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Kuehne & Nagel Profit Growth Slows as Franc Offsets Cargo

Kuehne & Nagel International AG (KNIN), the world’s biggest sea-freight forwarder, was unable to benefit fully from growing cargo volume as the rising Swiss franc held back second-quarter profit growth.

Earnings before interest and taxes increased 4.6 percent to 206 million Swiss francs ($231 million), Schindellegi, Switzerland-based Kuehne & Nagel said in a statement today. The average analyst estimate compiled by Bloomberg was for Ebit of 202 million francs.

Europe’s economic activity has lagged behind other regions in the aftermath of the longest recession since the euro was introduced, weighing on shipping and transport companies. While profit growth slowed to less than half the advance in the first quarter, Kuehne & Nagel is more optimistic for volume gains in its sea and air-freight markets for the remainder of the year.

“Our results were negatively impacted by the strong Swiss franc,” Chief Executive Officer Detlef Trefzger said in the statement. “Sea-freight results suffered from this trend in particular, despite the solid growth and high productivity achieved in this business unit.”

Sales were little changed at 4.37 billion francs, with net income rising 5.9 percent to 162 million francs. First-half revenue fell 0.6 percent, while rising 4.1 percent when adjusted for currency shifts.

Road Division

Sea-freight volume jumped 8.2 percent in the first half, with air freight increasing 3.9 percent. Excluding currency effects, revenue rose 5.5 percent at the road and rail unit and 4.5 percent at the contract logistics division.

The Swiss currency’s gains on foreign-exchange markets reduces the value of revenue when converted into francs. The Swiss National Bank has set a ceiling of 1.20 francs per euro to prevent further increases. While the bank hasn’t intervened to protect the cap in almost two years, the franc has failed to weaken as predicted amid a recession in euro countries that ended a little more than a year ago.

Kuehne & Nagel reiterated a forecast that the company’s air and sea-freight volumes will rise 50 percent faster than industrywide gains this year. It raised market forecasts, saying global sea-freight volume will increase 4 percent to 5 percent and air-freight volume will rise 2 percent to 4 percent. The company predicted in April that worldwide sea freight would expand 3 percent to 4 percent this year, with air freight gaining 1 percent to 3 percent.

Kuehne also stuck to plans for its contract logistics business to expand at double the estimated market growth of 2 percent and 3 percent. The road and rail unit, which has been unprofitable on an annual basis since at least 2005, will keep pace with the market growth at 1 percent to 3 percent.

Kuehne & Nagel’s shares, including reinvested dividends, have returned 11 percent in the past year, generating a market value of 14 billion francs.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net Tom Lavell, Kim McLaughlin

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