Freight growth, particularly to and from the UK, has led to strong profit growth at ferry firm DFDS in the second quarter, with the Danish group raising its expectations for 2015.

The North European group said that despite concerns about Greece’s situation, overall economic activity in its key North European markets continued to pick up in Q2 helped by EU policy support and a lower oil price compared to 2014.

The appreciation of the British pound continued to impact trade patterns between the UK and the Continent and Scandinavia, with the UK economy continuing to grow in the quarter. Transport markets remained very competitive, although price pressure eased somewhat following a gradual improvement of shipping capacity utilisation in Northern Europe, the group said.

During the second quarter to 30 June, DFDS increased its revenues by 4% to DKK 3.4bn, with EBITDA before special items increasing by 37% to DKK 551m, contributing to a return on invested capital (ROIC) before special items of 10.3% for the last twelve months on a rolling basis, up from 8% for the full-year 2014.

Within its Shipping Division, North Sea freight volumes rose 10.1% in Q2, adjusted for route closures. Volumes in the Sweden-UK/Continent corridor increased slightly as automotive volumes picked up, offsetting an increase in competitor capacity in the corridor between Sweden and the Continent.

High volume growth continued on the routes between Denmark/Netherlands and the UK. Volume growth was boosted by the transfer of volumes from the closed Esbjerg-Harwich route to Esbjerg-Immingham. EBIT for the North Sea business increased by 20% to DKK 125m, adjusted for a one-off income in 2014 from the termination of a customer contract in an associated port terminal company and route closures in 2014. Higher volumes were the main earnings driver for both routes and port terminals.

On the Baltic Sea, freight volumes in Q2 were 2.4% above 2014 adjusted for the closure of a route in 2014. Volumes between Sweden and Lithuania/Estonia were up by 8.5% supported by an expansion of capacity.

Volumes between Denmark/Germany and Lithuania/Russia were lower than last year due in part to a reduction of capacity, including a change to a one-ship operation on the Russian route, and lower Russian volumes in general. The number of passengers, excluding drivers, was just below last year.

EBIT for the Baltic Sea business increased by 36% to DKK 71m adjusted for the closure of a route in 2014. The increase was due to higher freight earnings driven by volume growth and somewhat firmer unit revenues.

On its UK cross-Channel business, freight volumes in Q2 decreased by 4.2%, reduced by lower capacity on Dover-Calais following a one-ship operation in April and May of Q2 compared to a two-ship operation in 2014. Dover-Dunkirk’s capacity utilisation increased in the quarter as volumes were transferred from Dover-Calais while capacity was reduced on this route.

Unit revenues improved for both freight and passengers, including a positive impact from currency appreciation for primarily the passenger revenue. EBIT improved by DKK 25m to DKK 12m driven by higher volumes, firmer unit revenues and cost savings from the one-ship operation.

Meanwhile on its France & Mediterranean business, freight volumes in Q2 were 44.4% above 2014 adjusted for route closures. EBIT increased by DKK 16m to DKK 7m driven by higher activity and more efficient operations.

The company’s Logistics Division, which operates DFDS’s road freight transport and logistics activities, increased its EBITDA profits in Q2 by 25% to DKK 58m on revenues that rose almost 10% to €1.28 billion. EBITDA increased by 3% excluding acquisitions. The majority of activities performed ahead of last year and expectations but were offset by areas impacted by challenging market conditions in the Baltic region, Northern Ireland and some rail traffics, the company said.

In its Nordic logistics business, the number of transported units decreased in Q2 by 4.2% compared to 2014. Volumes were lowered by a slowdown of trailer activity between Denmark and the UK while activity levels out of Norway and Sweden were more stable, except for lower rail volumes.

Volumes were also reduced by the termination of an automotive logistics contract servicing a manufacturing plant in Russia, which has been temporarily closed. In addition, the streamlining of trailer operations between Sweden and the UK continued to improve capacity utilisation of trailers and hence lowered the number of transported units.

EBIT in its Nordic logistics business decreased by 31% to DKK 9m as costs were incurred in connection with the start-up of an automotive logistics contract in Gothenburg. In addition, the earnings of the rail and Baltic activities were reduced “following challenging market conditions”.

The Logistics Division’s ‘Continent’ business saw the number of transported units in Q2 increase by 5.5% compared to 2014. The addition of a new location in the Czech Republic accounted for 1 ppt of the growth.

Continued growth in activity between Benelux and the UK increased volumes, as did the development of new activities in Germany. EBIT doubled to DKK 10m due to the increased level of activity and higher margins as traffic balances were improved.

And for the Logistics Division’s UK & Ireland business, the number of transported units in Q2 increased by 0.5% compared to 2014 adjusted for the acquisition of Quayside on 1 July 2014. Volume growth was reduced by lower temperature- controlled volumes out of Scotland due to a shutdown of a major customer’s production in parts of Q2.

Improved utilisation of the vehicle distribution fleet since the acquisition of STEF also resulted in a decrease in the number of transported units. The contract logistics activities out of Peterborough continued to grow in the quarter. EBIT decreased by 15% to DKK 12m adjusted for the acquisition of Quayside with effect from 1 July 2014. Including Quayside, EBIT increased by 26% to DKK 17m. The adjusted result was mainly negatively impacted by a lower result for the activities in Northern Ireland due to a deterioration of traffic balances, the company said.

Source: Lloyd’s Loading List