Extraordinary air freight market and temporary cost savings boost Q2 at DSV

Warns that air freight capacity is expected to remain tight for the rest of 2020

DSV has reported strong Q2, 2002 and H1, 2020 performances. The Company continued its successful integration of Panalpina, and is seeing integration synergies and cost savings ahead of plan. The extraordinary air freight market and temporary cost savings had a positive impact on Q2, 2020 results.

Revenue reached DKK28,782.0 million in Q2, 2010 and DKK56,091.0 million in H1, 2020, growth of 46.0% and 41.3% respectively. Gross profit climbed 42.4% in Q2, 2020 and 36.6% in H1, 2020. EBIT, before special items, increased 62.7% in Q2, and by 36.5% for the H1 period. The operating margin in Q2 improved to 9.1% from 8.1% the previous year, whilst in H1, it fell to 7.5% from 7.7% in H1, 2019.

The Air & Sea division saw gross profit climb 87.6% in Q2 and 73.5% in H1. EBIT increased 96.5% in Q2 and 56.2% in H1. DSV reported 69.0% growth in air freight volumes in Q2, against estimated market growth of 25.0% – 30.0%. Sea freight gross profits climbed 27.8% in Q2 and 35.6% in H1. Air freight gross profits increased 152.2% in Q2 and 112.3% in H1. DSV reported 31.0% growth in sea freight volumes in Q2, against estimated market growth of 15.0% – 20.0%. The positive impact on air freight yields was due to the extraordinary market conditions. A gradual
normalisation is expected in H2, 2020. Sea freight rates were relatively stable due to efficient capacity management by the carriers (blanked sailings). There was moderate volume recovery during Q2, 2020.

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In the Road division, revenues declined 9.6% in Q2 and 5.7% in H1. Gross profits dropped 5.5% in Q2 and fell 3.4% in H1. EBIT declined 22.2% in Q2 and 17.8% in H1. DSV considers these to be good results considering the market situation. COVID-19 had a limited impact on domestic transports, whereas international transports were severely hit. There was a gradual recovery of activity in Europe after the low point in April. Cost savings are progressing as planned but have not fully compensated for lower activity.

In the Solutions division, revenues increased 5.7% in Q2 and 9.1% in H1. Gross profits climbed 10.2% in Q2 and 10.9% in H1. EBIT was flat in Q2 and declined 7.5% in H1. The operating margin was 7.2% in Q2. Automotive, industrials and parts of retail were negatively impacted by COVID-19. eCommerce and pharma/healthcare saw a positive development. The growth in revenue and gross profit was mainly driven by the Panalpina acquisition; however, EBIT was negatively impacted by costs related to customer contracts.

Growth rates are in constant currencies and including M&A impact.

Following the acquisition of Panalpina, synergies have been achieved faster than expected and the timeline has been updated. The transfer of customers to DSV systems is progressing well and no significant service issues have emerged. Around 50 countries have been onboarded, representing more than 90.0 % of Panalpina’s volume. The legacy Panalpina air charter network continues and DSV has increased the number of services and destinations in the network.

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Total synergies and cost savings of DKK3,700.0 million are expected from the Panalpina integration and COVID-19 initiatives. Of these savings, approximately DKK800 0 were achieved in H1, 2020. The full-year impact is expected from Q1, 2021. Costs related to the integration and COVID-19 initiatives are expected at the level of DKK3,100.0 million (previously DKK3,300.0 million). In 2019, the income statement was impacted by integration costs of DKK800.0 million. The remaining integration costs are expected in 2020.

Looking ahead, the outlook for 2020 is based on assumptions of a gradual improvement of the global freight markets over the third and fourth quarters as markets reopen and with no material disruptions of global supply chains. Freight market volumes in H2, 2020 will remain below last year, but DSV expect the negative run rates to lessen. Air freight capacity is expected to remain tight for the rest of 2020; however, DSV expect a gradual normalisation of air freight yields.



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