Strong 3Q Airfreight performance for K+N

kuehnenagel-3q16Switzerland-based forwarder and logistics services provider Kuehne + Nagle reported third-quarter net income down 4.8% y-o-y to US$179 million, as Gross Profit (what some forwarders call net revenue) rose 4.8% to $1.68 billion. Operating income (EBIT) for the quarter was down 3.0% to $225 million. For the first three quarters of 2016, K+N’s net income was up 4.1% to $525 million, gross profit was up 6.3% to $5.02 billion, and operating income was up 5.9% to $695 billion.

The fall in third-quarter net income and operating income came despite strong performance in the company’s Airfreight business segment. And, interestingly, the strong performance of the Airfreight segment came despite difficult market conditions. K+N said: “The global airfreight market remained tense in the third quarter and pressure on margins continued due to shrinking demand and further capacity increases. Against this trend, Kuehne + Nagel grew its tonnage by 3.8 per cent and gross profit per 100 kilos by 1.4 per cent, mainly due to further scaling its industry-specific solutions.”

Given that worldwide growth in air freight demand in the third quarter was probably about 4%, K+N’s 3.8% growth in airfreight tonnage was in line with the overall market. The growth in gross profit per 100 kilos (i.e. yield), on the other hand, comes against a worldwide trend of declining yield, and represents a strong performance.

And, speaking of strong performances, operating margin for the Airfreight segment was 30.5% in the third quarter.

For the first three quarters of 2016, Airfreight operating income was up 8.9% to $227 million, as gross profit rose 6.4% to $739 million.

Performance in the company’s other business segments was mixed. As can be seen in the chart, Seafreight operating income declined 9.2% in the quarter, while Contract Logistics operating income was flat with 3Q15. Overland operating income was down a huge 67%, but this is almost meaningless, as the fall was only $2 million – from $3 million on 3Q15 to $1 million in the current year quarter.

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