Affected by global macro trends in the logistics industry, Switzerland based global forwarder and contract logistics player Kuehne + Nagel reported an operating profit (EBIT) fall of 13.1% y-o-y to CHF 1654m. Revenues however had a small turnaround, of +4.0% to CHF 24,802m.
Where net turnover showed a sign of recovery, the falls in margins and EBIT continue a trend that has occurred since the post-pandemic boom of 2022. According to the company’s leadership, the overall falls stem from “A lower contribution from the organic business” that they attribute to 11.7 basis points of the fall in EBIT, offset by acquisitions that amounted to 0.8 basis points of positive growth.
Kuehne + Nagel has four divisions that we will look at below – Sea, Air, Road and Contract Logistics.
Sea
– Revenue +7.9% y-o-y to CHF 9,282m
– EBIT -16.2% y-o-y to CHF 851m
– Volumes -0.6% to 4.31m TEU
Where many of the company’s rivals have benefited to some extent from the Red Sea crisis, K+N’s leadership admitted that it had been affected by overcapacity in 2024. This may well have contributed to the sharp falls in EBIT.
Air
– Revenue + 5.3% y-o-y to CHF 7,308m
– EBIT -13.9% to CHF 478m
– Volumes +5.5% to 2.092m tonnes
It is widely understood that Kuehne + Nagel is a major forwarder for the Asian discount e-commerce platforms. These companies use algorithms to achieve optimal loads in air freight, minimising logistics costs and thereby their own bottom lines to the cost of their logistics services suppliers. This may well be a key issue behind the growth in air freight volumes but the sharp fall in margins experienced by the air forwarding division.
Road
– Revenue -1.7% y-o-y to CHF 3481m
– EBIT -26.3% y-o-y to CHF 98m
Other than a brief mention of the soft European road freight market, K+N made no explanation as to the factors behind this division’s poor performance. What is known is that the company operates road forwarding services in North America, Europe and SE Asia, the former two of which are seeing softness in the market.
Contract Logistics
– Revenue -0.8% y-o-y to CHF 4731m
– EBIT +13.5% to CHF 227m
The company gained market share in the profitable markets of healthcare/pharmaceuticals and e-commerce fulfilment. It also opened a number of highly automated warehouses in the year. Both of these factors will have helped the jump in profitability to what K+N’s leadership highlighted as a record EBIT for the division.
Given contract logistics as a logistics market is least affected by short term shocks, the ongoing growth of this division should insulate Kuehne + Nagel from the uncertainties of the coming year.
Inorganic growth
As stated earlier, inorganic growth contributed +0.8 basis points to the otherwise negative growth reported by the company in 2024. K+N made three major acquisitions in the year:
– It took a 51% stake in Tennessee, USA based IMC Logistics that handles end-to-end container logistics in the US
– Canada based customs broker Farrow that joins the Road division
– SE Asia based City Express also joins Kuehne + Nagel’s Road division
The company has yet to publish forecasts for the year ahead but given the clear uncertainties in most of the markets it operates in, no forecasts made to date have been offered with great certainty. The Asian online discounters affected the company deeply this year, unforeseen last year, and other markets will have similar curve balls – some of which have already been pitched. It remains to be seen whether the company breaks from its two-year downward trend of profitability into 2025.
Author: Richard Shrubb
Source: Ti Insight
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