Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DSV AS (DSDVF, Financial) has seen increased activities and multi-client facilities, indicating a potential for higher volume sites.
- The company has invested in physical infrastructure, digitization, and AI, which are expected to enhance operational efficiencies.
- There is a balanced situation between demand and supply in the market, suggesting stability.
- DSV AS (DSDVF) has a good outlook for producing additional volumes, particularly in ocean freight.
- The company has a healthy development on its existing portfolio and is successfully acquiring new accounts.
Negative Points
- Inventory levels are down, and activity levels are not booming, indicating potential challenges in maintaining growth.
- The market is highly competitive, which may impact the company's ability to increase conversion rates.
- Inflation is not fully accounted for in the company's projections, which could affect operational costs.
- The road transport market is tough, with prices being driven down, requiring significant volume growth to maintain profitability.
- The efficiency program's full impact will not be realized until next year, indicating a delay in seeing the benefits.
Q & A Highlights
Q: Can you elaborate on the decision to launch new operational efficiencies and the expected impact on costs and inflation?
A: Michael Ebbe, Chief Financial Officer: We have invested in physical infrastructure, digitization, and AI over the years. Now, as things normalize, it's time to capitalize on these investments to maintain our ratios and deliver value to customers. Inflation is not factored into these efficiencies, so it must be considered separately. The market remains competitive, and we aim to increase our conversion rates by leveraging these initiatives.
Q: What assumptions are baked into your updated guidance range, especially regarding gross profit in the second half of the year?
A: Jens Lund, Group CEO: We expect a stable development in gross profit from Q2 into the second half. We anticipate a slight increase in growth rates, particularly in ocean freight, and expect this trend to continue into Q4. Our outlook is positive, driven by strong traction in our products and a balanced demand-supply situation.
Q: Can you provide more details on the efficiency initiatives and their impact on your upgraded guidance?
A: Jens Lund, Group CEO: The efficiency program is broad and impacts all cost lines in the P&L across all divisions and countries. The updated outlook includes expectations for the remaining part of the year and the efficiency program. The full-year impact will be more significant next year as the program phases in.
Q: What are your expectations for air volume trends and gross profit yields for the rest of the year?
A: Jens Lund, Group CEO: We expect air volume trends to accelerate in the second half of the year, driven by e-commerce from Asia. Gross profit yields are stable, and we anticipate a peak in the second half. The difference in yields compared to competitors is due to our classic freight forwarding model, which remains stable.
Q: How much of the air volume growth in Q2 is from existing clients versus new wins?
A: Jens Lund, Group CEO: Approximately 60% of the air volume growth is from existing clients, with the remaining 40% from new accounts. This balanced growth is healthy and helps us avoid high churn rates. Despite a tough market with driven-down prices, we have managed to grow our volumes significantly.
Q: What is the current situation regarding demand and inventory levels in the market?
A: Michael Ebbe, Chief Financial Officer: The destocking phase has likely ended, leading to a more balanced demand-supply situation. We don't see significant inventory building among our customers at this moment, indicating a stable market environment.
Q: How do you compare your performance to your Swiss competitor, especially in terms of airfreight rates and gross profit?
A: Jens Lund, Group CEO: Our performance differs due to our classic freight forwarding model compared to their 3PL model. While they may have different dynamics with airfreight rates, our yields remain stable, and we focus on producing additional volumes to drive gross profit.
Q: Can you explain the nature of your efficiency initiatives and their expected impact on costs?
A: Jens Lund, Group CEO: The efficiency program impacts all cost lines across all divisions and countries. It is not volume-driven but aims to find cost savings throughout the organization. The full-year impact will be more significant next year as the program phases in.
Q: How do you expect the efficiency program to impact your financial performance in the short and long term?
A: Jens Lund, Group CEO: The efficiency program will have a phased impact, with more significant results expected next year. While it will move the needle this year, the full-year impact will be more pronounced in the following year.
Q: What are your expectations for the second half of the year, particularly regarding airfreight and ocean freight?
A: Jens Lund, Group CEO: We expect a positive outlook for the second half, with stable yields in airfreight and a level playing field in ocean freight. Growth rates are anticipated to be slightly higher, continuing into Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
