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DSV raises outlook as global supply snarls keep freight rates high
Global Banking & Finance Review®
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COPENHAGEN (Reuters) -Freight forwarder DSV raised its annual earnings outlook on Tuesday after benefiting from high freight rates, but said consumer demand and freight rates have slipped slightly over the past few months as economic uncertainty bites.
COPENHAGEN (Reuters) -Freight forwarder DSV raised its annual earnings outlook on Tuesday after benefiting from high freight rates, but said consumer demand and freight rates have slipped slightly over the past few months as economic uncertainty bites.
The shipping industry has seen earnings skyrocket as high consumer demand coupled along with pandemic-related supply chain bottlenecks and Russia’s invasion of Ukraine have prompted a spike in freight rates.
But as soaring inflation causes consumers to grow wary of spending, demand for freight services has “softened” in the past months with volumes of air and sea freight estimated to have declined in the first half, DSV said.
“There is a quiet slowdown in especially air and sea volumes, but rates are still high, the supply chains are still difficult,” DSV’s Chief Operating Officer Jens Lund told Reuters.
Freight rates are still four to five times higher than prior to the COVID-19 pandemic, Lund added.
DSV, the world’s third-largest freight forwarder, reported earnings before interest and tax (EBIT) before special items of 7.5 billion crowns for the second quarter, beating an average of 6.5 billion crowns forecast by analysts in a company poll.
It said it now expects earnings before interest and tax (EBIT) before special items for 2022 to be in the range of 23 billion crowns to 25 billion crowns ($3.16 billion to $3.43 billion), up from an earlier estimate of 21 billion to 23 billion crowns.
Shares in the company traded up 0.5% at 0745 GMT. They have fallen nearly 26% this year on uncertainty about the global economic outlook.
“DSV is a clear industry winner and they will continue their impressive growth in the future through organic growth and acquisitions,” Jyske Bank said in a note.
DSV also launched a 7 billion crown share buyback programme on Tuesday running from July 26 until Oct. 4.
($1 = 7.2802 Danish crowns)
(Reporting by Nikolaj Skydsgaard; Editing by Christopher Cushing, Sherry Jacob-Phillips and Susan Fenton)
Freight forwarding is the process of arranging the transportation of goods on behalf of shippers. It involves coordinating shipments from the point of origin to the destination, including customs clearance and documentation.
Freight rates are the charges levied for the transportation of goods. These rates can fluctuate based on demand, supply chain conditions, and other economic factors.
EBIT stands for Earnings Before Interest and Taxes. It is a measure of a company's profitability that excludes interest and income tax expenses, providing insight into operational performance.
A share buyback program is when a company purchases its own shares from the marketplace. This can reduce the number of outstanding shares, potentially increasing the value of remaining shares.
Economic uncertainty refers to a situation where there is a lack of predictability regarding the economic environment, which can affect consumer behavior, investment decisions, and overall market stability.
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