Kuehne + Nagel profits up led by air and contract logistics

Kuenhe + Nagel

A somewhat strange set of results have been reported by Kuehne + Nagel (K+N), with higher profits but lower revenue. The core sea freight forwarding business suffered, yet the other, traditionally weaker, businesses prospered.

The whole company saw revenue (net turnover) edge down 1.2% to CHF16.56bn whilst EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) was up 6.6% at CHF1.11bn and EBIT (Earnings Before Interest and Tax) was up 8% at CHF918m.

In the container shipping market K+N saw both its revenue and its profits fall slightly, despite a substantial rise in volumes. At CHF8.7bn revenue (net turnover) was down 8.7% and EBIT was down 3.1% at CHF459m, yet crucially gross profit was up by 2.5%. Volumes in terms of TEU were up 6.1% at 1.05m. The gross profit implies that the freight rate that K+N pays continues to be weak whilst demand for container services is strong. As with Expeditors’ results last week, K+N appears to have had problems in a market that was volatile, with gross profit per TEU falling noticeably in the latter half of the year.

In contrast air freight forwarding saw a strong rise in EBIT, up 12.5% at CHF298m despite a fall in turnover of 2%. Volumes were up 4.3% in terms of tonnage, but the higher demand was very much skewed to the latter part of the year and gross profit per tonne fell in the fourth quarter.

The often troubled ‘Overland’ business also did well, with top-line revenue up 11.9%, although 8.8% of this was due to acquisition. EBIT was CHF28m up from last year’s CHF7m. Contract Logistics saw a similar trajectory, with revenue up 3.2% to CHF4.47bn but EBIT leaping by 23.5% to CHF147m. Performance improved dramatically in the fourth quarter although it is unclear why.

The container shipping market may remain difficult for forwarders such as K+N in the short-term but its rediscovered growth must be encouraging for the long-term. For if the air freight market can experience profit recovery, then so can sea freight. However, it appears that customers are quite sensitive to any rate increases and a background of stronger trade growth may be needed to change that.

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Source: Transport Intelligence, March 2, 2017

Author: Thomas Cullen