Kuehne + Nagel continues to make progress in a tough market

Kuehne + Nagel has announced a moderately strong set of results for the first quarter 2013, with mild advances in both profitability and revenue in most of its core businesses.

For the Group, turnover increased 5.4% year-on-year to CHF5.094bn, but gross profit was up only 2.3%. Net Earnings almost doubled to CHF134m, although these numbers are complicated by exceptional items from 2012. Underlying operational profits suggest a modest increase with EBITDA (Earnings Before Interest, Depreciation and Amortisation) for the quarter being CHF219m, up only marginally from the ‘before exceptionals’ figure of CHF218m in the first quarter of 2012.

In Kuehne + Nagel’s sea freight forwarding segment, container volumes increased 2.3%, but the key Europe-Asia route saw a fall in volumes whilst the company stated that Asia-Europe “grew moderately”, whereas it was other routes that saw growth of 5-10% in the volume of containers moved.

Kuehne + Nagel did not announce the gross revenue or profit numbers for individual business segments, but stated that EBIT (Earnings Before Interest and Tax)-to-gross profit margin had improved from 28.3% to 28.6%, implying any increase in profits will come from cost reductions.

The performance in airfreight was not dissimilar to sea freight with volumes up 5%, despite what must be a declining market. Kuehne + Nagel grew its volumes out of Asia and Europe and stated that EBITDA would rise by 9.3% year-on-year, in part due to lower operational costs.

Kuehne + Nagel claimed that its contract logistics segment has improved its performance in the first quarter of 2013. Due to what the company calls “the restructuring measures”, the business unit increased its EBITDA by 27.3% and reported hardened margins of 3.8%. However, it is quite possible the year-on-year increases are due to a tough first quarter in 2012.

Road and rail logistics suffered however, with EBITDA down CHF14m to a total of CHF2m, affected by lower volumes in the groupage business.

It is difficult to know exactly what is driving Kuehne + Nagel’s business from these figures, however in air and sea freight the company must be benefitting from its ability to grab market share and thus cover fixed costs better than its rivals. How effective it has been in driving down rates is not clear, although Karl Gernandt, Chairman of Kuehne + Nagel, was clearly giving a steer in stating that the company would “continue to focus on margin and cost management” as well as expand in growth markets outside Western Europe.

CHF1= €0.823/US$1.075