EU TRANSPORTATION: DSV | 1Q Results

(DSVDC; A3/A- Neg) 

Results fine, re. Schenker reminder seasoned M&A operator.
Re. levels we don't see the sector as too attractive - Norway (triple-A) state owned Airport operator, Avinor, trades flat to it on A1 ratings.

• Schenker acquisition closed, will be consolidated into financials from 1 May 2025.
  • Reiterates aim to lift EBIT margin of combined company to DSV's level by 2028
  • Schenker ran half DSV's, pro-forma combined copany was running 9% and implies +300bps of expansion over the 3yrs
  • Will be net 3.0x levered pro-forma (unchanged guidance), targeting 2.0x by latest 1H 2027 (~2 years)

Guidance including Schenker (impact for 2/3 of the year):

• adj. EBIT 19.5-21.5b
  • DSV's standalone 15.5-17.5 EBIT guidance is unchanged within this (16.1b last year)
  • implies 4b from Schenker or 6b adj. for FY (vs. 8.4b in FY23)
• one-off costs of DKK 2.0-2.5b in 2025. Total expected to be 11b over the integration period.

1Q:

• adj. EBIT of 3.9b, +4.8% y/y on a 9.3% margin (-30bps).
  • Air & Sea 3b, +10.6% driven by +3% volume growth in Sea and positive yield growth in both
  • Road DKK 0.4b, -17%. Revenue was only -3% on lower activity in Europe but cost inflation and depreciation hit EBIT
  • Solutions 0.5b, -6% on weaker margins (revenue +5%).
• adj. FCF was boosted from 443m to 3.2b on favourable WC
  • expects that tailwind to hold this year on lower freight rates and reduction of capital tied up in property projects