L1/ Despite market competition, DSV Group performed well in the second quarter of 2024, with strong results meaning that the company met expectations in key indicators such as revenue and profit, with gross profit down 4.0% compared to the same period last year. The decline in gross profit may be related to increased costs or price pressures. Earnings before interest and taxes (EBIT) before special items decreased by 12.4 percent, reflecting a decrease in profit before interest and taxes.
L2/ EBIT increased by 12.6 percent in the second quarter of 2024 compared to the first quarter. This indicates that DSV has made significant progress between quarters, possibly through improved efficiency or increased business volume, with growth in air and sea volume and stable unit earnings being the main drivers, increased volume means the company has moved more cargo, stable unit earnings indicating no reduction in profit per unit of cargo, DSV has revised its full-year EBIT guidance to 15.5 billion to 17 billion Denmark kroner due to the strong performance in the first half of the year, This indicates that DSV's outlook for the second half of the year is clear and optimistic.
L3/ DSV continued to deliver good financial performance in a challenging environment, mainly reflected in volume growth, market share improvement and solid cash flow, and the full-year guidance was revised to 15.5 billion to 17 billion Denmark kroner, indicating that DSV has clear and optimistic expectations for future financial performance, and DSV launched a new share repurchase program of 1.5 billion Denmark kroner, indicating that DSV is confident in its financial health and future growth prospects.
L4/ Specific performance of each department:
Sea & Air: Gross unit profit remained stable, with stable operating performance despite intense competition and market volatility. While the situation in the Red Sea has not affected financial results at the moment, a slight positive impact is expected in the second half of the year.
Highway: Achieved satisfactory results in a highly competitive market, with stable gross profit and EBIT before special items up 4.4% year-on-year. Through cooperation with other departments of the Group, the network was further strengthened and operational efficiency was improved.
Solutions: Gross profit increased by 8.1 percent year-on-year, and EBIT before special items increased by 6.8 percent. Despite the low utilization rate of the new plant, the performance was driven by an increase in new orders.
L5/ Outlook for the second half of the year:
EBIT before special items is expected to be between 15.5 billion and 17 billion Denmark kronor, an increase from the previous range of 15 billion to 17 billion Denmark kronor and an expected tax rate of around 24 percent, which is an expectation of the company's tax burden and affects the company's final net profit. The cost of the one-time cost special items is expected to be 650 million Denmark kroner, which includes possible one-time expenses or adjustments that affect the company's financial results, and the new share repurchase program will launch a share repurchase program totalling 1.5 billion Denmark kroner. This program starts on July 24, 2024 and runs until October 22, 2024
L6/ The Sea & Air segment, which is responsible for global air and ocean cargo, providing traditional freight forwarding services and customized project freight solutions, saw a 9.3% decrease in gross profit compared to the year-ago quarter, indicating that while the business may have grown, the decline in gross margin may be due to freight fluctuations, cost increases or other market factors, with EBIT before special items declining by 18.2%. This indicates a decrease in the department's profitability after deducting special item expenses, which may be affected by freight rate changes, increased operating costs, or other factors. Compared with the first half of last year, the gross profit margin in the first half of 2024 tends to be normal and remains relatively stable. This indicates that despite the decline in overall gross profit, gross margin is relatively stable, indicating that DSV may be doing a better job of controlling costs or adjusting prices. Despite freight volatility and market challenges, the segment estimates that its market share has expanded. This indicates that the company may have achieved good market positioning and customer base growth in a highly competitive market.
L7/ For LCL ocean freight products, DSV has increased its own control of LCL, the global air cargo market has been affected by the rapid growth of e-commerce, especially the growth of China's export volume, which has led to tight capacity and higher freight rates, especially in the Asia-Pacific region, due to the growth of China's export volume, which has taken up a lot of available capacity, resulting in higher freight rates. In addition, other trade lanes also saw an increase in available capacity due to increased passenger traffic and airline summer flight schedules. These factors affect the dynamics and price levels of the air freight market.
L8/ The addressable market is expected to achieve mid-single-digit growth in the second quarter of 2024 after adjusting for e-commerce and perishable food, with air freight volume increasing by 10% in the second quarter of 2024 compared to 6% in the first half of 2024, which shows strong growth in the air freight business, mainly driven by the improvement in export conditions in the Asia-Pacific region, which supported the air freight business, and the growth in the number of customers in the textile and pharmaceutical industries in the Chinese market, driving the air freight demand, The sea air freight business in the India subcontinent region had a positive impact on the overall air freight volume growth.
L9/ In response to the situation in the Red Sea, ships bypassed the Cape of Good Hope, which led to high freight rates, which were kept at a high level, and geopolitical risks and route adjustments directly affected freight prices, keeping them high, and in the second half of the second quarter, factors such as early summer peaks, port congestion, flight schedules and longer transit times led to further increases in freight rates. Particularly on the Asia-Europe route, these factors have had a greater impact on freight rates and have also impacted other first-leg routes, with market growth expected to be in the mid-single digits in the second quarter of 2024. Compared to the same period last year, ocean freight volume increased by 4% in the second quarter of 2024 and 6% in the first half of 2024. This indicates that the company has achieved growth in the marine business, although the growth rate is slightly lower than in the first half of the year, but still shows that the market demand is solid. Exports from the Asia-Pacific region continued to grow strongly, driving the growth in ocean freight volumes. Revenue for the second quarter of 2024 was 24,616 million Denmark krone, up 8.1% from 22,993 million Denmark kronor in the same period last year. The increase in revenue was mainly due to increased transport activities and higher sea freight rates, with segment revenue of 47,332 million Denmark kronor in the first half of 2024, down 2.3% compared to 49,206 million Denmark kronor in the same period last year. The decline in revenue may be related to changes in market conditions, fluctuations in freight rates, or other factors. The growth in air and sea freight volumes continues to be positively affected by the growth in demand.
The L10/ Highway segment is one of the market leaders in Europe and also has a presence in North America, South Africa and the Middle East. This shows that the company occupies an important position in a number of key markets and has strong market coverage capabilities. The division's extensive network of more than 280 terminals provides Full Truck Load (FTL), Less Than Truck Load (LTL) and consolidation services to meet the needs of diverse customers. In the second quarter of 2024, the segment's gross profit remained stable. EBIT before special items increased by 4.4 percent compared with the prior-year quarter. This growth demonstrates positive results in improving profitability in the highway sector, despite challenging market conditions. Despite the fierce competition in the market, it is estimated that the segment has gained more market share, especially in European consolidation.
L11/ Global warehousing and logistics services; The Solutions segment provides warehousing and logistics services worldwide and manages more than 500 logistics facilities, including freight management, customs clearance, order management, and e-commerce solutions. This means that the division offers a complete range of logistics solutions, from transportation and customs clearance to order processing and e-commerce support. Gross profit increased by 8.1% in the second quarter of 2024 compared to the same period last year. This growth demonstrates the division's success in improving profitability despite market challenges and competitive pressures. Earnings before interest and taxes (EBIT) before special items increased by 6.8 percent. This growth is further reflected in the division's strong performance in terms of operations and profitability. The Solutions segment performed strongly in the second quarter of 2024, with significant increases in gross profit and EBIT reflecting improved operational efficiency and profitability in the segment.