Kuehne + Nagel delivers record results in volatile market

Kuenhe + Nagel

Global freight transport markets are still overheated, with rocketing prices and continuing outbreaks of congestion, but the latest half-year results from Kuehne + Nagel illustrate freight forwarders continue to be able to exploit the situation and increase their profits.

Looking at K+N’s core business of ocean freight-forwarding, it appears that demand has returned roughly to the level seen before the COVID crisis. K+N handled 2.2m TEU, a 3% increase on the, admittedly turbulent first half of 2020. However, for the same period sales (Net Turnover) were up 55%, to CHF*5.2bn whilst Earnings Before Interest & Tax (EBIT) leapt 202% over the admittedly depressed H1-20 numbers, to CHF504m. Dr. Detlef Trefzger, CEO of K+N explained that “in the second quarter of 2021, the trend towards transporting higher value products in Sea Logistics continued. This, coupled with limited container capacity and reduced productivity across the supply chain, required a very high and sustained level of service intensity.” It appears that this service intensity is the key to profits.

The situation in ‘Air Logistics’ was similar. Although the numbers have been flattered by the acquisition of the freight forwarder Apex, the division saw tonnes carried rise by 44% year-on-year for the first half of 2021. Net turnover was up 62% for the first half at almost CHF4bn whilst EBIT was up 124% at CHF406m. The implication is fairly clear, despite a shortage of capacity and high rates the ability to deliver “tailor-made customer solutions such as combined sea and air freight” under-pinned profitability here.  

Even the road freight business did well, with a 14% increase year-on-year in turnover for the first half of the year with profits doubling, up 108% year-on-year to CHF54m. Again, demand was strong and this led to an improvement in asset utilisation especially in the less-than-trailer load business.

Only contract logistics was the performance equivocal. This business saw a fall in net turnover of 6%, however, this seems to have been driven by the disposal of certain businesses in the UK and profits still rose strongly, up 60% year-on-year for the first half of 2021 at CHF72m.

Overall, the group saw net turnover up year-on-year by 35% to CHF13.3bn whilst EBIT was up 147% year-on-year, to CHF1bn.

Dr. Joerg Wolle Chairman of the Board of Directors at Kuehne + Nagel commented that “Kuehne + Nagel closed the second quarter of 2021 with an absolute record result. This reflects the strategic course we have set and the initatives we have taken in recent years, as well as our early and successful pursuit of digital leadership….  the targeted expansion of our positions in Asia is increasingly paying off.” However, it might be asked, are these results the product of K+N’s “strategic course” or its ability to exploit extraordinary market conditions?

Source: Transport Intelligence, July 22, 2021

Author: Thomas Cullen