Kuehne + Nagel Group

CHF million

Jan-Sep 2011

Jan-Sep 2010

Turnover

14,598

15,178

Gross profit

4,380

4,453

Operational result (EBITDA)

728

746

EBT

579

572

Net earnings

454

449

Seafreight
During the first nine months of 2011, Kuehne + Nagel increased its seafreight volume by 11.4 per cent. Thus, the Group clearly outperformed the global container market growth, estimated to be around 5 per cent after volume growth dropped further during the third quarter. Leveraging its value-adding product portfolio, Kuehne + Nagel achieved highest growth in Asia outbound trades, especially to the Middle East and South America. Following the expansion of its specialised network for perishables in reefer containers, volume in this Kuehne + Nagel segment grew significantly as well. Despite slightly lower margins due to very low freight rates in the third quarter of 2011, EBITDA-to-gross profit margin stabilised at 35,3 per cent on a very high level (previous year: 35.8 per cent) in the first nine months of 2011. The operational result remained at the previous year’s level.
 
Airfreight
In airfreight, Kuehne + Nagel increased its tonnage by 14.5 per cent in the first nine months, although growth in the international airfreight market considerably slowed down in the last months. Compared to the same period in 2010, market freight volumes stagnated. Kuehne + Nagel performed particularly well in Europe, South America and North America, whereas demand in Asia declined. Investments in the development of solutions, tailored to specific industries, such as pharmaceutical and high-tech, were compensated by improved productivity. As a result, EBITDA-to-gross profit margin increased from 30.5 per cent in 2010 to 32.3 per cent in 2011. EBITDA was improved by 13.1 per cent.

Road & Rail Logistics
In the first three quarters of the year, Kuehne + Nagel’s European overland activities recorded a growth in net turnover of 4.9 per cent (currency adjusted: 19.4 per cent.) The company continued to invest into the expansion of its European groupage network and at the same time focused on the development of road logistics services in markets outside Europe. Through the acquisition of Grupo Eichenberg, Brazil, Kuehne + Nagel has gained access to the South American overland market. Currency adjusted, the operational result was slightly above the previous year’s level, EBITDA margin decreased from 1.7 to 1.4 per cent.

Contract Logistics
In contract logistics, net invoiced turnover declined by 5.7 per cent (currency adjusted: increased by 7.9 per cent). Focal point of the business unit’s strategy has been the expansion of services for multinational customers and the consolidation at strategic logistics hubs. Furthermore, the integration of contract logistics services into end-to-end solutions has been an integral part of the strategic approach. The challenging market conditions in France led to margin pressure, restructuring measures and a negative impact on results. Compared with the previous year’s period, EBITDA in contract logistics was reduced by 11.5 per cent; currency adjusted it remained stable. EBITDA margin decreased from 4.1 to 3.7 per cent.

Reinhard Lange, CEO of Kuehne + Nagel International AG, said: “Considering the softening market growth, we are satisfied with our results in the first nine months of 2011. Volatility is high and the fourth quarter is expected to remain demanding. We will continue to consequently implement our growth strategy and further build on our commitment to deliver innovative, value-adding services to our customers around the world.”

In the road logistics sector, Grupo Eichenberg is one of the leading providers, both in the domestic market and in Mercosur trades; the company operates daily services to and from Argentina, Chile and Uruguay. Besides this core competence, Grupo Eichenberg is also very successful in domestic airfreight forwarding, another important segment of the Brazilian logistics market.

Karl Gernandt, Chairman of the Kuehne + Nagel International AG said: “This acquisition is in line with our global growth strategy and ideally fits our objective to significantly expand our activities in particular in Brazil, one of the world’s key growth markets. Grupo Eichenberg complements the service offering and customer base of our strongly performing national company. Together, we are able to increase our value proposition by providing global integrated door-to-door solutions in Brazil.” 

“In a dynamically growing market, companies from industry and trade are looking for global logistics solutions, allowing them to create value and increase competitive advantage,” said Gerson Eichenberg, Chairman of Grupo Eichenberg. “Jointly, we can optimally meet these requirements, and thus further strengthen Kuehne + Nagel’s market position,” the two gentlemen announced.

Kuehne + Nagel Group

CHF million

First half 2011

First half 2010

Turnover

9,786

9,849

Gross profit

2,954

2,961

Operational result (EBITDA)

502

475

EBT

398

358

Net earnings

312

281

"The Kuehne + Nagel Group performed strongly in the first six months of 2011, despite a slowdown in market growth in the course of the second quarter and results negatively impacted by the strong Swiss Franc,” said Reinhard Lange, CEO of Kuehne + Nagel International AG.

