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Kuehne + Nagel Sees "Tough Ride" As Auto, Industrials Weaken

Kuehne + Nagel Sees "Tough Ride" As Auto, Industrials Weaken

Kuehne + Nagel (K + N) said it is cautiously optimistic on the outlook for the second half of 2019, but it will be a "tough ride in a tough environment," Chief Executive Detlef Trefzger said.

The second-largest freight forwarder globally, K + N (SIX: KNIN) reported earnings per share of $1.69, which was below the $1.77 per share consensus forecast of Wall Street analysts, and down just under 2 percent from a year ago. Gross profit net of transportation expenses rose 3.8 percent to $2.054 billion.

The results came during a quarter where K + N saw volumes in its automotive business drop as car sales slow. German auto parts maker Continental AG issued a forecast for global auto production to drop 5 percent in 2019, compared to an earlier forecast of stable demand.

"Automotive and industrial are the two verticals that are downtrending," Trefzger said. "We expect no stabilization at the moment, maybe in the fourth quarter."

He did call out consumer goods and perishables as the main verticals that are showing growth in the current environment.  

Lower demand for automotive air freight was one reason for volumes in that segment to drop 8 percent from a year earlier to 404,000 tons, the lowest volume since the third quarter of 2017. Despite the volume downturn, K + N is seeing a better yield for each air freight shipment thanks to the acquisition last year of Quick International Courier. Gross profit of $84 per 100 kilograms was up 21 percent from a year earlier, with half the gain attributable to Quick. Earnings before interest and taxes for airfreight were flat year-on-year at $23.2 million.

K + N's ocean business saw strong sequential growth of 8 percent from the first quarter, reaching 1.246 million twenty-foot equivalent units (TEU), but was up only 3 percent from a year earlier. Earnings before interest and taxes for sea freight were $99.8 million, up 5 percent from a year earlier, thanks to a better yield and cost management.

(Source: K + N)

Trefzger said the effect of U.S. tariffs on Chinese-made goods has been mostly benign as the consumer is "willing to pay the landed tariff cost." But the fact that shippers drove so much volume through last year means that inventory levels remain high.

"If we see a restocking, we will see that in the fourth quarter," Trefzger said. The result  is that "we have no sign of a peak season," Trefzger said.

"We have a normal seasonality, but not the hard push for higher demand through peak season," he added.  

K + N's European trucking segment saw gross profit rise 5 percent to $581 million with earnings before interest and taxes rising 10 percent to $21.1 million, thanks to increases in its pharmaceutical, less-than-truckload and less-than-container load business. Its warehousing and contract logistics business saw gross profit grow 2.7 percent to $2 billion with earnings before interest and taxes falling 13 percent to $57 million.

Image Sourced by Pixabay

Posted-In: Auto Industry Freight FreightwavesEarnings News Global Markets General


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