DSV’s UTi acquisition boosts airfreight, but drags on profit

Although DSV’s acquisition of UTi has yet to pay significant dividends, as net profit dropped 45.4 percent year-over-year, to US$49 million for the first quarter of 2016, the company’s airfreight operations reported significant growth. Airfreight volumes for DSV soared 71 percent to 122,817 tonnes during the same period.

Much of the airfreight volume growth (66 percent) was directly attributed to the company’s acquisition of UTi, with the remainder coming from expansion of its existing operations. These expansions,  the forwarder added, “continued the positive trend of above-market growth rates of 2015.”

As airfreight volumes increased, gross profit growth outpaced revenue expansion for the division. Gross profit jumped 73.1 percent, to $136 million, while revenues rose 50.2 percent to $490 million. For the company’s combined forwarding operations, earnings before interest and taxes (EBIT) rose 6.7 percent to $63 million.

The company’s overall profitability has taken a hit from restructuring costs related to the integration of UTi which began in January. DSV estimates associated costs will total $230 million, two-thirds of which will be incurred in 2016. One-off costs for the quarter were $57 million and are expected to drop to $31 million for each of the remaining quarters of 2016.

Chief executive Jens Bjørn Andersen said, “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.”