Air and sea freight volumes at the world’s largest freight forwarder, DSV, saw a decline in the third quarter, but revenues grew more than 15% year on year, due to elevated ocean freight rates.
According to third-quarter results released today, DSV posted group revenue of DKr71.9bn ($10.8bn), up 10.5% year on year, and an EBIT before special items of DKr5.4bn, up 19.5% year on year.
Its Air & Sea forwarding division reported a 3% decline in air freight tonnage and ocean freight teu, but a 15.9% increase in combined revenue, to DKr45.6bn, while EBIT before special items was up 19.8% year on year, to just under DKr4.3bn.
DSV also noted that over the first nine months of the year, its sea freight volumes had grown 13%, but attributed the Q3 decline to a mixture of “weaker commercial performance on the APAC-Europe tradelane and the effect of yield management initiatives.
It said: “The quarterly decline was greater than expected, but stabilised during the period.
“Performance was impacted by weak demand on Middle East-related tradelanes, where disruptions affected activity, while the APAC-Europe tradelane continued to be affected by integration-related commercial impacts in certain countries, particularly in Germany.”
Chief executive Jens Lund told analysts on DSV’s earnings call this morning the firm had spent the quarter “sanitising” its lower-paying and loss-making shipper accounts.
“I would say of the 3% decline, about two percentage points were sanitising and the remaining 1% a business decline, certainly in air freight,” he said.
Third-quarter air freight volumes also fell 3%, year on year, to 560,890 tonnes, although over the nine-month period they were up 15% year on year.
The company explained: “Despite a positive volume trend during the quarter, the decline was larger than expected.
“Volumes were impacted by yield-management initiatives, conversion from air freight to sea freight, lower-than expected activity in Europe and reduced e-commerce volumes on the APAC-Europe tradelane.
“This was partially offset by growth within the technology business in APAC and North America. Middle East-related tradelanes remained weak, due to the ongoing conflict in the region.”
Mr Lund added that between 20% and 25% of volumes were now running through the Tango TMS inherited through DSV’s acquisition of Schenker, the remainder being handled via the CargoWise system.
“It’s predominantly the larger clients that we have on that [Tango] platform – the more complex ones.
“We’ve not started any roll-out yet – we’ve said that we want to improve Tango, and it will also co-exist with CargoWise for quite a while, so that we de-risk the roll-out.”
Meanwhile the Road Transport division was clearly the group’s worst performer: revenue essentially flat, at DKr23.4bn; while EBIT before special items decreased 35.1% year on year, to DKr526m, on the back of falling volumes and “a period with operational issues”.
DSV said: “However, the operational performance normalised at the end of the quarter and focus is now shifting to improving productivity and commercial performance.”
It added: “While the Schenker integration continued during the quarter, the synergies are expected to be delayed into 2027.”
In contrast, its Contract Logistics arm saw revenue grow 7.3%, to DKr14.3bn, while EBIT before special items increased 50.3%, to DKr1.7bn, following “productivity and capacity improvements, including consolidation of low-margin sites”.
Mr Lund said: “Where you have activities in warehouses that basically operate at a very low margin, and sometimes even at a minus margin, all these things are not delivering the return we require – we are basically terminating this volume now.
“That’s part of the CL improvement – you take some business out that maybe loses money, or has very low margin, and you replace it with business that operates at a normal margin. And look at what an impact it has,” he added.