Kuehne + Nagel was saved by its airfreight forwarding business in 2020 after its core seafreight forwarding business suffered in the first half of the year.
Over the year for the whole company, revenue – or what K+N calls net turnover – fell by 3.4% year-on-year to CHF*20.4bn ($22.2bn), gross profit was down -6.3% but EBITDA (Earnings Before Interest, Depreciation and Amortisation) was up 5% at CHF1,920m whilst pre-tax earnings were down 1.4% at CHF789m.
The Sea Logistics business saw turnover fall y-o-y by 4.9% to CHF7,091m, with gross profit down by 7.9%. Earnings Before Interest and Tax (EBIT) fell by 7.2% to CHF423m. Volumes fell by 6.8% to 4,529m TEU from 4,861m TEU in 2019. In terms of volume, business recovered considerably in the fourth quarter as compared to the severe 11% drop seen in Q2.
The gap between the fall in turnover and the fall in gross profit is instructive, it might be suggested that K+N was squeezed between the higher freight rates and lower volumes. The good news is that Q4 saw a marked recovery, with EBIT up 20.2% year-on-year.
K+N’s Air Logistics business, in contrast, exploited the crisis effectively. As the company explained in its press release, “Air Logistics has proven to be the preferred transport solution in dealing with the Covid-19 crisis. The high demand for Kuehne + Nagel’s expertise in pharma and essential goods led to excellent results”.
The result has been an 11.6% increase in turnover at CHF5,194m, a 1.1% rise in gross profit and a 53.5% jump in EBIT at CHF505m. This trend seems to be accelerating towards the end of the year, with Q4 EBIT rising by 134.8%. The disparity in the numbers is remarkable and implies an unusual market structure.
The other, smaller parts of K+N suffered badly. Road Logistics saw profits fall by 20.5% to CHF62m with K+N complaining about a major fall in volumes in the early part of the year although it also said there has been a significant recovery in the fourth quarter. Matters were worse at contract logistics with EBIT falling by 59.6% to CHF80m, affected in part by the divestment of the contract logistics business in Britain.
Many parts of the logistics sector have had an eventful but profitable crisis in 2020. Somewhat surprisingly Kuehne + Nagel has not really been one of them. Although clearly, its airfreight forwarding business has been agile in exploiting its opportunities much of the rest of the company has not. K+N has invested heavily in airfreight forwarding in what is an important strategic move, possibly the company’s experience in 2020 may have other implications for strategy.
Source: Transport Intelligence, March 4, 2021
Author: Thomas Cullen