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Investors bid up 'golden goose' DSV - bar set high for Kuehne

DSV's third-quarter (Q3 26) update out today unequivocally proves that the Danes are the freight forwarding benchmark where it matters, making top dollar in air and sea. Enjoying a Q3 conversion rate (CR: Ebit/gross profit = 45.8%) at its highest level since the start of the Schenker integration, Air & Sea's operating margin was equally outstanding, reaching... (Click to expand the table below and all others) ... 9.4% in the three months to the end of September. For comparable purposes, look backwards from Q3 24, full focus on core Air & Sea operations, just as the Schenker deal was secured... through Q4 24 and then Q1 25 - that's the last quarter without 100% of Schenker (deal closed on 30 Apr '25). The CR read, respectively: 50.5% (Q3 24); 48.3% (Q4 24); and 46.3% at last reading in the first quarter of 2025, right before two months worth of Schenker business was partly consolidated in Q2 25. Ebit margin over those three quarters rose sequentially quarter on quarter from 10.8% to 11.3% in Q4 24, and then dropped to 10% as the first Schenker hit was taken. We are at 9.4% now, getting to over 10% soon enough too, base case. Indeed. Positive earnings momentum in Q3 this year led to Ebit growth of +18.9% year on year in Q3, driven by a reduced cost base, as DSV points out - thank headcount management in the Air & Sea unit, outperforming the fall in volumes on the downslope. More freight is not necessarily the answer, anyway, to paraphrase CEO Jens Lund's remarks in the call with analysts - but high-yielding freight is, while regarding volumes, expected to plateau, DSV is at an inflection point. That said. Both air and ocean freight yields - as gauged by: gross profit per unit - climbed, yet unlikely summited if recent trends are anything to go by, reaching Dkr8,936 ($1,341.8) and Dkr4,142 ($622), respectively, their top readings since Schenker started being consolidated. Both readings are a bit soft compared to ex-Schenker data from Q3 25 (more here: pages 8 & 9, drawing from Q3 25 results), yet they were definitely satisfactory. Equally solid was the performance in Contract Logistics, with Q3 26 Ebit soaring +50% year on year - there are some adjustments to be made there as well as in Air & Sea, but all good. Looking forward, also bear in mind the contract logistics market is expected to grow at mid-single-digit rates, DSV's crystal ball says. As flagged by DeskOne earlier today, reinstating stock buybacks* is a small step in the right direction (also recall DeskOne's 8 October take: 'Investors scream: BRING BACK THE BUYBACKS'). (*However small in size, only $225m, the authorisation was welcome, and needed... given "obligations for share options", DSV CFO told the analysts; share count will marginally shrink, about 1%, starting today to 1 Feb 27.) 'Golden goose' DSV in sub-Dkr1,200/share value territory, as we argued a week ago, in early trade delivered +9% capital appreciation on the stock market today, trading as high as Dkr1,300 from around Dkr1,150 last week. +13% or so: not a bad Premium call, after all, it seemed at that point in time, with 12-month trailing (diluted and adjusted earnings per share) just above Dkr56. Then Master Lund decided to lead the show, and the stock traded as high as Dkr1.363.5, +13.5%. Which leads us to two considerations: the Dkr1,301 (early-trade) level highlighted below... ... is bang in line with the pre-hammering level of exactly a month ago; then, thanks to that and additional daily gains, DSV has recouped nearly $5.8bn of lost value in just a few hours - as much as CH Robinson valued RXO at takeover enterprise value, just saying. (By comparison: 'Dead wood' at Sfr230/share Kuehne + Nagel: +0.2% in early trade then in negative territory, -0.2% at last check, just what it deserves at the moment, given its rich trading multiples... while new US leadership caught our attention overnight ahead of DSV's release.) Also worth noting: DSV's net leverage is still high but free cash flow looks good, implying the group's share repurchase programme is conservative in size. To the bad news now. Volumes in air and sea were just ok-ish (more here: pages 7 & 8), almost unsatisfactory. On top of that, DSV assumes the addressable global air and sea freight markets will grow "around mid-single digits" this year, while in the current quarter (Q4 26), it predicts volume growth for Air & Sea "below the market and with slightly lower average gross profit yields compared to Q3 2026". Elsewhere where it remains troubled - the asset-heavy road business sucks: coveted synergies delayed to next year, as widely expected - it also expects "flat to low-single-digit growth for the road freight market for the remainder of the year". What else not to like? Total workforce is on its way up for the first time sequentially by nearly 1,200 (FTE) heads to 148,405 versus 159,490 (73,402 pre-Schenker deal) since the same quarter last year. But that may end up being a blessing in disguise if business with the hyperscalers keeps rolling in. There are signs it will, based on Lund's thoughtful remarks. Still, please bear with the bear: 2027-2030 tech/AI/whatever-related synergies are not worth the paper they are written on, although there's faith in those targets. DSV also narrowed its full-year Ebit guidance, yet the Dkr24.5bn mid-point is unchanged. Bernstein today - noting DSV is "capable of repurchasing c.Dkr6bn [stock] per quarter once it hits run-rate earnings power with a balance sheet at target leverage (<2x, we expect trends to c.1.5x)" - painted a neat picture of a business that is still healing, where Road will get better soon, if you trust management. Today's update was, overall, a good exercise aimed at building confidence, restoring trust in a 0.5%-yielding stock that anyway, lest you forget, still trades just +8% higher than at closing on Lund's Day One as group CEO, 1 Feb 2024. Classic relief rally, for now, but one that was very much needed.

