Looking at the financial statements of DFDS on Tuesday, one could see that the North Sea turnover had declined due to lower demand and a new competitor. Today CEO Niels Smedegaard reveals that one third of the shipping company’s decline is due to the new competitor, Swedish North Sea RoRo.
“North Sea RoRo has been at it since the end of January, and about one third of the drop we are seeing in the North Sea is because of them. The rest is due to other things, including our terminals, which are also lacking volume compared to the same quarter the year before,” says Niels Smedegaard to ShippingWatch.
The DFDS shipping division had a turnover of USD 143.6 million in the first quarter of 2012, compared to USD 149.3 million for the first quarter of 2011, a drop of USD 5.8 million. In addition to this, EBIT before special items dropped to USD 12 million from USD 16.7 million.
“There is more capacity in the North Sea, which is, of course, due to North Sea RoRo, but it is also due to the southern part of the North Sea, from Rotterdam to England, where the newbuilding programs of various suppliers are giving them new and bigger tonnage. When the market goes down a little, the result is overcapacity, which causes some pressure on prices,” says Niels Smedegaard. One of these competitors is Belgian shortsea operator Coblefret.
Less effect than expected
When North Sea RoRo announced its intentions to sail the Gothenburg-Immingham route, DFDS issued a statement to the Stock Exchange saying that they had to expect a “significant negative effect” on the company’s results for 2012. But so far, Niels Smedegaard believes that the company might have been too pessimistic.
“Of course there is an effect on the finances for the first quarter, but it is smaller than we have previously predicted. The situation is not over yet, though, so it is something that will be affected by the developments of the market,” says Niels Smedegaard.
That is why he notes that DFDS has been successful at keeping the majority of the customers who might otherwise have chosen North Sea RoRo as their shipper.
The company’s financial statements for the quarter showed that DFDS has launched initiatives to meet the changes in the competitive situation. DFDS announced on Monday that it has moved a ship from the Gothenburg-Immingham route (where North Sea RoRo is also operating, ed.) to Gothenburg-Ghent. But Niels Smedegaard says that this is not because of the new competitor.
Volvo doing well
“Swapping ships between Immingham and Ghent is not only an effect of North Sea RoRo. The declining English market, combined with the new competitor, lets us make better use of the new, longer ships on the continent, where we are seeing increased demand. Volvo continues to do well, and they are one of the biggest customers on that route. So it makes sense to move things around,” says Niels Smedegaard.
He explains that no “golden initiatives” have been planned in order to engage the competitor – the point is to have a better product.
“There is no magic on the way. We have a better product, and we will make sure to have a better product than North Sea RoRo. This could be in number of departures, ship capacity in and out of terminals, and number or reloadings,” says Niels Smedegaard.