Kühne + Nagel reports revenue and profit decline in the first half of the year

The logistics service provider Kühne + Nagel presented its figures for the first half of 2020. Thanks to operational efficiency, K+N secured market share gains. Careful capacity planning and active cost management helped during the coronavirus crisis. The decline was greatest in land transport, while air freight even resulted in a small profit.

(Schindellegi) Considering the effects of the coronavirus pandemic and the global lockdown, the Kühne + Nagel Group achieved an impressive operational result in the second quarter of 2020. The resulting market share gains and the cost savings initiated across the group had a positive impact. Net revenue in the first half of the year was CHF 9.8 billion, and EBIT was CHF 419 million. Currency fluctuations had a significantly negative effect in the first half of the year, both on net revenue (-5.9%) and EBIT (-5.3%). Free cash flow increased by 5.5% during the reporting period.

Overall Figures

Dr. Detlef Trefzger, CEO of Kühne + Nagel International AG, states: “The crisis triggered by the coronavirus pandemic, which led to lockdowns in most countries, had profound effects on the international economy. We took the right measures early on and managed Kühne + Nagel very successfully under these difficult conditions. We also expect considerable uncertainties for the second half of the year, for which Kühne + Nagel is well prepared thanks to agile structures, consistent cost management, and high-quality service offerings.”

Dr. Jörg Wolle, Chairman of the Board of Directors of Kühne + Nagel International AG, comments: “The strategic decisions we made at Kühne + Nagel in recent years are also having a positive impact during the coronavirus crisis. The company has been consistently digitalized, allowing it to remain fully operational even during the crisis. The return of Asian markets and Kühne + Nagel’s strong position were reasons for the successful performance in the second quarter. The good work in recent months underscores how resilient Kühne + Nagel is today.”

 Sea Freight

The significantly negative market environment with reduced trading volume led to a declining business development in the sea freight sector in the first half of 2020. In some industries, including pharmaceuticals, temperature-controlled transport, and e-commerce, Kühne + Nagel was able to gain market share. However, the good margin development in these areas and cost management could not compensate for the significant decline in the SME customer portfolio.

Container volume decreased by 11.7% in the second quarter compared to the previous year to 1.1 million TEU. The net revenue of the business unit decreased to just under CHF 1.7 billion, and EBIT fell to CHF 88 million.

Customer interest in CO2-neutral sea freight solutions remained high despite the volatile market environment. The focus was primarily on complete solutions for climate-neutral supply chains.

 Air Freight

As cargo capacity on passenger flights (“Belly Carrier”) was not available in the second quarter of 2020, the air freight division specifically purchased charter capacity for its customers. With the gradual resumption of passenger connections since June, a slight normalization of conditions is noticeable. The high demand for crisis goods led to a short-term shift in the product mix and, together with active cost management, resulted in very appealing profitability.

With 315,000 tons, the air freight volume in the second quarter was 22.0% below the previous year. Net revenue increased to CHF 1.4 billion, and EBIT rose to CHF 110 million.

Further progress was made in automating processes, particularly in the implementation of the in-house transport management system AirLOG.

 Land Transport

The months of April and May 2020 were marked by a significant decline in orders. Since June, a noticeable recovery in shipment numbers has been observed. In particular, demand for national transport capacities has practically improved to pre-crisis levels. In North America, demand for all product segments – with the exception of pharmaceuticals and e-commerce – remained significantly below the previous year.

Net revenue in the business unit fell to CHF 721 million in the second quarter, and EBIT decreased to CHF 9 million. Due to high market acceptance, the digital booking platform eTrucknow was introduced in additional Asian countries.

 Contract Logistics

In contract logistics, the significantly reduced demand in the second quarter of 2020 was mitigated by stringent cost management. Basic goods and e-commerce, which now account for around half of the contract logistics portfolio, saw significantly higher demand. Ensuring operations, even during the lockdown, recently led to market share gains. The net revenue of the segment fell to CHF 1.1 billion in the second quarter, and EBIT decreased to CHF 28 million. With tailored solutions, contract logistics will continue to expand its market position in the areas of pharmaceuticals and e-commerce fulfillment.

Extraordinary General Meeting

The Board of Directors of Kühne + Nagel International AG has decided to propose the distribution of a dividend of CHF 4.00 to shareholders at an extraordinary general meeting on September 2, 2020.

“The management and the Board of Directors have continuously assessed the developments and the economic situation during the pandemic and proactively addressed them. In light of the good results, the company’s strong resilience, stable cash flow, and available liquidity, we have decided to propose a reasonable participation for shareholders in the company’s success in 2019 with a dividend of CHF 4.00 per share,” says Dr. Jörg Wolle, Chairman of the Board of Directors. “Regardless of the gradually observable easing in the market, our company will closely monitor the impacts of the coronavirus crisis in the second half of the year.”

Photo: © Kühne + Nagel

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