DSV Panalpina restores guidance to near pre-pandemic level

Dive Brief:

DSV Panalpina reinstated its guidance for 2020 to pre-pandemic levels with the announcement of its first-half earnings Friday. After a better-than-expected first half, the carrier restored earnings before interest guidance to exactly the level it set out in January and decreased its expense projection from earlier in the year. DSV withdrew its financial guidance in March due to the uncertainty brought on by the pandemic.
Despite the seemingly positive outlook, CEO Jens Bjørn Andersen urged cautious optimism on a call with analysts. "I don't think that we should get our hopes up too high. Because I think ...we're just in the beginning, we're going to see more impact from some of the businesses that are suffering," said Andersen of the pandemic on a global scale.
The freight forwarder laid off 3,000 employees in May to cut costs as overall freight volumes fell. Volumes remained down in the first half — 15-30% year over year depending on the mode. But, revenue in the first half was up 40% year over year, led by airfreight and driven by rates rather than volume, along with the integration of Panalpina after finalizing the acquisition last year. DSV Panalpina's air and sea revenue saw 89% year-over-year growth in the first half.

Dive Insight:

Though the freight forwarder beat expectations in terms of revenue for the first half, the pandemic has drastically changed the way it does business, Andersen explained. Three-quarters of the airfreight the company moved in the quarter flew on cargo planes, rather than in the belly of commercial aircraft.

With belly cargo drastically decreased from the market, airfreight rates have been above normal for most of 2020 — three times the January rate at the May peak for China to U.S. Rates have been on the way down since May, but July saw another uptick and the CEO indicated some form of this benefit will last through the year.

"It's still a whole new way of operating for the whole market. So this is something which will also mean that probably the volatility in rates will continue going forward, which is not necessarily bad for a company like DSV," said the CEO, calling airfreight profitability "too good to be true" in the second quarter.

Andersen said the forwarder's asset-light approach makes it particularly suited to the current uncertainty since it "allows us to adjust our costs almost on a daily basis."

Andersen, calling the company's guidance "more unsecure than normal," has concerns regarding the second half including coronavirus cases around the world and the remaining effects of depressed economies.