A 23% decline in operating profit during the second quarter represented sequential improvement for Swiss logistics giant Kuehne+Nagel, which credited increased airfreight demand with offsetting other sector declines and said it expects stronger profits in the back half of the year.
Meanwhile, Danish rival DSV on Wednesday reported a 12.4% reduction in operating income from the prior year compared to a 21% decline in the first quarter as the company reaped rewards from volume growth and market share gains across its three business lines.
Kuehne+Nagel’s earnings before interest and taxes dropped to 402 million Swiss francs ($451 million) from a year earlier. That was better than the first quarter when operating profit fell 39%.
The world’s largest logistics provider generated $6.8 billion in revenue, 9% less than during the second quarter of 2023, but revenue trended upward from the negative 18% growth in the first quarter.
The company said the impact of Red Sea diversions for ocean shipping was “minimal” while acknowledging it indirectly benefited the airfreight forwarding business.
Healthier results were driven by a meaningful uplift in seasonal volumes compared to the first quarter, as well as the company’s continued focus on yield management and reducing sea and air operating costs.
CEO Stephen Paul said the company anticipates stronger profits in the next six months due to a modest rise in ocean container demand combined with stronger yields, and a strong peak season for airfreight.
K+N air cargo revenue increased 9% during the quarter to $2 billion. Operating profit of $130 million was 17% lower year over year but improved from the 39% first-quarter decline. Volume and yield growth mirrored the overall market’s double-digit recovery from last year’s post-pandemic swoon, with the company focusing on profitable segments such as health care and semiconductors. The air logistics division moved more than 1.1 million tons in the first six months of 2024, a 5% gain from the previous year. Volumes were up 7% in the second quarter.
Subsidiary Apex Logistics was primarily responsible for the upturn in air cargo volume from the first quarter to the second as the Hong Kong-based air forwarder leveraged the wave of e-commerce orders out of China to other parts of the world. Apex block space capacity with airlines is already 70% sold out for the third and fourth quarters, which gives the company pricing power over the remaining capacity as businesses rush to move goods for holiday shopping seasons, said Paul.
“We are well positioned to capitalize on any further market recovery and are cautiously optimistic that the second half will include a noticeable airfreight peak season,” Paul said on an analysts’ call.
Management said demand for hybrid sea-air services between Asia and Europe was strong in the first half as customers sought to shorten transit times at lower cost than full airfreight, due to the Red Sea situation.
Ocean shipping revenues were down 3%, with the segment posting a 32% drop in operating profit as ocean rates sharply escalated.
Contract logistics was a positive story, with revenue only off 1% from a year ago and operating profit up 4%. In the second quarter, K+N expanded distribution centers for customers such as BMW and Wacker Neuson in Germany, and Lego in Belgium. It is setting up a major Adidas distribution facility in Italy to support e-commerce distribution in Southern Europe. The company also opened new locations in the United States and the United Arab Emirates to meet the growing demand for e-commerce and health care services.
Early this year, K+N acquired Farrow Group, a large, Canada-based customs broker, to better help clients navigate customs clearance and complex international trade regulations. It also signed an agreement to acquire City Zone Express, a Malaysia-based cross-border logistics company with 260 vehicles and more than 860,000 square feet of warehouse space that also operates in Singapore, Vietnam, Thailand and China. The transaction is expected to close this quarter.
K+N said it continues to improve operating efficiency, but the new strategy of attracting small- and medium-size enterprises means cost reductions aren’t realized as fast because those types of companies require more service support.
DSV
DSV, the third-largest global logistics provider, said earnings before interest and taxes fell more than 12% y/y to 4.1 billion Danish kroner ($597 million) before special items but that results were up from the first quarter because of higher volumes and better air and ocean margins. Revenue jumped 9% to $6 billion compared to a 5% decline in the prior quarter.
The company said Red Sea shipping delays haven’t impacted financial results so far but could have a slightly positive impact in the second half of the year.
The road transport segment delivered a 4.4% gain in operating profit with the aid of new control towers and an expansion of the less-than-truckload network in Europe. Supply chain solutions profit increased 6.8% as the group added new customers.
The company said a new efficiency drive is expected to deliver annual savings of $109 million, beginning in 2025.
DSV’s airfreight volumes grew by 10% in the second quarter and by 6% in the first half compared to the same period last year. The increase was mainly driven by improved export volume from the Asia-Pacific region, which was supported by growing textile and pharma customer volumes out of China and sea-to-air conversion in the Indian subcontinent. DSV estimates it grew faster than the overall air market during the three months ending June 30.
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