DFDS freight services continues – passenger routes slashed

2020-04-27T10:29:48+00:00 April 27th, 2020|Finance|

DFDS said 84% of last year’s revenue of DKK17 bill was generated by freight activities, which included freight ferry services and logistics solutions.

Passenger ferry services generated only 16% of the total 2019 revenue, the company said.

In an update on measures it is taking to counteract COVID-19, the company said that all of its freight activities continue to operate through the lockdowns, as Europe supports its economies by exempting seafarers, dock workers and truck drivers from travel restrictions to keep trade open for goods, including priority items, such as medicine and food.

However, the lockdowns have caused passenger routes to be suspended.

DFDS said that to adapt its activities, a number of measures have been and are being taken, including:

– Throughout operational sites — including freight ferry routes, port terminals, and logistics solutions, such as forwarding and warehousing operations — the company continues to operate by strictly following the various authorities’ enhanced health procedures and guidelines to ensure safe and reliable operations.

– In offices, authorities’ guidelines are similarly applied to ensure employee health and well-being, such as travel restrictions, working from home, split teams and enhanced hygiene.

– Suspension since mid-March of two routes – Copenhagen/Oslo and Amsterdam/Newcastle – with a large passenger carryings versus freight.

– Freight capacity reduced since end-March/beginning-April in the remaining network of 20 ferry routes that predominantly carry freight. This has been reduced through lay-up of 12 of the 50 ferries, as well as other measures to reduce the number of sailings. All 20 routes continue to operate.

– Channel and Baltic Sea passenger activity reduced to only essential travel. Reduced number of drivers per cabin in Baltic Sea.

– Participation in government wage and fixed cost compensation programmes to preserve affiliation with employees and mitigate financial impacts.

– Around 2,200 employees have thus far been sent on paid leave within various programmes in areas with reduced activity.

– Contingency planning for reduction of logistics capacity ongoing, including equipment and warehousing. Primary change thus far is suspension of a large part of the cross-docking operation in Gothenburg.

– Cost saving and postponement initiatives, including a hiring freeze.

-Reduction of investments to the tune of around 20% of the investments of DKK2.3 bill planned for 2020. As 1Q20 investments are completed, this equals a targeted reduction of around 30% in 2-4Q20.

DFDS also claimed that it was in a solid financial position with regard to both liquidity resources and financial flexibility to meet challenges and opportunities that may arise from present and future market conditions.

Liquidity resources at the end of 1Q20 amounted to DKK1.7 bill, consisting of cash and cash equivalents of DKK0.3 bill and undrawn committed credit facilities of DKK1.4 bill. In April, additional committed facilities of a minimum of DKK750 mill were secured.

In view of the continued exceptionally high level of uncertainty, DFDS outlined a selection of preliminary key figures from the 1Q20 income statement ahead of its scheduled reporting on 7th May.

Preliminary 1Q revenue has decreased 1% to DKK3.8 bill and preliminary EBITDA before special items decreased 10% to DKK610 mill.

From mid-March, passenger revenue and earnings were reduced as two passenger routes were suspended and the number of passengers sailing on other routes were reduced to only essential travel.

To a lesser extent, freight activities were also negatively impacted from mid-March by lower activity related to COVID-19.

Freight revenue remained overall on a par with 2019, including positive impacts from acquisitions and bunker surcharges related to the transition to new rules limiting the sulfur content in fuel oil from the start of this year.

Around half of the decrease in EBITDA was related to lower passenger activity caused by the virus. The other 50% was due to the drop in freight, increased earnings compared with 1Q19 from UK stockpiling ahead of Brexit and a lower result for special cargo logistics, mainly due to one-off costs.

DFDS also highlighted a number of key risks at present:

  • Reliability and continuity of operations are contingent on employee health and continued exemption of operations from lockdown initiatives.
  • Passenger earnings in the high season – June/August – were at risk from duration of lockdowns and level of ferry travel post lockdowns.
  • Lower activity in certain sectors during and post lockdowns may reduce freight volumes. The automotive sector is a key risk
  • Increased credit risk on suppliers, counterparts and customers.