Global health crisis and acquisition impact DSV Panalpina Q1 results

DSV Panalpina saw revenues and airfreight volumes increase in the first quarter of the year, thanks to its acquisition of Panalpina, while the coronavirus outbreak had a negative impact on results.

“The financial performance in Q1 2020 was impacted by both the integration of Panalpina and the Covid-19 situation, the latter leading to lower activity levels during the quarter,” it said.

DSV Panalpina revealed a 26% year-on-year increase in revenues for the first quarter of 2020: DKK27.3bn this year, compared with DKK20bn in the same period of last year.

The group’s earnings before interest and tax (ebit) in the first quarter of this year was 7.6% higher (DKK 1.6bn) than the same period last year (DKK 1.5bn).

However, DSV Panalpina’s profits declined by 65.%, primarily as a result of restructuring costs from the ongoing integration of Panalpina and higher net financial costs. “Furthermore, the profit for the period was negatively impacted by Covid-19,” the company added.

Focusing on its Air and Sea division, DSV Panalpina said its performance in the first quarter of this year was also positively impacted by the integration of Panalpina, “which has progressed according to plan”, but it was negatively impacted by the coronavirus pandemic, which caused the global freight markets to decline year-on-year.

DSV Panalpina said it experienced airfreight volume growth of 112% in the first quarter of this year.

“The growth was driven by the acquisition of Panalpina, but was negatively impacted by lower activity following Covid-19,” it said.

Taking these points into consideration, the Air and Sea division saw revenues increase by 43% year on year — from DKK9.5bn in the first quarter of last year to DKK16.7bn in the same period this year.

Air and Sea’s ebit was DKK1.1bn in the first quarter of this year – 11% higher than the same period last year (DKK998m).

“This corresponds to a growth for the period of 12.9%,” the company explained. “The positive development is a result of the inclusion of Panalpina and the gradual realisation of synergies.”

The Air and Sea division’s operating margin was 6.8% in the first quarter of this year, compared with 10.6% in the same period last year.

Commenting on this, DSV Panalpina said: “The decline in margins is attributable to the acquisition of Panalpina, which initially has an adverse effect on the margins. As the integration progresses and the synergies are realised, margins are expected to increase again.”

Exploring the airfreight division alone, DSV Panalpina reported that it achieved 51% higher revenues in the first quarter of this year compared with the same period last year — DK 9.5bn and DKK 4.6bn respectively.

Gross profits for the airfreight sector were DKK 2.2bn in the first quarter of this year — 42% higher than the DKK 4.6bn achieved in the same period last year.

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Reflecting on the entire group’s performance for the first quarter of this year, Jens Bjørn Andersen (pictured), group chief executive, said: “When this year started, we were really looking forward to demonstrating the strength of the DSV Panalpina combination. The Covid-19 crisis has obviously changed the agenda for everybody and hit our markets in a severe way, but we have been able to continue the integration as planned.

“All things considered, we delivered satisfactory results in Q1 2020 and our asset light business model has shown its strength. The crisis will have a significant impact on activity levels in the coming months, and we are taking the necessary steps to adapt while supporting the supply chains of our customers and ensuring the safety and health of our employees.”

Such “necessary steps” include participating in government wage and fixed cost compensation programmes. However, the company warned: “redundancies cannot be avoided in certain parts of the organisation”.

The company went on to explain: “We target annual cost savings in the level of DKK1.4bn. The initiatives are expected to trigger restructuring costs of approximately DKK1bn in 2020”.

“Despite the current situation with regards to Covid-19, we expect the ongoing integration of Panalpina to continue as planned,” it added.