Quite a good year for Kuehne + Nagel

Kuehne + Nagel has seen moderate increases in revenue and profit with a set of fourth quarter and annual results that show underlying demand reasonably strong but profit margins still under pressure in areas such as forwarding.

The headline of these results is the profits made at the ‘Overland’ road freight division. After stripping out currency movements, the business saw an increase of 1% in revenue to CHF2,762m (US$2.7bn/€2.5bn). The division also made its first ever profit of CHF80m (US$80.4m/€74m), a contrast to the loss of CHF8m made in FY2013. The fact that this is the first time the Overland business has delivered a profit illustrates the problems that Kuehne + Nagel has had in the European business.

At the core freight forwarding business the numbers were similarly muted. Sea freight forwarding saw an increase in volumes of 6.8%, with the number of containers handled up 7%. Yet even after stripping out the effects of currency movements revenue was up only 5.8%, gross profit 4.1% and EBIT up 2.3%. The company admitted that “in the Asia-Europe traffic Kuehne + Nagel concentrated on margin stability and did not participate in the intensive price competition”, indicating that the business is still suffering from the low rates in the container sector.

Air freight had a similar year with volume up by 5.3% year-on-year and turnover up 5.5% after stripping-out currency effects. The good news here, however is that underlying EBIT was up by 11%, with the unadjusted figure being a 7.2% rise. Understandably Kuehne + Nagel described this as a “successful” performance and claimed that it had clearly secured its position as “the second largest global air freight forwarder”.

Contract logistics performed better with a 7.7% increase in EBIT, representing a 9.1% increase after the effects of currency. This was on a modest 4.4% increase in sales. Kuehne + Nagel stated that this was due as much to the growth of existing contracts as to the gain in new business.

Overall Kuehne + Nagel saw an increase of 1.9% year-on-year net turnover which, adjusted for currency, represented an increase of 5.1%. EBITDA was up by 4.5% at CHF1,005m. This is a solid result, although with growth in world trade expected to be in the mid-single digits surely it is not unreasonable to expect such a performance.

However, what the climb in value of the Swiss Franc will do to the transparency of Kuehne + Nagel’s figures in the near future is uncertain.