K+N eyes more cost-cutting after first-half profit and market share declines

Kuehne + Nagel (K+N) vowed to continue to cut costs after reporting weak second quarter and first half 2024 results that failed to impress investors.

Group-wide revenues declined 9% year on year, to finish the first half at SFr11.6bn ($13bn), while EBIT was down 32%, to SFr778m, and net profit down 33%, to SFr576m.

The company said the “result was impacted by negative exchange rate effects of 2% in the first half of 2024 and non-recurring restructuring costs of SFr17m in the second quarter”. CEO Stefan Paul argued that the remaining two quarters would look better thanks to corporate restructuring and expected higher revenues.

“In the first half of 2024, we continued to focus consistently on the initiatives of our strategic Roadmap 2026,” he said.

“The recovery in demand for air freight had a positive impact, while the renewed disruptions in the Red Sea created additional complexity in supply chains worldwide.

“We are well positioned for anticipated higher demand in the second half of the year, and we expect to realise further efficiency gains,” he added.

However, it appears to have lost market share, especially in its core ocean fright division, which accounts for around half of the group EBIT.

It noted it had shipped 2.1m teu in H1, essentially flat year on year, while Container Trade Statistics data put global volume growth for the first five months of the year at 7.5%, which Loadstar Premium described as “dispiriting”, although it added that financial results were broadly bang in line with investor expectations.

Ocean freight revenues for the six months declined 17% year on year, to SFr4.1bn, while EBIT dropped 38%, to SFr397m. Its key metric of gross profit per teu in Q2 declined 16% quarter on quarter, to SFr469 per teu.

Air freight had a better period, with first-half revenues declining just 4%, to SFr3.4bn, and divisional EBIT down 28%, to SFr210m.

However, volumes were up 5% in the first half, to over 1m tonnes of air freight in the first six months, representing a 10.8% decline in gross profit per 100kg.

“Volume growth developed in line with the addressable market, and focused on profitable segments such as healthcare and semiconductors. Demand for combined sea-air logistics services recorded strong growth in the first half, as some customers sought to shorten transit times due to the situation in the Red Sea,” said K+N.

The smaller road logistics unit saw revenues decline 6%, to SFr1.8bn, while EBIT was down 29% year on year, to SFr66m.

“With around 12m orders processed, the volume was on a par with the same period of the previous year,” it said, adding that its expansion plans in North America – K+N’s road freight earnings have traditionally been very Europe-heavy – was under way.

“The acquisition of Canadian customs broker Farrow was successfully completed in February 2024. The integration and expansion of the business on the southern border of the US is proceeding according to plan,” it said.

Finally, the contract logistics unit saw turnover decline 6%, to SFr2.3bn, and EBIT down 5%, to SFr105m, a performance management described as doing “very well”.

“In the second quarter, Kuehne+Nagel expanded distribution centres for customers such as BMW and Wacker Neuson in Germany, in addition to Lego in Belgium.

“Kuehne+Nagel opened new locations in the US and United Arab Emirates to meet the growing demand for e-commerce and healthcare services,” it said.