Seafreight
With seafreight volumes increasing by 12 per cent in the first half of the year, Kuehne + Nagel succeeded in doubling the market growth rate of about 6 per cent. Highest growth was achieved in exports from Europe to North America and Asia as well as from Asia to Latin America and the Middle East.  EBITDA margin in relation to gross profit improved from 34.5 to 35.2 per cent, reaching a new record high as a result of cost efficiency and increased volumes. The operational result (EBITDA) was up by 7.8 per cent despite considerable investments in growth initiatives.

Airfreight
In airfreight, Kuehne + Nagel increased tonnage by 18 per cent, in spite of sharply declining volumes in the global airfreight market during the second quarter, resulting in a market growth of just about 2 per cent in the first half of 2011. Kuehne + Nagel’s expansion of activities in the field of perishable logistics following the acquisitions in South America as well as increased demand in the trade lanes from Europe to North America and Asia contributed to the strong performance. Also, the volume increased in trades from North America to Europe and to South America, whereas airfreight business from Asia to Europe did not reach expectations. EBITDA-to-gross profit margin improved from 29.2 per cent to 32.6 per cent. The operational result was 22.9 per cent higher than in the same period last year. 

Road & Rail Logistics
The extension of activities in the groupage, full load and part load businesses led currency adjusted to a 21.4 per cent rise in net invoiced turnover. RH Freight, specialised in European groupage services and as part of the Kuehne + Nagel Group consolidated as of April 2011, contributed about 10 per cent to the increase of shipments. While the results in Western Europe clearly improved, the business unit’s 6.9 per cent decrease of EBITDA was due to investments in the organic development of overland services in countries such as Poland and China. EBITDA margin was at 1.8 per cent (previous year: 2.1 per cent). 

Contract Logistics
In contract logistics net invoiced turnover rose currency adjusted by 5.4 per cent. New businesses and the consolidation of warehousing activities at major logistics centres supported the enhancement of capacity utilisation to 94 per cent. Thanks to productivity improvements, the EBITDA margin remained on the previous year’s level. The operational results increased currency adjusted by 6.5 per cent.

Outlook
“Considering the debt crisis and currency situation in Europe as well as the volatile world economy, it is not possible to reliably forecast how the global  markets will develop in the second half of the year,” said Karl Gernandt, Chairman of the Board of Directors of Kuehne + Nagel International AG. “Market analysts anticipate slower growth in the logistics industry. Nevertheless, the Kuehne + Nagel Group is well positioned to tackle future challenges. While maintaining an effective cost management, the Group will continue to pursue its global strategy, focussing on investments in growth markets and -segments. In this context, the acquisition in Brazil announced today is a significant step.”

In addition to the publication of the half-year results 2011, please note Kuehne + Nagel’s press release “Expansion in Brazil“.  

Karl Gernandt, Executive Vice Chairman of the Board of Directors, outlined the strategic cornerstones of the growth initiative, which had been developed under his leadership and that will run into 2014. Its primary goal – sustained increase of the value of the company – will be generated through increased customer focus, integrated logistics solutions, efficiency and IT leadership.

All proposals approved
The shareholders approved the annual report, the financial statements and the consolidated financial statements for 2010 and followed the Board of Directors’ recommendation to increase the dividend to CHF 2.75 per share compared to the previous year (CHF 2.30). In addition, the shareholders approved the distribution of capital contribution reserves, amounting to CHF 1.50 per share. Payout is scheduled for May 17, 2011.

The Annual General Meeting granted discharge to the Board of Directors and the Management Board for the 2010 business year.

Elections to the Board of Directors
Juergen Fitschen, Karl Gernandt, Hans-Joerg Hager, Klaus-Michael Kuehne, Hans Lerch, Dr. Wolfgang Peiner, Dr. Thomas Staehelin, Dr. Joerg Wolle and Bernd Wrede were re-elected to the Board of Directors for one-year terms.

Dr. Renato Fassbind, a Swiss citizen, was newly elected to the Board of Directors for a one-year term. He brings with him an extensive knowledge of financial management. From 2004 until October 2010, Dr. Fassbind held the position of Chief Financial Officer at Credit Suisse Group AG and Credit Suisse AG. In this function, he had been a member of the Executive Boards of Credit Suisse Group AG and Credit Suisse AG since 2004.