New report reveals hidden extra costs of cargo crime

Cargo theft is costing businesses far more than the value of the stolen freight; loss of a single €5,000 parcel can potentially generate €35,000 in additional costs, as organised gangs and cybercriminals exploit vulnerabilities in Europe's supply chains. LivingPackets' Hidden Cost of High-Value Delivery report, published today, estimates that every euro of direct loss carries four to seven euros in additional costs, including replacement, reshipping, dispute handling, and customer dissatisfaction. Across 10,000 shipments of goods worth €5,000 each, a 0.1% incident rate would mean 10 losses, representing €50,000 in stolen goods, and up to €350,000 in hidden costs, the analysis, drawing on Logistics Bureau research, found. Meanwhile, TAPA EMEA recorded more than €1bn in freight theft losses across Europe, the Middle East, and Africa in the 18 months to 30 June. Only 7.8% of the 58,661 reported incidents included a recorded loss value, suggesting the documented total significantly understates the problem. "The problem is not marginal," said LivingPackets. In an interview with SNAP, TAPA's UK lead for EMEA Harry Hughes said: "We've seen organised crime groups travelling two to three hundred miles to target specific vehicles. They know the routes. They know the transport companies that are moving them, the lanes they go on." Cargo theft methods include curtain slashing, entire loaded trailers taken from depots, and cyber-enabled fraud involving phishing emails, falsified collection documents, and manipulated delivery instructions. Mr Hughes also warned: "Criminals are sometimes buying legimate carriers, trading as a legitimate carrier for two to three weeks and then disappearing with loads." LivingPackets argued that while conventional tracking could record where a parcel was scanned, it cannot necessarily establish what happened between scans, or identify where custody was compromised. However, its technology embeds sensing, authentication, and event recording into reusable shipping boxes. LivingPackets founder and executive chairman Alexander Cotte said: "If the shipment itself can tell us what happened, brands, carriers and insurers start from the same facts." The company said French telecoms operator SFR had seen loss and damage claims fall by 93% on the flows concerned, while a luxury jeweller recorded no losses on LivingPackets-managed shipments. Automotive parts shipper Cotrolia reportedly reduced its breakage rate from 30% to 1%. The report advised the need for stronger carrier verification, secure parking, tighter control of collection instructions, and better shipment visibility as criminals exploit both physical and digital weaknesses across freight networks. SNAP's head of commercial for the UK and Ireland, Nick Long, urged that secure truck parking should be integral to fleet security and journey planning, rather than treated as an optional extra.

We're 'shouldering cost burden of green transition', say carriers

Shipping lines claim they are bearing the cost of investments in alternative fuels and lower-emission vessels, as shippers and their freight forwarders remain reluctant to pay more for greener shipping. That is according to speakers at the Singapore International Bunkering Conference and Exhibition yesterday. Pacific International Lines (PIL) head of operations and procurement (China) Chia Yujin said shippers in price-sensitive markets were not yet ready to pay for the industry's transition to alternative fuels by 2050, leaving carriers to finance much of the investment. In March 2022, PIL was the first Asian shipping line to commission LNG dual-fuelled ships, ordering four 14,000 teu vessels at Jiangnan Shipyard. "Our ships trade in Latin America, we trade to Africa, and usually our shippers are from China," Mr Chia said. "At this point in time, people are a little bit more price-sensitive. Our shippers and consignees are typically not very ready to pay for the transition, so everything we do has to be voluntary, and come out from our own pocket," he added. Despite the lack of immediate financial returns, shipping lines are pressing ahead with alternative-fuel vessels and investing in the operational expertise needed to use them, it was said. X-Press Feeders' head of global operations, Vijayachelvan Silva Raju, said the company deployed methanol-powered ships without customers sharing the additional costs, partly to prepare its workforce for a future in which alternative fuels are expected to play a larger role. And the world's largest feeder operator is investing in crew training, building a pool of personnel experienced in handling methanol; Mr Raju argued that waiting until demand increased could leave it without sufficiently trained crews. "We don't have any shippers we could share the cost with. But why are we still operating these ships? Because we believe that when it comes to 2030, we will need to operate more ships with the same fuel, and I can't go and find a trained crew at that time. So we are investing now, not just in assets, but also on crew and training," he explained. There are now 650 containerships capable of using alternative fuels including methanol and liquefied natural gas (LNG) on order, compared with around 330 in September 2023. Maersk Line has 56 dual-fuelled ships on order and is already operating 24. Its head of fleet operations (East), Dinesh Kumar Balraj, said alternative fuels must be available at commercially viable prices, while ports need suitable bunkering facilities and ship operators must ensure their crews are trained to handle them. "It's not just placing orders for dual-fuelled vessels, but also how we optimise the existing fleet through retrofitting or other methods like digitalisation and network optimisation," he said. "Now it's about scaling what we've learned - we've had a lot of experience operating dual-fuelled vessels, learning about different fuels. "Scaling doesn't mean that an engine has to run on a particular fuel. The fuel and the bunkering infrastructure should be available; operationally, we must be ready, and the crew must be ready," he added.