Despite Volume Growth, Kuehne + Nagel Earnings Decline

Despite Volume Growth, Kuehne + Nagel Earnings Decline

Kuehne + Nagel’s operating profit declined 5.8 percent 2012 from the previous year as slimmer margins, rising costs and an antitrust fine outweighed the impact of increased ocean, air and land transport volumes.

The Swiss global logistics group earned 921 million Swiss francs ($976 million) before interest, tax, depreciation and amortization, down from 978 million francs ($1.04 billion) in 2011.

This was reduced to $907 million, a year-over-year decline of 12.5 percent, by a $69 million fine by the European Union for its alleged participation in an air freight forwarding cartel, which Kuehne + Nagel is appealing.

Revenue increased 5.9 percent to $22 billion, driven by double-digit growth in all markets except Europe, which registered a gain of just 0.6 percent.

Gross profit, a better performance indicator for a logistics company than revenue, grew 3.3 percent to $6.5 billion.

Net earnings, including the one off antitrust fine, fell to $523 million from $642 million in 2011.

Europe’s sovereign debt crisis saw a sharp decline in its trade with the emerging countries in Asia and Latin America in the second half of the year, which resulted in overcapacity, unprecedented rate volatility and strong pressure on profit margins, Kuehne + Nagel said.

“Kuehne + Nagel managed to increase its volumes in all business units, but was not able to compensate margin pressure and higher costs with the volume growth achieved,” said Chief Executive Reinhard Lange, who is stepping down in May for health reasons.

Ocean container traffic reached around 3.5 million 20-foot-equivalent units, a 6 percent year-over-year increase, compared with market growth of just 2 percent.

Air freight tonnage rose 2 percent in a shrinking global market, driven by a strong performance in intra-Asian traffic and Asian exports to North and South America, the expansion of the perishable logistics segment and the intensified marketing of industry specific solutions.

Road and rail logistics net revenue rose 7.4 percent, but volume growth slowed in the second half of the year because of the further deterioration of the southern European economy.

The company said the outlook is clouded by “a lot of uncertainties regarding the economic development in 2013.”

“It is assumed the European economy will not recover quickly and sustainably, while there are encouraging signals from the emerging markets and the USA.”