Statutory Auditor
KPMG AG, Zurich, was confirmed as the statutory and Group auditor for the business year 2011.

The next Annual General Meeting will be held on May 8, 2012.

Kuehne + Nagel Group

CHF million

1st Quarter 2011

1st Quarter 2010

Turnover

4,820

4,604

Gross profit

1,458

1,442

Operational result (EBITDA)

249

228

EBT

196

167

Net earnings

154

131

"The good results in the first quarter underline the value of our global logistics capabilities, flexibility and operational efficiency in a market influenced by different economic conditions, political unrest and natural disasters," said Reinhard Lange, CEO of Kuehne + Nagel International AG. "As planned we expanded our activities in all business units while at the same time increasing productivity.”

Seafreight
In seafreight, Kuehne + Nagel increased container volume by 14 per cent while - according to first estimates - the global container market grew between 7 and 8 per cent. Kuehne + Nagel achieved highest growth in the trade lanes to and from Latin America as well as to and from the Middle East. As outlined in its strategy, the Group increased volumes in transpacific and intra-Asian trade lanes. In the first three months of 2011, EBITDA-to-gross profit margin rose from 34.0 per cent in the previous year to 35.9 per cent due to high operational efficiency. EBITDA improved by 15.5 per cent to CHF 112 million.

Airfreight
With a 21 per cent increase in volume, Kuehne + Nagel’s airfreight business again exceeded expectations and outperformed the market, estimated to have grown between 6 and 7 per cent. In all regions, Kuehne + Nagel benefited from its investment in sales and its industry-specific product offering. In particular, Kuehne + Nagel’s expansion of the specialised network for perishables yielded results. Following the acquisitions in South America, volumes significantly increased in this segment. Double-digit growth was also achieved in worldwide exports for the automotive industry. Due to the above-market average volume growth and increased productivity EBITDA-to gross profit margin improved from 28.7 to 32.3 per cent. The operational result rose by 28.6 per cent to CHF 63 million.

Road & Rail Logistics
Kuehne + Nagel gained market share in the European overland business as well. Net invoiced turnover increased by 15.1 per cent (currency adjusted) exceeding market growth of 6 per cent. EBITDA remained stable on last year’s level, despite continuous price pressure, fierce competition and investments into the expansion of the European groupage network and its full and part load activities. EBITDA margin decreased from 2.2 to 1.9 per cent. The results of the recently acquired RH Freight, United Kingdom, a company specialised in European groupage activities, will be consolidated as of April 2011.

Contract Logistics
In the contract logistics business unit net invoiced turnover rose by 7.9 per cent (currency adjusted). New business wins contributed to a reduction of idle space from 12 to 7 per cent compared with the previous year's first quarter. However, start-up costs for various new projects negatively impacted EBITDA, which was 8.9 per cent below the preceding year. EBITDA margin declined from 4.2 to 3.9 per cent. Measures have been implemented to improve productivity.

Reinhard Lange: "It is difficult to forecast the world economic development in the months to come. We are confident that our resilient integrated business model will support the continuation of our strong performance.”

The Board of Directors of Kuehne + Nagel International AG will propose to the Annual General Meeting of May 10, 2011, to repay capital contribution reserves according to article 20 DBG to its shareholders, amounting to CHF 1.50 per share. Upon approval the payment is planned for May 17, 2011.

In addition to the proposed dividend for the business year 2010 of CHF 2.75 per share, Kuehne + Nagel shareholders will receive CHF 1.50 per share from repayment capital contribution reserves, resulting in a total payment of CHF 4.25 per share.

“New Zealand is of key importance for perishables exports to Australia and the South Pacific Islands,” said Peter Ulber, Executive Vice President Sea & Air Logistics, Kuehne + Nagel International AG. “We are very pleased to join forces with Cooltainer to further strengthen our regional market position through this strategically focused product offering. Cool-tainer’s activities ideally complement our operations in Australia and New Zealand and will give us the opportunity to generate synergies to the benefit of our customers.”

“We are excited about the opportunities that being part of the worldwide Kuehne + Nagel Group will offer the Cooltainer customers and staff,” said Stuart Grant, CEO and shareholder of Cooltainer. “Demand for New Zealand and Australian food products will continue to be strong and the performance of the cool chain service providers is crucial in ensuring exporters achieve maximum return.”

The transaction is subject to the approval of relevant anti-trust authorities.

