Kuehne + Nagel Q3 Ocean Growth Offsets Air Decline

Kuehne + Nagel's ocean freight and land transport units both made third-quarter gains, helping to offset volatile air freight markets that hit earnings.

The Swiss forwarder's third-quarter earnings before interest and tax (EBIT) rose 16% year-on-year to CHF283 million ($287.2 million), while net turnover fell 1.1% to 5.23 billion Swiss francs in the period.

K+N KNIN was the world's second-largest global third-party logistics provider after DHL Supply Chain & Global Forwarding by revenue last year, according to Armstrong & Associates. Its results for the first nine months of 2019 suggest it is well on its way to maintaining that position this year.

Net revenue of CHF15.8 billion over the period was 3.1% higher than a year earlier, while EBIT rose 6.6% to CHF794 million. The forwarder said organic net turnover growth amounted to 4.3%, foreign exchange effects had a negative impact of 2.9% and acquisitions had a positive effect of 1.7%.

"Against the backdrop of consistently tense global markets, Kuehne + Nagel once again delivered very solid results," said Detlef Trefzger, CEO of Kuehne + Nagel International AG. "In Seafreight and Overland in particular, our focus continued to be on customer service, cost efficiency and digitalization."

He said K+N's Airfreight unit had encountered "volatile" markets with net turnover and EBIT down 2.6% and 3%, respectively, over the first nine months of the year compared to the same period of 2018.

"The airfreight market continued to decline in an environment of global economic uncertainty and rising trade barriers," added a statement. "As a result of the sharp drop in demand in some key industries, Kuehne + Nagel's Airfreight volume fell by 6.4% year-on-year to 1.22 million tonnes."

However, the acquisition last year of time-critical logistics firm Quick International Courier, a specialist in solutions for the aviation and pharma and health care industries, has had "a sustained positive impact" on the unit's performance in 2019, added Trefzger.

Seafreight, K+N's key revenue earner, saw an increase of 7.3% year-on-year to CHF5.6 billion in the first nine months, with EBIT up by 10.2% year-on-year to CHF357 million over the same period.

"Seafreight posted a very solid net turnover growth and once again improved its performance in the third quarter," said a K+N statement.

"Kuehne + Nagel grew significantly in a stagnating overall market and, with 3.67 million standard containers (TEU), the group transported 152,000 units more than in the same period of last year (up 4.3%)."

The company said the main success drivers of its Seafreight unit were a "selective growth strategy" and "effective cost management."

Between January and September, net turnover in K+N's Overland unit rose by 2% year-on-year to CHF2.7 billion and EBIT by 8.8% to CHF62 million, a growth performance K+N described as "well ahead of the market."

It added, "Groupage shipment volumes in France and Germany remained firm. In Austria and Eastern Europe, Kuehne + Nagel strengthened the overland transport network with the acquisition of the Jöbstl Group."

In North America, K+N said key accounts remained the largest growth driver, while the intermodal business further weakened due to falling oil prices.

K+N continues to restructure its Contract Logistics unit and this yielded related one-off profits from real estate sales amounting to CHF23 million in the third quarter that were included in EBIT. As a result, unit EBIT rose 20.4% over the first nine months to CHF112 million.

"Due to portfolio optimization measures and a focus on higher-margin business, net turnover increased by 3.5% year-on-year to CHF4.0 billion and gross profit by 2.1% to CHF3.0 billion," said a statement.

"Growth was thus significantly slower than in the previous year's period. With the opening of new distribution centres in Luxembourg, Germany and Belgium, the business unit focused on further high-quality growth in the areas of pharma and health care and e-commerce fulfillment."
FreightWaves articles by Mike

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