Kuehne + Nagel Group

CHF million

2007*

2008

2009

Turnover

20,975

21,599

17,406

Gross profit

6,014

6,253

5,863

Operational result (EBITDA)

1,019

1,020

885

Net earnings

536

585

467

Kuhne + Nagel International AG

CHF

Dividend per share

1.90

2.30

2.30**

* Restated for comparison purposes.

** Proposal to the Annual General Meeting.

Datasheets

Consolidated Financial Statements 2009

Karl Gernandt, Executive Vice Chairman of the Board of Directors, said “The good performance of the Kuehne + Nagel Group in the crisis year of 2009 was due to its operational strengths and the timely and consistent execution of its strict cost management and commitment to market share expansion. Thus, we were able to considerably strengthen our global market position. In addition, we took advantage of the crisis to further improve organisational and operational efficiencies in line with our profitability objectives.”

Economic environment
As a result of the economic crisis, in the first half-year 2009 the logistics industry suffered unprecedented declines in turnover and volumes, both in international and national freight forwarding and in contract logistics. This development led to a reduction of transport and logistics capacities. In the second half of the year, the economic contraction began to ease and logistics demand started to recover.

Market share gains and strong operational performance
Kuehne + Nagel’s anti-cyclical investments in sales and the accelerated development of industry-specific solutions led to market share gains in all business fields. The increase of EBITDA margin from 4.7 to 5.1 per cent was due to the early and consistent alignment of cost structures to the reduced transportation volumes, significantly increased productivity and continued process optimisation.

Extraordinary provision
As already communicated in October 2007, international freight forwarders including Kuehne + Nagel have been subject to investigations by various competition authorities. Based on the negotiations with the US Department of Justice (DoJ), Kuehne + Nagel expects that it will be possible to reach a settlement. The company has accordingly set aside a provision of CHF 35 million to cover all possible costs connected with the case. The provision affects the business field seafreight with CHF 10 million and airfreight with CHF 25 million respectively.

Seafreight
In 2009 the seafreight business was caught in the down-current of world recession. Worldwide volumes fell for the first time in global containerisa­tion history. Kuehne + Nagel, however, managed to win market share against the trend in many trade lanes and strengthened its position as global market leader. Important factors were its sophisticated, value-creating product portfolio, customer focussed IT solutions and increased group-wide sales activities. Kuehne + Nagel’s 4.6 per cent volume decline was remarkably moderate compared with the approx. 12 per cent overall market decline in seafreight volumes. In comparison with the previous year, EBITDA margin increased from 4.6 to 5.0 per cent, while the operational result decreased by 17.9 per cent.

Airfreight
The global airfreight market experienced an unprecedented slump in demand beginning in the fourth quarter 2008, a situation that did not stabilise until July 2009. For the whole year, the airfreight market declined by 12 per cent. To counteract the effects of the recession, Kuehne + Nagel also increased its sales activities in this business field and con­centrated on marketing its highly specialised services for niche segments. Due to these efforts, the 9.2 per cent volume decline was less than the overall market average. Thanks to continued market share gains, Kuehne + Nagel advanced to the third place in the ranking of global airfreight forwarders. At 5.6 per cent (previous year: 5.7 per cent) EBITDA margin remained stable, the operational result decreased by 28.1 per cent.

Road & Rail Logistics
Kuehne + Nagel was able to partly compensate for the substantial recession-induced fall in European road transport volumes through market share gains in fields of full truckload (FTL) and less than truckload (LTL), along with solid business performances in Germany and France. The French Alloin Group, acquired by Kuehne + Nagel in 2009 and whose integration progressed well during the year, made an important contribution to the result development and the better utilisation of the European overland network. Compared with the previous year, EBITDA margin increased from 0.8 to 2.1 per cent and the operational result improved by 126.1 per cent.

Growth impulses and synergies are expected from the consolidation of the Road & Rail Logistics and Contract Logistics business units under one management responsibility, a measure in effect since January 1, 2010.

Contract Logistics
Thanks to well-filled order books for industry-specific solutions and strict cost management Kuehne + Nagel achieved stable contract logistics results despite significant demand fluctuations, regional variations in warehouse capacity utilisation and increased price pressure. The Lead Logistics Solutions business segment proved a growth driver as, especially in a difficult economic environment, the efficient management of complex supply chains gained in importance. EBITDA margin remained at the previous year’s level of 4.6 per cent, while the operational result decreased by 6.9 per cent.

