The designated CEO Stefan Paul trimmed the truck freight division for profit.
(Photo: Bloomberg/Getty Images)
Zurich Kuehne+Nagel benefits from global logistics chaos. The leading freight capacity trader based in Schindellegi, Switzerland, more than doubled its profit from CHF 764 million to CHF 1.6 billion in the first half of the year. Free cash flow climbed 300 percent to 1.7 billion Swiss francs. These are funds that are available to Kuehne+Nagel for dividends or repayments, for example.
Detlef Trefzger, who is handing over the top post at Kuehne+Nagel to his fellow board member Stefan Paul on August 1, said: “The uncertainties and challenges in the global supply chains will continue in 2022.” The corona lockdowns in China keep costs high, especially in sea freight.
As the world’s largest agent for freight capacities, Kuehne+Nagel was able to pass these costs on to customers. “On the basis of our digital platforms and industrial solutions as well as the tireless commitment of our employees, we were able to implement efficient and complex logistics solutions for our customers,” explained Trefzger.
Sea freight is the largest and fastest growing business area. Sales there increased by 88 percent compared to the first half of 2021 to around 9.9 billion francs. Pre-tax profit (EBIT) even climbed 140 percent to CHF 1.2 billion.
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The logistics chaos in the ports of China and Europe led many customers to the company’s own digital platform Sea Explorer. Kuehne+Nagel customers can replan their supply chains there using real-time data. Demand is likely to remain high. An indicator developed by Kuehne+Nagel, which measures waiting times in ports around the world, indicates that the situation in sea freight will remain tense.
Margins in sea and air freight of up to 62 percent
Air freight is also booming. Net sales climbed 59 percent to 6.3 billion francs in the first half of the year. Pre-tax profit doubled to CHF 826 million. Kuehne+Nagel announced: “In the air freight division, the closure of Russian airspace and the lockdown in Shanghai led to the short-term rescheduling of many routes.”
The long-standing head of the truck freight division will take up the post of CEO in August.
(Photo: Kuehne + Nagel)
The company explained: “The operating expenses were correspondingly high in the first half of 2022” – and thus the margin of the logistics group. Kuehne + Nagel measures this as the ratio of EBIT to gross profit. This was 62 percent for sea freight and 51 percent for air freight.
The balance sheet of the truck freight division, which was considered a problem area at Kuehne+Nagel for years, is also positive. There, sales climbed by twelve percent compared to the same period last year, and pre-tax profit improved by 48 percent. The margin is just under 12 percent, so profitability lags far behind sea and air freight.
New CEO impresses with winning truck freight
The fact that the truck freight division makes a positive contribution to earnings is credited to the designated CEO Stefan Paul. The German manager switched from DHL to Kuehne+Nagel in 2013 and took over the truck freight and sales departments on the board.
His track record earned him the nomination as CEO of Kuehne+Nagel, which was announced at the end of 2021. As CEO, Paul has to prepare the group for an end to the logistics boom.
>> Read here: Logistics group Kuehne+Nagel will have a new boss in 2022
Jörg Wolle, Chairman of the Board of Directors of Kuehne+Nagel, expects high demand for the group’s logistics services in the second half of the year. But Vontobel analyst Michael Foeth assumes that the mix of weak economic growth and high inflation will also affect Kuehne+Nagel. “We expect continued weakness in freight volumes and a gradual reduction in freight rates, somewhat offsetting the strong positive momentum of recent quarters.”
The group is countering this with investments in technology and digitization – for example the digital sea freight logistics platform. The expansion of so-called contract logistics also helps Kuehne+Nagel. The division includes solutions for online trading. The logistics group has just laid the foundation for a distribution center for Adidas in Italy, with which the sporting goods group wants to distribute its goods in southern Europe. The logistic center business promises less fluctuating than sea and air freight. Further logistics deals with major customers could follow under Paul’s leadership.
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