It can take some time for all the pieces to click into place when you’re trying to build something worthwhile, but more than two years after Danish freight-forwarder DSV agreed to acquire U.S.-based UTi Worldwide, DSV is already realizing the benefits of the acquisition.
During the forwarder’s third quarter earnings call, CEO Jens Bjørn Andersen said DSV’s growth lagged early in the year with the work of integrating UTi’s operations with DSV. That is now a thing of the past, as Andersen said growth at DSV is “back on track” and the forwarder is outperforming the already strong market on the airfreight side. That translated into good news for third-quarter results at DSV, where the integration of UTi’s operations helped increase earnings before interest and taxes (EBIT) by 34.4 percent, year-over-year, while airfreight tonnage rose by 11.7 percent over the same time. DSV’s leadership said it was confident that the UTi acquisition would pay off, but third-quarter growth outperformed even their expectations.
When Air Cargo World spoke with Andersen last year to get the details of the acquisition, some industry folks were still skeptical. With 2017’s strong results, ACW caught up with him again to learn more about how DSV is benefitting from its mergers and acquisitions (M&A) strategy, and what consolidation activity could be ahead for airfreight.
Q: How has the integration of UTi changed DSV’s handling of air cargo?
The cost synergy benefits DSV is seeing from the acquisition began emerging earlier than expected, at the end of this year’s second quarter, and continued to gain steam through the third and into the fourth quarter, and should pay off in 2017 with revised expected operating profit of between US$737 million and $768 million. With UTi, we instantly acquired more volume, which, of course, has positioned us better in the market.
I don’t think it’s changed the way we handle air cargo, but we have a stronger market position. For the last 12 months, the airfreight market has been red-hot and I am certain that our new market position has helped us secure capacity at competitive rates.
Q: How helpful has the UTi acquisition been in increasing growth in regions outside of DSV’s traditional European foothold?
Very helpful. The point of M&A is to grow – in size, activities and markets. With UTi, we grew significantly in North America, in South Africa and in Asia. UTi was a great fit for DSV in terms of business, culture and geography, no doubt about that.
Q: With the integration of UTi into DSV’s operations delivering such positive results, are there plans for more M&A activity with other 3PLs?
M&A has been an integral part of DSV’s strategy for many years and there is no reason to change that. There is still a lot of room for consolidation in the market. We believe in future consolidation – within the industry and with DSV as an active participant.
Q: What role do you see technology and digitalization playing in the airfreight and logistics industry?
It’s already an essential part of how we conduct our business and, by all indications, technology will become ever more important. We are following the development closely and following suit without being frontrunners. In our business, we always have to watch the cost aspect, but we also have to keep up with the times – it’s a constant balance. Obviously, we’ll be very keen to implement any technological developments coming from the aviation industry and hope that these will follow a global standard, so that we may offer them and related benefits to all our customers.
Q: With strong Q4 2016 growth making year-over-year comparisons tougher and double-digit growth less likely, how do you expect tightening capacity to impact the industry into 2018?
We’ll have to wait and see. Traditionally, tightness of capacity means higher rates, but it depends on whether the tightness is global or in certain markets, and a whole lot of other factors. We’re used to navigating in an unpredictable and volatile market, and that’s all you have to go on, really. You have to constantly monitor the market, base your decisions on that and not try to predict the future.1 - Reader Likes This Post