Kuehne & Nagel Profit Doubles as Air-Freight Volume RisesRichard Weiss
Kuehne & Nagel International AG, the world’s biggest sea-freight forwarder, said first-quarter profit almost doubled as air-freight shipments rose and a reorganization helped the company reduce costs.
Net income surged to 132 million Swiss francs ($142 million) from 67 million francs a year earlier, Schindellegi, Switzerland-based Kuehne & Nagel said today in a statement. Revenue increased 5.4 percent to 5.09 billion francs. Earnings in the 2012 period were hurt by a European Union antitrust fine of 65 million francs.
Subdued economic activity is weighing on shipping companies as countries that share the euro currency struggle with a sovereign-debt crisis. Industrial production in euro nations has declined for 16 straight months, and China’s economic growth unexpectedly lost momentum in the first quarter as gains in factory output and consumption weakened. Kuehne & Nagel said earnings were bolstered by spending reductions in the sea- and air-freight businesses and in contract logistics.
“Across all three businesses, margin improvement suggests improving cost-control momentum is lifting, on which future volume and demand recovery might amplify earnings growth,” Damian Brewer and Andy Jones, analysts at RBC Capital Markets, said today in a report to clients.
Kuehne & Nagel rose as much as 3.9 percent to 109.70 francs, the highest intraday price since Feb. 20, and was trading up 0.9 percent at 10:49 a.m. in Zurich. That pared the stock’s decline this year to 3.2 percent, valuing the company at 12.8 billion francs.
“Particularly in view of the recessive economic situation in the euro zone, we can be quite satisfied with the results,” Chairman Karl Gernandt said in a separate statement. “The measures introduced to increase efficiency and improve profitability are working effectively. We will continue to focus on margin and cost management and are therefore confident to achieve further improvements.”
Air freight volume increased 5 percent, in contrast to a 2 percent decline in the market, while container volume rose 2.3 percent, the company said.
Growth in sea freight was held back by a decline in trade from Europe to Asia and “just” moderate increases in the opposite direction, while other routes saw volume jumps of 5 percent to 10 percent, the company said. Growth opportunities will arise mainly in regions outside of western Europe, Gernandt said.
“Without an improvement in underlying market volumes, Kuehne & Nagel will continue to struggle to match historical levels of profitability growth,” Stephen Furlong, a Dublin-based analyst for J&E Davy Holdings, said in a note to clients.
The company shuttered 30 warehouses in 2012 amid a shift of focus to multinational customers. Kuehne & Nagel reiterated a forecast that its sea-freight volume will rise 4 percent to 6 percent this year, outpacing market growth of 2 percent to 3 percent, while air-freight handling will increase 1 percent to 3 percent, compared with a market forecast of as much as 2 percent growth.
The outlook for the oceangoing business may be more at the lower end of its range, while the prediction for air cargo is more toward the higher end, Chief Financial Officer Gerard Van Kesteren said today in an interview with Bloomberg Television.
Chief Executive Officer Reinhard Lange will step down May 7 for health reasons, with Gernandt leading the company on an interim basis, Kuehne & Nagel said March 4. It may take until the end of the year to find a successor, Van Kesteren said.