H1 results show that Kuehne + Nagel appears to be relying on its core ocean freight business to progress in a fairly stable, if not very exciting, direction although its management seem pessimistic for the prospects ahead.
The latest half-year numbers saw revenue, or ‘Net Turnover’, rising by 5% year-on-year for the six months since January, however the second quarter saw growth slowing, at 3.1%. Gross profit similarly rose by 5.5% for the half-year, weakening in the second quarter to 3.8%. For the whole company, Earnings Before Interest & Tax (EBIT) crept up by 2% over the six months.
Looking at the performance of each constituent business, the Seafreight forwarding division saw revenue 12% higher year-on-year at CHF4,890m whilst profits in term of EBIT climbed 11.9% to CHF235m. This was a reasonable performance bearing in mind that container volumes rose by just 4.5%. Kuehne + Nagel claim that this represents another increase in market share, with volume demand overall growing by 2.5%.
The performance at Airfreight was flatter. Revenue edged up by CHF48m to CHF2,761m over the six months, whilst EBIT fell by 4.4%. Kuehne + Nagel described the air freight market as “under pressure” with key markets “stagnating”. Volumes fell by 5.8% year-on-year. The company said that one of the few areas of growth was pharmaceuticals and perishables.
Contract Logistics was similarly muted, with net turnover up 4.4% but EBIT down CHF9m to CHF57m. The result was blamed on “restructuring” and K+N is hoping its new warehousing technology will drive up profits in the future.
The ‘Overland’ road freight business saw a modest 3.3% increase in turnover and a 4.7% improvement in EBIT, although K+N reported a slowing market in the second quarter. Problems occurred in areas such as oil and gas related intermodal and project cargoes. Kuehne + Nagel also disclosed the acquisition of a road freight company in Austria.
Dr. Detlef Trefzger, CEO of Kuehne + Nagel, commented that the company had achieved at “a high level…. due to the consistent implementation of our strategy”. This may be true in sea freight but, as even he admitted, the company is struggling with the air freight market and contract logistics does not seem to be firing on all cylinders. Clearly Kuehne + Nagel is looking to technology to help with costs but it also needs more accommodative market conditions.
Source: Transport Intelligence, July 25, 2019
Author: Thomas Cullen