Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DSV AS (DSDVF, Financial) announced the acquisition of Schenker in September, with capital raised in early October to support the transaction.
- The company reported year-on-year growth in EBIT for the first time in a while, indicating a recovery from previous downturns.
- Gross profit increased by 4.8%, and EBIT rose by 1.5% in constant currencies, showcasing financial improvement.
- DSV AS (DSDVF) has narrowed its guidance range, indicating confidence in achieving higher financial targets.
- The company has seen strong growth in air and ocean freight, with air freight up 7% for the year and ocean freight up 8% for the quarter.
Negative Points
- The road market in Europe is challenging, with declining gross profit margins and conversion ratios due to cost pressures.
- Cost inflation, particularly in IT and software licenses, is a concern, prompting the company to initiate cost-cutting programs.
- The NEOM project is experiencing slower-than-expected ramp-up, leading to limited activity in Q4 and early 2025.
- The company faces tough discussions with customers over price increases in the road segment, which could impact relationships.
- There is uncertainty about the timing of market stabilization in ocean freight, with potential impacts on gross profit per unit.
Q & A Highlights
Q: Can you discuss the composition of your gross profit in Air & Sea and the mix changes from pre-pandemic to now? Also, what is the underlying demand backdrop for Q4 and 2025?
A: Jens Lund, Group CEO: The majority of our income in ocean freight is from services rendered, such as documentation and consolidation, rather than freight markups, with about 70% being service-related. In air freight, 50-60% is freight-related. Demand for Q4 and 2025 is expected to be subdued, but we anticipate gaining market share due to our commercial approach.
Q: Regarding the road business, how are price increases being perceived by customers, and what are the CapEx commitments for NEOM this year and next?
A: Jens Lund, Group CEO: We are experiencing higher volumes but lower prices in the road business. Price increases are necessary to support hauliers, though customers are resistant. For NEOM, we expect minimal capital deployment this year and low levels next year due to slower project ramp-up.
Q: How should we think about the normalized GP per unit in ocean next year, and what is the strategy for increasing wallet share with customers?
A: Jens Lund, Group CEO: We expect GP per unit to stabilize, with slight increases in the lower single digits. Our strategy focuses on expanding our service catalog and increasing the pipeline with existing customers, not sacrificing yield. The Schenker acquisition will enhance our service offerings.
Q: Can you share insights on customer satisfaction improvements in ocean freight and the impact of EU mobility package changes on the road market?
A: Jens Lund, Group CEO: Our NPS scores have been improving, indicating high customer satisfaction, particularly in ocean freight. The rollback of EU mobility package requirements should increase truck supply and reduce unnecessary emissions, benefiting the market.
Q: What are your integration plans for DB Schenker, and how will your M&A strategy evolve post-integration?
A: Jens Lund, Group CEO: We are preparing for integration by aligning systems and planning structurally. Post-integration, we will continue to pursue M&A opportunities that enhance our service catalog and economies of scale, as the industry remains fragmented.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