Real Estate
Kuehne + Nagel optimised its portfolio consisting of properties and leasehold premises. At the end of 2009, after commissioning new logistics properties in Germany, France, Canada and the United Arab Emirates, Kuehne + Nagel’s freehold portfolio comprised 123 logistics facilities and office buildings in 21 countries.

Insurance Broker
The Nacora Group, operating in the global insurance broker business, delivered satisfactory results in 2009 despite reduced business volumes. Its specialised cargo insurance expertise, customer orientation and service quality contributed to the favourable business development.

Turnover
The Kuehne + Nagel Group posted an invoiced turnover of CHF 17,406 million, a 19.4 per cent decrease compared with the previous year (includ­­ing negative currency effects of 5.5 per cent). Acquisitions had a positive effect of CHF 650 million.

The largest turnover decreases were recorded in the Americas (25.0 per cent), the Asia-Pacific region (22.6 per cent) and in Europe (18.5 per cent). Kuehne + Nagel’s organisations in the Middle East, Central Asia and Africa experienced the least impact, turnover decreased only by 6.1 per cent.

Gross profit
Gross profit – in the logistics and forwarding industry a better perfor­mance indicator than turnover – declined by just 6.2 per cent despite a negative currency effect of 7.5 per cent. Acquisitions had a positive effect of CHF 382 million.

In the Middle East, Central Asia and Africa gross profit decreased by 3.8 per cent, in Europe by 4.2 per cent and in Asia-Pacific by 11.5 per cent. In the Americas, gross profit decreased by 14.6 per cent.

Operational result (EBITDA)
Earnings before interest, tax, depreciation and amortisation of goodwill and other intangible assets (EBITDA) decreased by CHF 135 million (13.2 per cent) compared with the previous year. This includes negative effects of CHF 53 million from currency exchange rates and CHF 35 million related to the competition investigations. Acquisitions positively contributed CHF 40 million. Regionally, the biggest contribution came from Europe (CHF 579 million resp. 65.4 per cent), followed by the Asia-Pacific region (CHF 140 million resp. 15.8 per cent), the Americas (CHF 128 million resp. 14.5 per cent) and Middle East, Central Asia and Africa (CHF 38 million resp. 4.3 per cent).

Dividend
Despite the difficult global economic environment, the Kuehne + Nagel Group again has achieved a respectable result. Therefore, the Board of Directors will propose to the Annual General Meeting of May 18, 2010 the distribution of a dividend at the same level as 2008 of CHF 2.30 per share.

Outlook
The Kuehne + Nagel Group is emerging from the crisis year 2009 stronger than before and is well positioned for the expected economic upswing. As there is some uncertainty regarding a lasting global economic recovery, the Group will adhere to its strategy of market share expansion combined with strict cost management.

Chief Executive Officer Reinhard Lange said: “Our aim for 2010 is profit­able growth above market average in all business units. In addition, we will further enhance our product offering, develop new areas of value creation and increase our service quality to make Kuehne + Nagel an even more attractive logistics partner for companies in trade and industry.”

The Statement of Objections follows the investigations initiated by the European Commission at Kuehne + Nagel premises in October 2007 and subsequent questionnaires. A Statement of Objections is a procedural document whereby the European Commission communicates its preliminary view of a possible infringement of EU competition law. Addressees are allowed to present arguments in response.

Kuehne + Nagel will examine the Statement of Objections, will respond in due course and reserves its right to exhaust legal remedies.

Kuehne + Nagel Group

Jan-Sep 08

Jan-Sep 09

CHF million

Turnover

16,305

12,800

Gross profit

4,731

4,388

Operational result (EBITDA)

771

694

EBT

589

499

Net earnings

452

387

Seafreight
During the first half of the year, the international seafreight market was characterised by significant volume declines; the third quarter, however, saw the first signs of recovery. Leveraging its broad geographic reach and its value-adding product portfolio, Kuehne + Nagel was able to expand market shares in almost all trade lanes. Volumes handled by Kuehne + Nagel increased by 11 per cent from second to third quarter. Compared with the first nine months of last year, the decrease was 8.5 per cent while the overall market declined 16 per cent. As a result of the early adaption of cost structures, the operational result declined just 9.5 per cent compared to the previous year’s period. EBITDA margin was at 5.3 per cent (previous year: 4.4 per cent) despite margin pressure due to rate increases in the third quarter.

