Kuehne + Nagel continues to grow faster than a toughening forwarding market

Kuenhe + Nagel

For several quarters Kuehne + Nagel has been sustaining its profits by exploiting a combination of better cost control and expanding gross profit. The latest nine month results from the Swiss based forwarder confirm this, although business looks like it is becoming harder in the third quarter.

For the period July-September, turnover fell by 2.4% to CHF4,100m but gross profit was up 3.3%. This growth number was lower than that for the first nine months of the year, when it was up 6.3%. It illustrates that business in the core forwarding markets softened slightly. EBIT (Earnings Before Interest and Tax) for the last quarter fell 3% year-on-year to CHF223m, a reversal of the nine-month trend which rose by 5.9%.

Volumes in the core Seafreight business continued their notable rise, with the nine-month period seeing a 5.4% increase which only slowed in the third quarter. Demand was strongest in transpacific and intra-Asian trades whilst K+N reports it has noticed the effects of “consolidation in the shipping industry”. For the nine months this division saw gross profit up by 4.3% and EBIT up by 1.5% to CHF340m.

K+N described the air freight market as “tense” and that demand was “shrinking” in the face of capacity increases. Yet the forwarder grew its tonnage by 2.2%, compared to the first nine months of 2014. That increase accelerated through the third quarter, rising by 3.8%. Gross profit was up by 6.4% and EBIT was 8.9% higher at CHF220m.

The ‘Overland’ trucking business continued to suffer through the nine months with an 11.7% fall in underlying EBIT before acquisitions, although underlying turnover up by 3.6%.

Contract Logistics appears to have fallen back somewhat in the third quarter in terms of margins and EBIT with the latter falling by 18%. This is reversal of the nine-month performance which saw EBIT jump by 16.3%.

Overall K+N’s marketing strategy of focussing on specific client sectors appears to be working, but as Detlef Trefzger, CEO of Kuehne + Nagel commented, “cautious consumer behaviour in parts of the EU and the USA resulted in lower export volumes in Asia” and this is depressing the market overall.

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Source: Transport Intelligence, October 20, 2016

Author: Thomas Cullen