Kuehne + Nagel Group

CHF million

2009

2010

Turnover

17,406

20,261

Gross profit

5,863

5,958

Operational result (EBITDA)

885

1,004

EBIT

594

765

Net earnings

467

601

Kuehne + Nagel International AG

CHF

Dividend per share

2.30

2.75*

*Proposal to the Annual General Meeting.

Consolidated Financial Statements 2010

Karl Gernandt, Executive Vice Chairman of the Board of Directors, said: “The company’s strategic parameters are set to achieve growth above market average while at the same time increasing efficiency and productivity. This approach proved successful in 2010. Due to our industry-specific product portfolio we gained market share in all our business units and strengthened our global competitive position. Efficiency increase, documented by the improved ratio between gross profit and EBIT, indicates the internal strengths of the Group and provides a resilient basis for further development in the years to come.”

Economic environment
In the first half of 2010, there was still no certainty of a sustained global economic recovery due to the lasting recession in the U.S., the credit risks in some southern European countries and the volatility in international finance markets. Emerging countries, primarily China, significantly contributed to the growth of global trade, which closely correlates with the international logistics business. While the economy in Asia picked up significantly, a diverging gross domestic product development was seen in the other regions. In this environment, the Kuehne + Nagel Group concentrated on its strengths: customer orientation, detailed industry know-how, operational excellence and internal efficiency.

Development of the business units

Seafreight
In 2010, Kuehne + Nagel’s seafreight business recovered its growth momentum of the pre-crisis years. With an increase in container volume of almost 16 per cent, the company outperformed the market (between 10 and 12 per cent), and gained market share in almost all trade lanes. Kuehne + Nagel fully participated in the Asia export and import boom and recorded highest growth in the trades between Asia and Latin America. Important factors were its IT based products, efficient route and transport management, as well as strong demand for the LCL (less-than-container-load) activities which contributed significantly to the results in this business unit. Increased productivity and strict cost discipline resulted in a 17.3 per cent rise of the operational result. EBITDA to gross profit margin improved to 36.0 per cent (previous year: 31.3 per cent).

Airfreight
The recovery of world economy, market-oriented airfreight products and proactive capacity management resulted in a significant upturn for Kuehne + Nagels airfreight business. Cargo increased on all routes, particularly in the traffic from and to the Asia-Pacific region high growth was recorded. The Group achieved new record levels of cargo volumes handled (almost 1 million tons – a 25 per cent increase compared to the previous year) and productivity. The development of solutions tailored to specific industries, e.g. pharmaceuticals, high-tech and perishables, proved successful. The operational result increased by 47.2 per cent, EBITDA to gross profit margin improved to 31.2 per cent (previous year: 25.0 per cent).

Road & Rail Logistics
In the European overland transport market, the strong economic upswing led to a marked increase in freight volumes. At the same time, service providers had to cope with fierce competition and increased price pressure. Kuehne + Nagel faced up well to the situation. The expansion of activites in the groupage, less-than-truckload (LTL) and full-truckload (FTL) businesses led to a 16 per cent rise in net invoiced turnover (currency adjusted). However, investments in additional locations in France adversely affected the operational result of this business unit, which was 17.3 per cent lower than in the previous year. EBITDA margin decreased from 2.1 per cent (2009) to 1.5 per cent, presenting a challenge for the time to come.

Contract Logistics
After the global slump in demand in the preceding year, the contract logistics market recovered slightly in 2010 with a 3 per cent growth, although pressure on margins remained. Kuehne + Nagel gained a number of new contracts worldwide, resulting in a 5 per cent (currency adjusted) increase in net invoiced turnover. Idle space, caused by the 2009 crisis, was reduced significantly. However, negative exchange-rate effects and still insufficient result development in North America impacted the operational result. EBITDA margin remained almost stable at 4.4 per cent (previous year: 4.6 per cent).

Turnover
In 2010, turnover increased by 16.4 per cent to CHF 20,261 million, despite a negative currency effect of CHF 928 million, which was much higher than in previous years.

All Kuehne + Nagel regions contributed to the turnover increase. Asia-Pacific recorded highest turnover growth of 32.3 per cent, followed by the Americas with a 25.5 per cent increase and Middle East, Central Asia and Africa with 15.2 per cent. In Europe, turnover improved by 12.1 per cent.

Gross profit
Gross profit rose by 1.6 per cent to CHF 5,958 million despite a negative currency effect of CHF 338 million.

