Investors Drop Danish Ferry Operator as Hard-Brexit Risk Grows

(Bloomberg) -- Investors dumped shares in the biggest Nordic ferry operator, DFDS A/S, after it gave more details of the havoc that Britain’s planned exit from the European Union is wreaking on its business.

DFDS fell as much as 12% in Copenhagen trading, representing almost $200 million in lost market value in less than an hour, after the company said Brexit will hurt volumes more than previously expected. The selloff was the worst in nine months, as shareholders analyzed lower forecasts for revenue and profit this year.

“Volumes have fallen rather dramatically,” Chief Executive Officer Torben Carlsen said in a phone interview from Copenhagen. DFDS’s new forecast takes into account the risk that the U.K. will leave the EU without a deal.

Until now, the Danish company had banked on Britain finding a solution to its Brexit talks “relatively quickly,” after an extension was agreed in March, Carlsen said. “We have to acknowledge that it’s taking longer,” he said. “Now we’re looking at the end of October and with the prospect of a hard Brexit.”

Tensions around the Brexit process have intensified since Boris Johnson became prime minister last month, with a “do-or-die” mantra that Britain will quit the EU by Oct. 31, with or without a deal.

DFDS generates more than half of its business from serving the U.K., transporting cargo and people across the channel. It has “several hundred people” working to help cope with the fallout of Brexit, though not all of them are full-time, Carlsen said.

As volumes started to decline, Carlsen says DFDS “had first expected that the drop was a compensation for the stockpiling that businesses had done previously. But the drop has continued.”

That means that the investment decisions made in the U.K. “before Brexit have now been completed and we don’t see new projects materializing,” he said. The upshot is that, given the outlook, “people in England are buying fewer large consumer goods.”

The company now sees 2019 revenue growing just 6-8%, compared with a previous forecast of 10-12%. It also cut its forecast for operating profit, or Ebitda, for this year by about 6%.

“There may be some panic in 4 to 6 weeks if there is no deal, but we think that the range of our guidance has room for that,” the DFDS CEO said. “I’m sure that there have been other crises between the U.K. and Europe in the 150 years we have done business on the route, but in modern times, we haven’t seen anything like this.”

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net

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