Airfreight
The international airfreight market saw a slight improvement in tonnages in the third quarter; therefore, overall cargo decrease slowed to 17 per cent in the first nine months of the year. Kuehne + Nagel increased its market share by intensifying sales activities and expanding its industry-specific solutions. Compared with the second quarter, Kuehne + Nagel increased tonnage by 7 per cent in the third quarter. For the nine months, Kuehne + Nagel’s tonnage decline of 15.5 per cent was less than the overall market decline. Operational result decreased by 16.6 per cent compared with the previous year’s period, while EBITDA margin, despite the third quarter’s rate increases, improved from 5.8 to 6.9 per cent.

Road & Rail Logistics
The European road transport market suffered substantial volume declines during the past nine months, especially in August, when business was impacted by the recession-related holiday prolongation by shippers. Never­theless Kuehne + Nagel was able to considerably improve results compared with the previous year, mainly due to the acquisition of the French Alloin Group, further standardisation of processes as well as improved network utilisation. EBITDA margin went up from 1.0 to 1.8 per cent and operational result increased by 50 per cent compared to the previous year’s period.

In order to strengthen the European market position and to optimise operatio­nal synergies, national and international overland traffic and contract logistics-related distribution activities will be consolidated under the responsibility of Management Board member Dirk Reich as of January 1, 2010. Management Board member Xavier Urbain, who has significantly contributed to the successful expansion of the Group’s overland business, will terminate his operational responsibility with Kuehne + Nagel International AG on December 31, 2009, and will continue to support the Company’s growth strategy on a consultancy basis.

Contract Logistics
While the contract logistics market continued to stabilise on first half-year level, for the first nine months the business unit’s operational result was still 17 per cent below the previous year. Strict cost control and new business implementation kept the third-quarter operational result nearly level with the second quarter. EBITDA margin decreased only slightly from 5.1 to 4.7 per cent.

Reinhard Lange, CEO of Kuehne + Nagel International AG, said: “We are reasonably satisfied with our results for the first nine months. Our dual strategy has proven effective – we have successfully counteracted substantial volume declines through strict cost management and increased sales activities. As a result, we have continuously expanded our market share and over-proportionately benefited from the third quarter’s business stimulation.“

As the only logistics service provider and – together with ABB – as the only Swiss-based company, Kuehne + Nagel was ranked among the best 25. Further to this, the study counts Kuehne + Nagel among those seven companies who “in particular have proven by their success that they are not one-time wonders [and] have been able to defend their status as Global Champions. […] The consistently strong performance of these seven companies is a testament to the strength of their corporate strategies and the resilience of their business model.”

Further information on the A.T. Kearney Global Championship 2009 can be found at:
http://www.atkearney.com/index.php/Publications/the-at-kearney-global-champions-2009.html
and
http://www.businessweek.com/globalbiz/content/sep2009/gb20090930_066258.htm

Kuehne + Nagel Group

First half 2008

First half 2009

CHF million

Turnover

10,700

8,498

Gross profit

3,139

2,929

Operational result (EBITDA)

530

466

EBT

403

337

Net earnings

308

258

Reinhard Lange, CEO of Kuehne + Nagel International AG, said: “Considering the extremely difficult global economic environment, the development of our business and results during the first half of 2009 was satisfactory. We expanded market share throughout the business units, while our value-creating services and global cost management contributed to margin improvements. We see this as a confirmation of the resiliency of our business model.”

Seafreight
During the first six months of the year, the global seafreight market was characterised by volume declines and fierce competition. Kuehne + Nagel, however, maintained the positive volume trend of the first quarter 2009 and gained further market share. From the first to the second quarter 2009, volumes grew by 10 per cent; although, compared to the first half of 2008, volumes declined by 11 per cent. Due to strict cost management and growing demand for complex logistics services, the operational result decreased just 3.3 per cent. EBITDA margin increased from 4.3 to 5.5 per cent.

Airfreight
With cargo volumes down more than 20 per cent, the global airfreight market continued to suffer in the first half of 2009. Kuehne + Nagel’s focus on strengthening its activities in certain niche markets and expanding customer relationships, led to a volume decline (19 per cent) that was below market. From the first to the second quarter 2009, Kuehne + Nagel increased volumes by 10 per cent. Compared with the previous year’s period, operational result decreased by 16.2 per cent. EBITDA margin, however, grew from 6.1 to 7.4 per cent.

