ability to adapt to changing market conditions,” DSV group chief executive Jens Bjørn Andersen said in a statement.

“The market development outlook is still uncertain, but we see signs of stabilization and we anticipate gradual improvement in global trade volumes over the next quarters.”

The air & sea division posted a 35.7% drop in EBIT before special items for H1 2023, impacted by lower freight volumes and rates compared with last year.

The solutions division reported a 23.4% y-o-y decline in EBIT before special items, largely due to a slight drop in activity and an expansion of warehouse capacity.

A 2.8% slide in EBIT before special items was posted by the road division, which performed well and gained market share in a market with lower activity across most sectors, DSV said.

In the first half, demand for transport and logistics services were marked by the macroeconomic situation. In parallel, the logistics markets had quickly normalized after the disruptions in recent years.

DSV said that, in a highly competitive market, it is reinforcing its commercial efforts and maintaining its plan of outgrowing the general market while delivering value to customers.

Based on its performance in H1 2023 and the assumption of a gradual improvement in transport volumes in the second half, DSV has upgraded its full-year outlook for 2023 EBIT before special items to a range of DKK 17 billion-18.5 billion, from DKK 16 billion-18 billion previously.

As the global logistics market continues to normalize, the Danish transport and logistics company expects a further decline in gross profit yields for air & sea from the first half 2023 levels.

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