Asia-Europe over-capacity forces Kuehne + Nagel onto the back-foot


Such is the savagery of the competition on the Asia-Europe container trades that Kuehne + Nagel (K+N) was willing to sacrifice market share in order to preserve margins with shipping-lines themselves apparently being the main competitor to the Swiss forwarder.


In the company’s latest figures for the first three quarters of the year, volumes measured in TEU were up 2.3%, but this was driven by trans-Pacific and trans-Atlantic growth, not the core Asia-Europe trade. In its sea-freight forwarding division, both turnover and gross profit edged-up by 0.5%, but EBIT (Earnings Before Interest and Tax) fell 1%.


Normally, it would be expected that a forwarder the size of K+N would benefit from such a weak market, however it is the shipping lines themselves who are under-cutting K+N in an attempt to fill their vessels. After the results presentation, the Chief Financial Officer Gerard van Kesteren commented to journalists that “shipping lines are trying to get business back. It’s cutthroat competition” It is one of the ironies that K+N which is one of Maersk’s largest customers appears to be suffering from Maersk’s focus on cost. If this situation continues, it would potentially represent a significant threat to K+N’s business model.


In other areas of the company’s business market conditions were more normal. K+N saw its air freight volume grow by 3.3%, despite what it described as a “stagnant” market overall. Margins firmed broadly with underlying EBIT up by 6.4%. As suggested by numbers from IATA earlier in the month, K+N reported that Europe and North America are showing signs of life, with traffic into the Middle East strong.


Contract logistics saw a profits bounce, with EBIT up 59%, however margins are still fairly normal at 3.9% as measured in EBITDA/revenue. Underlying sales grew by 4% as K+N said that its focus on larger, more globalised customers was responsible for delivering the combination of higher sales and better margins. The ‘Road & Rail’ business continued to suffer losses with turnover down 2.5% with significant write-downs depressing EBITDA (Earnings Before Interest, Depreciation and Amortisation) and operating profits still in the red.

Overall, the company saw turnover up 1.5% over the past nine months, whilst gross profit was up 2.8% and EBIT up 6.5%.

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