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UPDATE 1-DSV nudges up profit forecast, announces buyback
July 30, 2014 / 7:35 AM / in 3 years

UPDATE 1-DSV nudges up profit forecast, announces buyback

* Q2 underlying op profit 701 mln DKK vs forecast 707 mln

* Sees 2014 profit 2.55-2.70 bln DKK vs 2.5-2.7 bln before

* To buy back another 400 mln DKK of shares

* Shares climb over 3 percent (Adds analysts, share price, CEO comments)

COPENHAGEN, July 30 (Reuters) - Danish freight forwarder DSV nudged up its 2014 profit forecast after a strong rise in second-quarter volumes and announced another share buyback programme, sending its stock over 3 percent higher in early Wednesday trading.

Second-quarter operating profit before special items was 701 million Danish crowns ($126 million), up from 680 million in the same period last year, though below a mean forecast for 707 million in a Reuters poll of analysts..

The world’s six-largest freight forwarder said sea-freight volumes measured in twenty-foot equivalent units rose 9 percent year-on-year in the first half, while air freight in tonnes was up 11 percent.

It said it now expects 2014 operating profit before special items in a range of 2.55-2.70 billion crowns up from a previous forecast of between 2.50 and 2.70 billion.

“The growth within air transportation is stronger than I had expected. They have taken more market share ... and their margins are less squeezed by competitive pressure than we saw at Kuehne & Nagel and Panalpina,” said Nykredit analyst Ricky Rasmussen, referring to DSV’s rivals.

Air and sea freight contribute 42 percent of DSV’s revenues. Nevertheless, converting volume growth into profit remains tough in a competitive market, Sydbank analyst Jacob Pedersen.

“Revenue will grow, but not in the same level as the 10 percentage volume growth might indicate,” he said.

DSV said it would launch another buyback worth 400 million crowns in August after conducting a similar buyback in April.

“We convert 100 percent of our earnings to cash. The priority usage of the cash is M&A but since we haven’t done any M&A, we do the buyback,” DSV Chief Executive Jens Bjorn Andersen told Reuters.

“What investors can expect is that we keep the leverage of the company around two times of EBITDA (earnings before interest, tax, depreciation and amortisation),” he said.

Andersen said DSV’s business in Russia constitutes just a percent of the company’s total business so he expected little impact from the ongoing turmoil in eastern Ukraine, which the West says Russia is stoking.

Shares in DSV are down 3.2 percent this year underperforming Swiss logistic firm Kuehne & Nagel which is up 4.3 percent, but performing better than its smaller rival Panalpina which is down 15.9 percent year to date.

$1 = 5.5617 Danish Crowns Reporting by Teis Jensen, Sabina Zawadzki and Annabella Nielsen; editing by Sabina Zawadzki

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