News / Strong first half for ocean freight keeps Kuehne + Nagel on course

K+N

Ocean freight is keeping Kuehne + Nagel on target as its other divisions continue to struggle in a difficult market.   

Ocean turnover rose some 11%, with ebit up 12% to Sfr235m, as group first-half revenue increased 5.3% to Sfr10.6bn ($10.8bn), generating a 42.9% surge in ebitda to Sfr869m and a 2% upturn in profit (ebit), which hit Sfr511m.   

While some analysts suggested the performance was merely “on course”, chief executive Detlef Trefzger tried to sweeten the news.   

“We achieved a high-level result in the first half of 2019,” he said. “This was due to the consistent implementation of our strategy in all business units.   

“Currently our focus is on addressing the significant changes in airfreight market conditions and on continuing our restructuring activities in contract logistics.”   

Global air freight has remained under pressure, with much of the blame levelled at the economic impact of growing trade barriers and the China-US standoff. But higher inventories have also led to weaker demand.  

K+N failed to avoid this, with volumes dropping 5.8% to 813,000 tonnes, forcing ebit for the division down 4.4% to Sfr174m.  

“We are focusing on sustainable business and have not lost any major customer in air freight,” Mr Trefzger told investors. “Our ambition is to outperform the market, but not at all cost.”   

And the company pointed to some positive elements in air freight, noting growth in pharma and perishables, where K+N has looked to expand.   

However, results in the contract logistics and overland divisions were not greeted with much applause. One analyst told The Loadstar the first half in contract logistics had been “messy”, while overland was “okay-ish”.   

Overland revenue climbed 3.3%, with ebit improving 4.7% to Sfr45m. Contract logistics recorded a downturn in profits, despite a 4.4% increase in turnover.   

The company said: “Growth in overland was well above the market, however it slowed down in the second quarter in line with market trends. The primary growth drivers in Europe were Germany and France, while large customers performed well in North America.”  

However, it noted that, due to falling oil prices, intermodal business in the US and its project business in the Middle East and Africa had “stagnated”.   

On the contract side, the company saw some new business wins and claimed further gains would come from the implementation of a new warehouse management system.   

Head of Loadstar Premium Alessandro Passetti suggested K+N was in “defensive mode” but, thanks to ocean, was on course to meet its 2019 forecast.  

“With our initiatives to improve our technological capabilities we will become more cost effective and improve customer service,” added Mr Trefzger. “We are well set to successfully meet the challenges of an ever-demanding market… and remain cautiously optimistic; targets and ambitions will be met but it will be a tough ride.”    

You can see K+N’s first-half results here, and our analysis on Loadstar Premium here.