Road & Rail Logistics
In the first half of 2009, the European road transport market suffered high declines in volume and, in addition, business was negatively affected by overcapacity. Although turnover was down 17.3 per cent, Kuehne + Nagel still performed better than the market average. Gross profit increased by 32.8 per cent due to acquisitions. Despite planned investment in standardised operational software, EBITDA margin remained stable at 1.6 per cent (previous year: 1.7 per cent).

Contract Logistics
In the second quarter of 2009, the global market for contract logistics stabilised at the first-quarter level. However, compared to the previous year’s period, there was a considerable volume drop, which Kuehne + Nagel compensated for with new business. Turnover was down 9.1 per cent (currency-adjusted: increased by 1.4 per cent). Due to insufficient capacity utilisation, mainly in North America and the United Kingdom, the operational result decreased by 23.7 per cent. EBITDA margin was at 4.6 per cent (previous year: 5.5 per cent).

Outlook
The Management Board of Kuehne + Nagel International AG does not anticipate a substantial short-term improvement in the global economy and markets. The company will therefore continue its focused dual strategy of disciplined cost management and market share expansion.

The shareholders approved the annual report, the financial statements and the consolidated financial statements for 2008 and followed the Board of Director’s recommendation to increase the dividend to CHF 2.30 (previous year: CHF 1.90). The dividend will be distributed as of May 18, 2009.

The Annual General Meeting granted discharge to the Board of Directors and the Management Board for the 2008 business year.

Hans-Joerg Hager, a German citizen, was elected to the Board of Directors for a one-year term. From 1996 to 2008 Hager has been a member of the management boards of Schenker Deutschland AG as well as of the worldwide Schenker AG and is a reputed expert in the logistics and transport industry.

Dr. Joachim Hausser, Klaus-Michael Kuehne, Dr. Georg Obermeier and Dr. Thomas Staehelin were re-elected to the Board of Directors for one-year terms.

Dr. Willy Kissling, who has been a member since 2003 and whose mandate expired with today’s Annual General Meeting, retired from the Board. Klaus-Michael Kuehne thanked Dr. Kissling for his valuable support and cooperation.

KPMG AG, Zurich, was confirmed as the statutory and Group auditor for the business year 2009.

Finally, the shareholders approved a number of amendments to the Articles of Association, among which a shortening of the election term for members of the Board of Directors from three to one year.

The next Annual General Meeting will be held on May 18, 2010.

Kuehne + Nagel Group

CHF million

1st Quarter 2008 

1st Quarter 2009

Turnover

5,310

4,291

Gross profit

1,554

1,444

Operational result (EBITDA)

262 

230

EBT

201 

168

Net earnings

154 

128

Seafreight
In the global seafreight market, the negative trend from the fourth quarter 2008 continued. While Kuehne + Nagel was affected by this development in the first two months, it was able to gain additional market share in March. The result was a 13 per cent volume drop in the first quarter of 2009, which was less than the market average. Due to strict cost management, the operational result was only 4.7 per cent (currency adjusted 2.6 per cent) below previous year. EBITDA margin increased from 4.4 to 5.3 per cent.

Airfreight
The airfreight business was particularly affected by the recession, with a global market decrease of more than 20 per cent compared with the previous year’s period. Strict cost control and intensified sales activities mitigated the impact on Kuehne + Nagel’s performance. Thus, despite an overall volume decline of 17.9 per cent compared to the previous year, substantial new business was generated. The operational result decreased by 10.3 per cent (currency adjusted 6.6 per cent), while the EBITDA margin grew from 6.1 to 7.9 per cent.

Road & Rail Logistics
In the first quarter of 2009, demand in European road transport weakened further. For example in Germany, a core groupage market, Kuehne + Nagel experienced a 20 per cent volume decline in the first two months of the year.  As of January 1, 2009, the French Alloin Group was fully consolidated in the Kuehne + Nagel Group’s financials, the 31.4 per cent increase in gross profit is mainly due to this acquisition. Improved network capacity utilisation and substantial cost reduction could not compensate for the significant fall in volumes. The operational result was 45.5 per cent (currency adjusted 20.5 per cent) lower than in the previous year’s period. Margin was at 1.0 per cent compared with 1.5 per cent in the first quarter of 2008.

