Kuehne+Nagel results down for Q1

Kuehne+Nagel , the world’s largest airfreight forwarder, posted a sharp decline in profitability, revenue and freight volumes in the quarter ended March 31 but emphasized that they were pleased with the first three months of 2023 in the context of the international business climate and of its performance before the pandemic. The Swiss group’s global operating profit (EBIT) totaled CHF$612 million ($685.7 million) while net turnover fell 34% to $7.5 billion. The group’s gross profit-to-EBIT conversion rate remained at a high level of 26%. “The macroeconomic environment remained extremely challenging at the start of 2023,” Kuehne+Nagel Chief Executive Stefan Paul said. “This does not come as a surprise as signs of significant weakening emerged last autumn, following the period of extraordinary, pandemic-related demand for logistics services. “With our focus on cost control through the consistent exploitation of the asset light model, the Kuehne+Nagel Group was able to hold its own in this environment and expand its market share worldwide. We already see early successes from the strategic Roadmap 2026 presented in March [2023].” The Air Logistics unit saw its EBIT plummet 64% to $172.55 million on a net turnover of $1.86 billion (-41%). The gross profit-to-EBIT conversion rate was reduced to 32% compared with 40% in Q4 2022 and 52% a year earlier. While Q1 airfreight volumes were down just over 17% to 475,000 tonnes, Kuehne+Nagel said that in an overall declining market, it maintained a stable market share while gaining share in areas like the transport of perishable goods. On market conditions In a brief update of market conditions in Q1, the group highlighted a decline in North America and Asia export volumes in contrast to the relative strength of Europe, intra-Asia and South America air exports. Inflationary pressure was partially compensated for by cost reductions. The Air Logistics unit’s Q1 performance was in line with the ”normalization” trend in the sector, Paul said on a conference call following the earnings release, adding that the unit felt the impact of weaker market demand, particularly on trans-Pacific routes. “Our assessment is that the [Kuehne+Nagel’s] 17% year-on-year decline in [air] tonnage is broadly reflective of the [general] market development with concentration on general cargo and high tech,” Paul said. “Pockets of relative strength include perishables and aerospace. Combined with an incremental expansion of air cargo capacity, average gross profit declined 13% sequentially in the first quarter.” Paul said he does not expect a significant uptick in airfreight volumes for Q2 and the summer, adding they are likely to stay at the same level as Q1. The prospect of restocking on the part of shippers as the year unfolds will probably benefit contract logistics in particular and also sea logistics, at least initially, he said. When asked whether Kuehne+Nagel had any volume commitment contracts for airfreight, Chief Financial Officer Markus Blanka-Graff replied, “We are entirely in the spot rate market with the exception of our long-term charters [operated by two B747 freighters]” — an indication of the uncertain mood in the sector. Kuehne+Nagel’s mergers-and-acquisitions strategy remains unchanged, Blanka-Graff said, with the company preferring bolt-on acquisitions — Asia is one of its main target areas, and e-commerce and pharma are two verticals the company continues to focus on. “We did one of our biggest deals when we acquired Apex [an Asian freight forwarder purchased in 2021 for $1.23 billion], but I don’t think we’re talking something of that magnitude [with regard to a potential acquisition),” he added.

Kuehne+Nagel results down for Q1

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