K+N improves profitability in H1 2016 as forwarding revenues decline

For the half year ended June 30, 2016, Kuehne + Nagel (K+N) reported net revenues (turnover from external customers minus customs duties and taxes) of CHF8,147m, a decline of 0.9% compared to the first half of 2015. At constant currencies, net revenues fell by just 0.5%.

Conversely, in terms of profitability, K+N enjoyed strong growth in both gross profit and EBIT, which increased by 7.9% and 11.0% respectively (currency impacts were small).

In the Seafreight division, TEU volumes were up by 5.8% (market volume growth was approximately 2% according to K+N). The company noted that growth on Intra-Asia, Asia-Europe and Asia-US lanes was particularly strong. It also noted that its LCL and reefer segments performed “well”. Despite strong volume growth, net revenues slumped by 12.5% overall, with currency only having a relatively small negative impact. Net expenses for third-party services fell by 11.4%, permitting gross profit per TEU to improve by 0.8%. EBIT was up by 8.3% while the EBIT-to-gross profit margin improved from 30.8% in H1 2015 to 31.3% in H1 2016.

In the Airfreight division, tonnage was up by 1.3% year-on-year in the first half of 2016 (market volumes contracted by around 1% according to K+N). Second quarter volumes increased by 2.9%. K+N asserted that strong export business in Asia, the Middle East and Africa contributed equally to tonnage growth. Net revenues fell by 4.6% overall, but net third-party expenses fell by 7.7%, as gross profit per 100kg improved by 5.5%. EBIT increased by 8.1%, while the EBIT-to-gross profit margin improved from 30.6% in H1 2015 to 30.8% in H1 2016.

In the Overland division, K+N increased its net revenues by 22.6%, of which acquisitions accounted for 16.3%. Currency effects boosted revenues by 1.5%, while organic growth contributed 4.8%. While K+N does not disclose volume data, it noted that its growth was “significantly above market”, owing to positive development in Europe and its US intermodal business (ReTrans). However, excluding the impact of acquisitions and currency movements, EBIT growth was -7.1%. Overall though, the division’s EBIT margin remained constant at 1.2%.

Finally, Contract Logistics appeared to have a relatively strong first half as net revenues grew by 6.9%. Growth would have been 7.0% excluding currency effects. K+N highlighted the pharmaceutical and e-commerce fulfilment sectors as business drivers. EBITDA and EBIT margin were 5.6% and 3.2%, up from 5.0% and 2.7% respectively in H1 2015.

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Source Transport Intelligence, 26th July 2016

Author: David Buckby