DSV’s UTi acquisition sees airfreight soar but profits take a hit

DSV Air & Sea has recorded drastically improved airfreight volumes as its latest acquisition, UTi, is included in its opening quarter results for the first time.
During the first quarter of the year, DSV, which recently won the Air Cargo News forwarder of the year award, saw airfreight volumes increase by 71% year on year to 122,817 tonnes, compared with an overall market decline estimated at 1.3%.
Meanwhile, airfreight revenues increased by 50.2% to DKr3.2bn and air gross profit was up 73.1% to DKr888m.
Splitting out the operations, DSV saw air freight figures develop ahead of the market while UTi recorded a decline.
“The original DSV air and sea freight operations continued the positive trend of above-market growth rates of 2015,” the forwarder said.
“Seen in isolation, UTi saw a decline compared to the same period last year. The negative volume development in UTi is attributable partly to a number of large airfreight shipments in the first quarter of 2015 as a result of the US west coast port strike.
“Furthermore, UTi lost a couple of large contracts in the first and second quarters of 2015, the full-year effect of which has not yet materialised.
“Adjusted for these events and the general impact of seasonality, UTi has reported stable activity levels since the acquisition.”
The overall forwarding business saw revenues increase by 30% to DKr7bn, while earnings before interest and tax increased by 6.7% against last year to DKr414m.
While the UTi acquisition had a clearly positive impact on revenues and volumes, some questions had been raised at the time the acquisition was announced as to its impact on the company’s profitability and this proved to be the case.
The UTi element of the business recorded an earnings before interest loss of DKr47m. Net profits were also affected by integration costs. One-off costs for the period totalled DKr370m, mainly related to UTi integration costs.
DSV, including road and warehousing business, saw first-quarter profits decline by 45.4% year on year to DKr233m, despite revenues increasing 21.6% year on year to DKr15.3bn.
The firm’s operating margin was down to 4.2% from 5.1% a year earlier.
However, management is positive it can improve the situation.
Chief executive Jens Bjørn Andersen said: “The acquisition of UTi has been a major theme in the first quarter of 2016. We took over the company at the end of January, and the integration process is ongoing.
“We have had a good start and the process is proceeding according to plan. It is of the utmost importance that we take good care of our customers during this phase so far we have been successful doing that and it is something that we monitor closely.
“As anticipated, UTi contributed a loss in the first months of the year, but the existing DSV operations continued the positive development of 2015. All in all, we are very pleased to report a first quarter operating profit in line with last year.”

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