The basic mood amongst the large logistics service providers is good. Both in the USA and Europe the sector’s big companies have reported rising sales figures and profits, as well as satisfactory market developments. The unrelenting high pressure on margins remains a serious challenge, however.
DSV’s takeover of UTi Worldwide represented a real tour de force for the Danish company – and depressed its profits in the short term. In the meantime the billion-euro deal has practically been completed, as CEO Jens Bjørn Andersen told the media at the recent presentation of the corporation’s half-yearly figures. “The integration process has been completed in all units, except for IT infrastructure and the back office. These will also by concluded by the end of this year. The financial gains from these synergies will have an impact on our balance sheets over the next three years.”
The latest half-yearly figures are already extremely positive. The Danish logistics provider generated gross profits of DKK 8.44 billion (EUR 1.13 billion). This corresponds to a rise of 7% vis-à-vis the like-for-like period last year. Currency fluctuations and the intensive effort required to integrate UTi Worldwide mean the two periods cannot be compared directly, however.
A record operating profit
DSV’s operating profit caused a bit of a stir. It came in at DKK 2.369 billion (EUR 318 million), or 53% higher than in H1 / 2016. “Of course we’re very pleased with this performance,” Andersen said. “A mere 18 months after the takeover of UTi our KPIs and our productivity have hit an all-time high.”
DSV’s air and sea division, its most important field of business, also saw significant growth. Both maritime cargo operations as well as its airfreight activities increased their volumes by approximately 10%. DSV wants to make the best of the current dynamism and has thus announced that it will be buying back shares worth around DKK 1 billion (around EUR 134 million).
The firm has set itself the target of gaining market shares and increasing sales for the rest of this year. The speeding-up of growth towards the end of the second quarter, especially in the airfreight segment, is considered a positive indicator for this aim.
More market share for Kuehne + Nagel
DSV’s positive results are no flash in the pan. Kuehne + Nagel, for example, has also completed a strong six months, gaining market shares in both the air and the sea freight sectors. The logistics provider increased its gross profits by 3.7% to CHF 3.377 billion. Its operating profit (ebitda) improved by 1.3% to CHF 554 million, and its net profits remained stable vis-à-vis the previous year, at CHF 356 million. For CEO Detlef Trefzger these results are down to cost cuts, pointing out that “our efficient cost management enabled us to counter ongoing pressure on seafreight and airfreight margins.”
The airfreight segment above all was a strong growth driver for Kuehne + Nagel in H1, with the tonnage increase coming to almost 18% – twice the pace registered by the market. The corporation said that industry-specific airfreight solutions were in particularly high demand, for example in the pharmaceuticals, aviation and aerospace sectors. The company did well on the high seas too, increasing its volumes by 7.7%.
K + N’s US services also gained market shares, as did transport to and from Latin America and reefer container activities. The margins nevertheless remained under pressure and declined a tad from the previous like-for-like period. Overland activities provided better returns, with net sales and gross profits rising significantly. Though K + N expects the sea and air freight markets to stay volatile for the rest of this year, at least, it nevertheless remains rather optimistic for the second six months of the year.
From the other side of the Atlantic XPO Logistics presented its own strong figures for the six months. The US corporation generated USD 7.3 billion in revenues, a plus of 1%. Its net profits came to USD 67.1 million, compared to USD 22 million in H1 / 2016. CEO Bradley Jacobs pointed out that “our strong start to the year accelerated in the second quarter, with record results for revenues and net income. The most notable growth came in last mile as well as in contract logistics.”
XPO Logistics was also very keen to invest in its future. Its investments in sales and technology in 2017 yielded a record USD 1.43 billion of new business in H1, which thus came in 62% higher than last year. Jacobs said that over and above this, XPO’s pipeline stands at more than USD 3.3 billion globally.
UPS benefits from parcels deluge
UPS, another major US logistics provider, also reported positive results. Sales in the second quarter came to USD 15.75 billion, which, adjusted for fluctuating exchange rates, represented growth of 8.9% vis-à-vis the previous year. Its operating profit rose by 8.7% to USD 2.2 billion.
The company’s parcels business in its home market contributed substantially to success. US consumers are buying goods in the internet more and more, and UPS has benefited from the trend with its strong portfolio of solutions and customer-friendly technology, the corporation stated.
Panalpina develops modestly
Panalpina, Switzerland’s second large logistics service provider, has reported a mixed first six months of the year. Its gross profits declined by 9% to CHF 673 million. It did manage to cut its operating costs by 6%, however, which resulted in reported ebitda of CHF 63 million.
Panalpina improved its airfreight volumes by about 7%, which roughly corresponds to the market growth rate. Its gross profit per tonne of cargo was affected by the pressure on margins, and declined by 10%. In the sea freight segment its volumes grew by 5%, with this department closing with a loss of CHF 2.6 million at the ebit level. For the second quarter alone the unit returned to the black, however. In the logistics segment Panalpina improved its profitability, despite a decline in its gross profits. CEO Stefan Karlen expects further pressure on the margins in H2, and thus wants to keep costs under control.