K+N steals the show in 2Q16

The head offices of two of the world’s largest forwarders are less than 100 km apart in Switzerland. But despite their geographical proximity (and exposure to the same foreign exchange and market effects), second-quarter financial and operating results were once again strikingly different for Kuehne + Nagel and Panalpina.

We’ll get to the details below, though it should be noted that for both forwarders airfreight outperformed seafreight, with both showing growth in volumes. K+N airfreight volumes grew 3% while Panalpina reported a 10.8% increase in tonnage.
Now, on to the details…

A solid quarter for K+N: 

The chart at right shows Kuehne + Nagel’s  reported second-quarter net income up 8.1% y-o-y to $189 million, as gross profit (what some forwarders call net revenue) rose 9.4% to $1.68 billion. Earnings before interest and tax (EBIT) jumped 8.2% to $240 million.

Looking at the results by business segment:

• Air freight forwarding: Gross profit from air freight forwarding was up 8.5% in the second quarter to $245 million, as tonnage rose 3%.
• Ocean freight forwarding: Gross profit from ocean forwarding was up 5.9% to $362 million as volumes rose 5.7%.
• Overland: Overland Gross Profit made the most significant gains, up 15.1% to $238 million.
• Contract Logistics: Gross profit in K+N’s Contract Logistics segment swelled 9.7% to $835 million.

For the first half of 2016, K+N’s net income was up 9.2% to $360 million, as gross profit rose 7.9% to $3.29 billion. Operating income for the half was up 11.0% to $460 million. Margins for the half were just as good as they were for the second quarter, Airfreight operating margin was up 0.2 points to 30.8%, ocean freight margin was up 0.5 points to 31.3%, overland margin was up 0.2 points to 3.7% and contract logistics margin was up 0.6% to 4.3%. Overall net margin for the half was up 0.1 points to 11.3%.

A not-so-good quarter for Panalpina:
Switzerland’s other big forwarder, Panalapina, fared less well than its compatriot, reporting second-quarter net income down 82.3% y-o-y to US$5 million, as gross profit rose 1.9% to $375 million. Operating income (EBIT) for the quarter was down 69.5% to $11 million.

As shown in the chart at right, Panalpina’s seafreight forwarding division was the clear weak spot in Q2. Volumes fell 8.1%, pushing EBIT into the negative with a loss of $3 million.

Panalpina’s airfreight forwarding business did less poorly with 2Q volumes up 10.8%. EBIT, although down 42%, was still positive at $15 million. For the first six months of the year, airfreight volumes grew 8.1% partially due to Panalpina’s January acquisition of Kenya-based flower logistics specialist Airflo from the Dutch Flower Group.

Discussing the results, Panalpina said that a major problem was its historical dependence on verticals like the oil & gas industry, but that it has managed to replace some of this business with”organic growth in other sectors.”