Morningstar | DSV Company Report
Following its acquisition of UTi Worldwide in 2016 DSV A/S is the fourth-largest third-party logistics provider, or 3PL, globally, with around a 3% market share in a highly fragmented market. Unlike peer Kuehne + Nagel, which has been in the industry for more than 125 years, DSV has accumulated its market share primarily through a series of strategic acquisitions over the past 30 years, which it has successfully integrated into its own operations.The company boasts healthy operating margins in its airfreight and sea freight businesses, averaging more than 7.5% over the past 10 years. However, DSV’s more capital-intensive and lower-margin road freight business has held back the group’s operating margins and returns on invested capital, or ROICs. The acquisition of UTi reduced DSV's exposure to European road freight and increased its exposure to airfreight and sea freight. It has also added scale, which we believe will be helpful in an industry that benefits from the network effect. The shipping sector faces several headwinds over the next few years. In sea freight, delivery of increasingly larger vessels has compounded the overcapacity issues that are currently pressuring shipping rates. In airfreight, increased cargo capacity from newly commissioned passenger jets is disrupting the traditional industry dynamics and ultimately increasing pricing volatility for 3PLs such as DSV. We have seen a similar situation unfolding in road freight, in which pricing competition has been increasing, notably from local players that are willing to sacrifice margin to maintain utilisation rates. In the medium term, however, given the increasingly global nature of trade, we expect the company to continue taking market share from smaller, less-capable third-party logistics providers as demand for sophisticated supply-chain technology and access to reliable capacity expand.DSV is engaged in the provision of transport and logistics solutions. As of Dec 31 2014, Co.'s operations comprised of three business areas. The DSV Air and Sea business provides air and sea freight services and designs project solutions. The DSV Road business provides road and rail transport services including full loads, part loads and groupage. The DSV Solutions business area specializes in contract logistics, which include logistic and warehousing solutions, as well as freight management, custom clearance, order management and e-commerce solutions.
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