Discussing his company’s full year and fourth quarter results just released, the CEO of Kuehne + Nagel, Stefan Paul, has described 2022 as an “exceptional year,” and this seems to be stating the obvious. For the full-year the company clearly did well. Revenue was up 20% and net earnings by 30% at CHF2.8bn. Yet the results of the fourth quarter pointed in a very different direction.
Unsurprisingly the most significant driver of this performance was the sea freight forwarding business with an EBIT (Earnings Before Tax & Interest) of CHF2.021bn. Yet, as the company commented in the results, “in the second half of 2022, complexity in the global ocean freight markets decreased” and this resulted in dramatically different market conditions which led to the fourth quarter seeing a fall in net turnover of -14% and EBIT crash by 42%.
The situation in Air Logistics was similar. The full year saw net turnover increase by 8% year-on-year and EBIT by 21%. Yet in the fourth quarter both have crashed by 39% and 50% respectively. Kuehne + Nagel commented that, “demand for cargo capacity remained high on most trade routes,” – although tonnage carried has fallen from 648,000 kg in Q4 2021 to 545,000 kg in Q4 2022. They added that the “supply of capacity remained volatile in the second half of the year”. However, the crazy market of the past two years is long gone and the flood of returning belly-freight means that the supply picture is very different. This market is on a new trajectory and that explains the fourth quarter downturn in profits.
What was much more stable is the performance of the contract logistics business, which continued its double digit rise in EBIT into Q4, with EBIT up 14% on a turnover increase of 8%. For the whole year EBIT was up 20%. The picture is similar in the road freight business, with a sustained double digit rise in profits. In both cases profitability was sustained by high asset utilisation.
The clear implication of these results is that the performance of 2022 may have been good but it is a poor guide to 2023. Dr. Joerg Wolle, Chairman of the Board of Kuehne + Nagel International, said that the company would “present with the Roadmap 2026 the continuous strategic development of Kuehne + Nagel until 2026” in order to deal with “challenging market conditions.”
This might be useful as the market conditions could be challenging and certainly different, so it will be interesting to see how Kuehne + Nagel will respond to them.
Author: Thomas Cullen
Source: Ti Insights
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