Kuehne + Nagel had a respectable 2019, with its just-released full-year results showing an ability to sustain both sales and profit growth in a difficult market.
The company as a whole saw revenue grow year-on-year by 1.5% to CHF21.094bn, gross profit by 3.5% to CHF7.981bn and EBIT (Earnings Before Interest and Tax) by 7.5% to CHF1.061bn. Profits before tax were 5.3% higher.
As seen elsewhere in the market the core Seafreight business saw a year of two halves, with volumes growing strongly in the first two quarters of 2019 but a vicious downturn towards the end of the year. In Q1 2019 turnover increased by 12.3% year-on-year whilst in Q4 it fell by 4.7%. Gross profit through the year was not quite so volatile, growing 3.8% year-on-year and EBIT was 9.1% up for the whole year at CHF456m, yet profit margins which strengthened at the beginning of the year weakened in the last two quarters.
The position in Airfreight was a bit more extreme, with turnover increasing by 4.7% in Q1 but falling by 7.2% in Q4. Despite the positive Q1, EBIT growth was still negative and worsened in Q4, at a fall of 21.4% year-on-year. For the full-year EBIT was down 7.3% at CHF329m.
The Overland trucking business continued its improved performance, with turnover up 1.7% at CHF3.586bn and EBIT up 2.6% at CHF78m. Similarly, the Contract Logistics business has sustained its recovery with revenue up 2.8% and EBIT up 43.5% to CHF198m even if write-offs are included. It is worth noting that the performance of this business accelerated towards the end of the year. If this recovery in profits represents a change in direction at the Contract Logistics business this will be of some significance for Kuehne + Nagel.
Kuehne and Nagel’s experience over the past year was broadly similar to its large rivals, as was its ability to sustain profit margins. The immediate future is very unclear; however, these results sustain the idea that even in periods of a demand downturn forwarders can sustain profits by expanding the ‘spread’ of freight-rates. It is worth wondering, however, what the effects will be of a rapid bounce-back in demand in air and sea markets.
Source: Transport Intelligence, February 27, 2020
Author: Thomas Cullen