Kuehne + Nagel hit in Q1 but not that badly

Kuenhe + Nagel

Kuehne + Nagel’s Q1 2020 results, announced yesterday (27-Apr), were not catastrophic. The company did suffer considerably from the COVID-19 crisis but the results were complex. The company as a whole saw net turnover fall by 6.2%, gross profit by 5.1%, while EBIT (Earnings Before Interest and Tax) fell by 24% year-on-year. Earnings for the period was *CHF139m.

Each one of K+N’s four divisions was hit by the crisis but the outcomes were not as might be expected.

For example, air freight forwarding has been at the eye of the storm yet although profits were down, it certainly did not collapse as a business. Rather turnover fell by 6.8% and gross profit was down 5.8% whilst EBIT dropped 11.3% to CHF71m. It could have been worse as tonnage carried fell by 9% but profit per tonne stabilised, aided by “short-term charter solutions for pharma and time-critical transports”.

Sea freight forwarding also saw volumes fall, in this case by 6.5% when measured in TEUs, however, whilst the China trade saw a “double-digit decline”, other areas of business such as reefers and Latin American perishables saw good growth. The result was that the ‘Sea Logistics’ division saw net turnover fall by 6.9%, gross profit by 9.9%. EBIT fell heavily, by 29.5% to CHF79m.

It might be assumed that in both air and sea forwarding EBIT is being hit harder due to the lower amortisation of fixed costs.

Bearing in mind the acute problems in European and North American road freight it might be expected that K+N’s ‘Road Logistics’ business would have had some sort of meltdown. Yet despite volumes “declining significantly” net turnover fell year-on-year by just 4.2%, gross profit by 1.4% although EBIT fell by 29.2% to CHF17m. e-commerce and pharmaceutical demand remained robust.

Contract logistics is generally a more stable business than the other three transport-focussed divisions, however, this was not the case over this quarter. K+N Contract Logistics exposure to automotive and retail resulted in a heavy hit to its business, moderated only by grocery retail, pharma and e-commerce. For the business, net turnover was down 6.1% year-on-year, gross profit down 4% but EBIT fell by a substantial 34.6%.

It seems that for Kuehne + Nagel the impact of the COVID-19 crisis may be spread over the more than one quarter and that its results will continue to be affected by the turmoil in logistics markets. However, these results suggest that the company is quite robust and capable of navigating even the most extreme market conditions. 

*CHF = €0.93/$1.01

Source: Transport Intelligence, April 28, 2020

Author: Thomas Cullen