In a global economy described by the head of the IMF as the “new mediocre”, growth in high single figures is not too bad for a forwarder such as Kuehne and Nagel. Over the past 9 months the company has seen underlying demand at its core sea freight business grow by 8%, which the company claims is twice as fast as the underlying market, whilst air freight grew by 5%, above the 3-4% which Kuehne and Nagel say the sector as a whole expanded by.
As is so often with Swiss domiciled Kuehne and Nagel, its financial results were depressed by currency fluctuations. For the nine months, net turnover for the nine-months increased by 1% year-on-year although the 3rd quarter saw a 4.2% rise. Profits were healthier however, with EBITDA (Earnings Before Interest, Depreciation and Amortisation) up 4.6% and EBIT (Earnings Before Interest and Tax) up 8.2% for the nine-month period. Underlying results were probably better than this, with K+N claiming a 12.1% increase in EBIT in the 3rd quarter after stripping-out currency fluctuations.
The sea freight market is characterised by falling bunker fuel prices, rock-bottom freight rates and moderate rates of growth yet K+N complains that the market remains “difficult”. Despite the increase in the number of containers handled profits were meagre, with an underlying increase in EBIT of just 2.6%. It appears that forwarders and lines are still cutting prices to get business.
Air freight was less tough with hardening margins and an underlying EBIT up by 10.8%. K+N ascribed growth to better performance in specific vertical sectors as well as perishables out of South America. Contract Logistics also did reasonably well with EBIT up by 8.1%.
Slightly less expected is the improving profit picture at the ‘Overland’ road freight business, which saw a marginal increase in turnover but a doubling of operational profits.
For Kuehne and Nagel the better performance in the air, contract logistics and road freight business is being balanced-out by continuing tough-times in the container shipping market. Underlying demand is not at very high-levels but is reasonable enough. Rather it is the ferocity of competition in the container market that is holding the company back from returning to the steady performance it experienced just a few years ago.