The Asia-Pacific region recorded a gross profit increase of 22.2 per cent, and Middle East, Central Asia and Africa of 12.3 per cent. In the Americas gross profit increased by 10.8 per cent. Due to negative currency effects (7.2 per cent), in Europe gross profit decreased by 2.3 per cent.

Operational result (EBITDA)
Earnings before interest, tax, depreciation and amortisation of goodwill and other intangible assets (EBITDA) increased by CHF 119 million (13.4 per cent) compared to the previous year. This includes negative effects of CHF 52 million from currency exchange rates.

With CHF 593 million (59.1 per cent) the biggest contribution to the operational result came from Europe, followed by the Asia-Pacific region with CHF 221 million (22.0 per cent), the Americas with CHF 152 million (15.1 per cent) and Middle East, Central Asia and Africa with CHF 38 million (3.8 per cent).

Dividend
In view of the very good development of business and results as well as the high cash flow of the Kuehne + Nagel Group, the Board of Directors will propose to the Annual General Meeting of May 10, 2011, to distribute a dividend increased by 19.6 per cent to CHF 2.75 per share (previous year: CHF 2.30).

Outlook 2011
The economic outlook for the current business year is favourable, although potential for a setback is still present, including such factors as currency risks and rising commodity prices.

“The 2010 results have established the direction for the further implementation of our growth strategy,” said Reinhard Lange, CEO of Kuehne + Nagel International AG. “In 2011 again, our goal is to achieve profitable growth above market average in sea- and airfreight. In contract logistics we also target growth above market average while keeping margins stable. A combination of organic growth and strategic acquisitions will result in further progress in European overland transportation. In addition, strategy implementation will focus on the expansion of regional operations, in particular in China, India, Brazil and Colombia, and the extension of tailor-made solutions for selected industries. The Kuehne + Nagel Group is customer-orientated, powerful and innovative. Therefore, we are very confident that we will accomplish our goals for 2011.”

In addition to the publication of the Financial Statements 2010 Kuehne + Nagel announced today an acquisition in the UK, which is a further important step in the scope of its growth strategy.

Please note our press release:
“Kuehne + Nagel to acquire RH Freight”

Kuehne + Nagel Group

Jan-Sep 2010

 Jan-Sep 2009

CHF million

Turnover

15,178

12,800

Gross profit

4,453

4,388

Operational result (EBITDA)

746

694

EBT

572

499

Net earnings

449

387

Seafreight
During the first nine months of 2010, Kuehne + Nagel maintained high-level container volume with a 17 per cent increase. Growth in the global seafreight market, however, softened in the third quarter. Kuehne + Nagel’s increased sales and marketing activities contributed significantly to further market share gains. In the first nine months, the EBITDA-to-gross profit margin grew from 32.5 per cent in the previous year to 35.8 per cent in 2010, mainly due to additional productivity increases.

Airfreight
Kuehne + Nagel increased airfreight tonnage by 29 per cent in the first nine months, although growth in the international airfreight market had slowed in the middle of the year. Kuehne + Nagel was able to considerably increase volumes and market share, especially in the trade lanes from and to Asia. At the same time, the company benefited from its service offerings tailored to specific industries, such as pharmaceuticals, high-tech and perishables. Increased productivity and efficient cost management contributed to an improved EBITDA-to-gross profit margin by 30.5 per cent (previous year: 29.3 per cent).

Road & Rail Logistics
In the first three quarters of the year, Kuehne + Nagel’s European overland activities registered a growth in net turnover of 9.5 per cent. Despite high investments into the expansion of the European network and the opening of new locations, the operational result and EBITDA margin to turnover remained stable.

Contract Logistics
The recovering domestic economies of the leading industrial nations led to a stabilisation of the contract logistics market; Kuehne + Nagel’s net turnover remained at the previous year’s level. EBITDA decreased in the first nine months by 13.2 per cent partly due to currency adjustments (6.6 per cent) and start-up costs for new businesses as well as restructuring activities in the United States and Canada. Contract logistics activities in the emerging economies of Asia and Eastern Europe improved. Investments in Asia have started to pay off and led to positive results for the first time.

Reinhard Lange, CEO of Kuehne + Nagel International AG, said: “Due to the very good results of the past nine months – and particularly in the third quarter of 2010 – we are confident we will achieve a strongly improved result for the full-year. We will concentrate our efforts on the consistent implementation of our growth strategy, thus further strengthening Kuehne + Nagel’s position in the global logistics market.”