World’s largest ocean freight forwarder continues to grow volume, but impact of liner alliances also take toll on margins.
Kuehne + Nagel said it’s on the hunt for acquisitions as one of the world’s largest freight forwarders looks to take market share in 2019. The outlook comes as the Swiss freight forwarder reported fiscal 2018 results that were short of analysts’ estimates. Despite growth in the Americas and Asia segments, higher costs dragged down K + N’s contract logistics business.
K + N reported full-year diluted earnings per share of CHF 6.42 Swiss francs ($6.36) per share, a 4.5 percent rise from last year. But that was below the mean earnings estimate of CHF 6.57. K + N shares were down nearly 5 percent in trading on the Swiss Stock Exchange in the wake of the results. The freight forwarder reported gross profit net of transportation expenses rising 10 percent for the year to CHF 7.7 billion with operating profit rising 5 percent to CHF 1.2 billion.
Chief Executive Officer Dr. Detlef Trefzger said the results stemmed from offering new digital platforms for customers, specialized services for shippers and targeted acquisitions. But the company saw weaker momentum in trade toward the end of last year.
“Even though the growth momentum of the global economy slowed down at the end of 2018, we confirm our goals for the year ahead. In 2019, we aim at growing twice as fast as the market and improving our results further, complemented with selected acquisitions to our portfolio,” Trefzger said.
In ocean freight, K + N was able to grow its market share, handling 4.7 million standard containers last year, a 7.7 percent gain. It said the gain came from offering a new online supply chain management service, the strong growth of U.S. imports and better trade between Europe and Asia. But a tighter supply of ships in various lanes last year “impacted margins,” particularly in the European export market. Gross profit of CHF 1.4 billion was up 4.6 percent, with earnings before interest and taxes up nominally to CHF 418 million.
The airfreight segment saw gross profit growth of 16 percent to CHF 1.2 billion with earnings before interest and taxes up 13 percent. K + N’s volume grew 11 percent to 1.7 million tons, higher than the overall market thanks to demand from pharmaceutical, healthcare and aviation industry demand. The acquisition of Quick International Courier also helped results.
K +N’s surface transportation segment saw the best margin improvement with earnings before interest and taxes rising 55 percent to CHF 76 million against a 14 percent rise in gross profit to CHF 1.1 billion. The company said the growth in European less-than-container and less-than-truckload shipments boosted results, as well as intermodal shipments and transport management for major customers in North America. K + N said it wants to expand its “digital competence” in surface transportation by adding more automated shipments to further raise efficiency.
In the contract logistics segment, earnings before interest and taxes fell 14 percent to CHF 138 million as the company exited some business and invested in a new global warehouse management system. K + N bought two companies that serve China’s automotive logistics industry and expanded its e-commerce offerings in Indonesia.
Xeneta sees mega-ships will hit Asia-Europe freight rates
Tracking service says bigger ships pose risk to rate gains from last year. (MarineLink)
Brexit prompting workarounds for cargo
U.K. shippers looking to avoid main ports due to congestion potential. (American Journal of Transportation)
Dutch customers seizes North Korea-bound vodka
Cargo aboard Cosco Shipping was suspected of being re-routed to North Korea, despite sanctions. (KXXV)
APL service seeks faster way to inland U.S.
CMA CGM subsidiary offering new expedited service in light of U.S. West Coast port jams. (Lloyd’s List)
U.S.-China tariff tension taking toll, survey said
President Donald Trump’s decision to halt tariff hikes originally scheduled for March 1 on $200 billion in Chinese goods offered businesses a respite from the nearly year-long trade war. Still, an overwhelming number of companies straddling the world’s two largest economies have a gloomy outlook on ties between the U.S. and China, reports FreightWaves Jim Wilson. A survey from the American Chamber of Commerce in the People’s Republic of China said 89 percent of its members have a pessimistic view of the bilateral trade relationship due to the trade tensions.
As far as the outlook, the Chamber said 37 percent of its members believe relations between the U.S. and China will deteriorate, but an equal percent thought relations would stay the same and the remaining 26 percent believe there is potential for improvement. “The freedom to import and export goods benefits both American and Chinese citizens in terms of more choices, value, jobs and economic wealth… Imposing overarching tariffs runs the risk of overshooting and causing a negative impact for everyone involved,” one respondent said.
