The start of 2024 has proved to be somewhat unexciting for Kuehne and Nagel. The logistics service provider’s just published Q1 2024 results show that, in the face of some quite volatile markets, the company saw its performance suffer.
Revenue, or ‘net turnover’, fell by 18% year-on-year to CHF5,508m (US$6bn), gross profit fell by 13% to CHF2,076m (US$2.2bn), EBIT (Earnings Before Interest and Tax) by 39% and net income by a painful 40% at CHF278m (US$304m).
At the core forwarding operations, the clear emphasis was on sustaining profit margins. This is not to say that the markets were weak as volumes in the Sea Freight business edged up year-on-year by 1.5%, however, earnings-per-container are much weaker, with gross profit per TEU being CHF193 lower than in Q1 2023. Kuehne and Nagel commented that container volumes had recovered on the transpacific trades and other routes to the Americas. Yet for the sea freight forwarding business, EBIT fell by 43% year-on-year to CHF197m.
The situation in air freight forwarding is similar, with moderate demand growth but a yield per tonne that is drifting lower. EBIT per 100kg, for example, has fallen from CHF32 in Q1 2023 to CHF19 in Q1 2024. For the whole air freight operation, EBIT fell by 39% to CHF94m.
The road freight business also appears to have suffered over the past quarter, with net turnover down 10% year-on-year and EBIT down 42%. It is unclear why this is, with Kuehne and Nagel commenting that volumes were “broadly unchanged”.
Similarly, the contract logistics business saw results deteriorate, with a 10% decline in net turnover and an 11% fall in EBIT before exceptionals to CHF55m. It is unclear why performance has deteriorated, with Kuehne and Nagel commenting that they are expanding market share in healthcare and e-commerce.
Clearly, Kuehne and Nagel are suffering in a sea freight market that has seen a spike in rates over the past six months but also in an airfreight market that has not. Demand is not brilliant but it is not falling. Rates in road freight are weaker, especially in the US, however, the wider contract logistics market continues to grow. Kuehne and Nagel’s response has been to improve productivity and drive down costs.
Author: Thomas Cullen
Source: Ti Insight
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