Kuehne + Nagel’s volumes stay ahead of market rates

Kuehne + Nagel remains on course for a bumper year for revenues after announcing positive second quarter results. Significant volume increases were seen across all operating segments, leading to a 14.2% year-over-year increase in revenues for H1.

Margins remain under pressure, but they make better reading when compared to the same time last year. Gross profit and EBITDA increased by 12.7% and 9.7% respectively.

The Swiss logistics firm has continued to increase volumes in its forwarding departments at a similar rate to 2017. The market leader in sea freight handled 2.289m TEUs in the year-to-date, up 8.1% year-over-year, which Kuehne + Nagel stated was “considerably faster” than market growth. Its volumes actually accelerated at a stronger rate in the second quarter of the year than the first. However, net turnover only increased by 1.7% to CHF*4,336m. EBITDA grew by 5.7%, meaning that its EBITDA/turnover margin have recovered somewhat from its slump at the end of 2017.

Its Airfreight business continues to manage substantial volume increases due to acquisitions and the strength of the air freight market. H1 volumes were up 18% year-over-year, meaning its volumes are now 40.0% higher than this time two years ago. The company is second only to DHL Global Forwarding by air freight tonnage handled, but with volume increases outstripping the pace of the market, K+N is further cementing its market position. Combined with an increase in freight rates, revenues in the segment increased by over a quarter. EBITDA increased by 21.4%, meaning its EBITDA/Turnover margin was down slightly at 7.1%.

Net turnover increased by 17.7% in K + N’s overland business, due to dynamic growth in European and North American trade lanes. K + N cited “industry-specific solutions” as the main driver of growth, specifically mentioning pharmaceuticals and e-commerce fulfilment. Its EBITDA/Net turnover margin increased by 0.3 percentage points to 3.6%.

e-commerce also provided further business in its contract logistics segment, where net turnover increased by 12.2%. The company launched a new WMS, KN SwiftLOG in May this year in 400 fulfilment centres worldwide. As a result of the roll-out, EBITDA took a hit of around CHF66m.

K + N undoubtedly faces a number of challenges. The prospect of a transpacific trade war, margin pressure and its growing debt-to-equity ratio (which has increased from 193.8% to 259.6% over the past six months) are potentially problematic for investors. Kuehne + Nagel’s unrelenting pursuit of market share has been successful up to now, but it might need to consider its margins more closely to weather the storms that may arise.

Author: Andy Ralls

Source: Transport Intelligence, July 19, 2018