Contract Logistics
The global contract logistics market continued to decline and was impacted by strong margin pressure in the first quarter. Kuehne + Nagel compensated for falling customer volumes with new business, and counteracted high fixed costs and insufficient warehouse utilisation through stringent cost management and workforce reductions. Nevertheless, the operational result decreased by 21.3 per cent (currency adjusted 10.2 per cent), the EBITDA margin declined from 5.2 per cent to 4.5 per cent.

“The solid performance in the first quarter confirms the efficiency of the measures we have taken at an early stage and implemented on a worldwide scale to adapt our enterprise to today’s economic environment,” said Reinhard Lange, CEO of Kuehne + Nagel International AG. “Since it remains impossible to predict by when the global economy will recover, we will adhere to our dual strategy of rigorous cost control with a commitment to market share expansion.”

Datasheets

“The acquisition of J. Martens significantly strengthens our capabilities and position not only in Norway but also in the international oil and gas logistics market,” comments Peter Ulber, Executive Vice President Sea & Air Logistics of Kuehne + Nagel International AG. ”It ideally fits our strategy to globally expand those services for our customers, which require a high level of industry-specific know how and experience.”

“I am very pleased with the opportunities opening up to both J. Martens and our customers through joining forces with the globally operating Kuehne + Nagel Group,” says Didrik Trumpy Martens, CEO of J. Martens, who will join the corporate Kuehne + Nagel Oil & Gas management in future. “Our strong market position in Norway as well as our innovative industry solutions will support Kuehne + Nagel’s ambitious expansion plans.”

The transaction is subject to the approval of relevant authorities.

Kuehne + Nagel Group

CHF million

2006*

2007*

2008

Turnover

18,194

20,975

21,599

Gross profit

5,253

6,014

6,253

Operational result (EBITDA)

857

1,019

1,020

Net earnings

459

536

585

Kuhne + Nagel International AG

CHF

Dividend per share

1.50

1.90

2.30**

* Restated for comparison purposes

** Proposal to the Annual General Meeting

Reinhard Lange, Chief Executive Officer of Kuehne + Nagel International AG, said: “The economic slowdown, which accelerated in terms of scope and pace in the last quarter, severely affected the logistics industry. Thanks to the stable development of our business in the first nine months and the early adaptation of rigorous cost controls, we were able to soften the impact of reduced volumes, while improving results compared with the previous year.”

Seafreight
Volumes increased by 2 per cent to a total of 2.670 million containers (TEU) shipped. Contrary to market trends, Kuehne + Nagel significantly increased export volumes in the trade lanes from Asia to North and South America and to the Middle East, extending its market share. However, cargo volumes declined in line with market developments in the main Asia-to-Europe and Europe-to-North America trade lanes. The operational result improved by 7.3 per cent due to the ability to provide value-added supply chain management services, cost efficiency as well as a positive performance in niche segments. EBITDA margin increased from 4.4 to 4.6 per cent.

Airfreight
International airfreight was heavily affected by the economic downturn, with December 2008 registering the biggest ever decline in traffic volumes. Although this development had an impact on Kuehne + Nagel’s airfreight activities, nevertheless, in 2008 the company increased cargo volumes by 2.1 per cent. EBITDA improved slightly (+0.9 per cent) and the EBITDA margin remained at a high level (5.7 per cent / 2007: 5.9 per cent) as a result of strict cost management and intensified marketing of value-added airfreight solutions.

Road & Rail Logistics
Volume growth in the overland business was above the market average during the first nine months of 2008, supported by the successful integration of the two German groupage providers G.L. Kayser and Cordes & Simon. However, Kuehne + Nagel was not immune to the slackening of the overall market in the fourth quarter, with order volumes declining significantly. Quality improvements and continuing process standardisation contributed to a gross profit margin improvement of 13.1 per cent. The takeover of the French Alloin Group, effective January 1, 2009, was an important milestone in the business unit’s strategy implementation. It provides a strong foothold in France and is expected to support growth in volumes across Europe. The operational result declined by 32.4 per cent, compared with the previous year, due to significant investments in IT and sales as well as budgeted start-up costs. EBITDA margin was at 0.8 per cent (2007: 1.2 per cent).

Contract Logistics
Kuehne + Nagel’s industry-focused contract logistics solutions are well accepted by customers worldwide. Despite adverse exchange rates, turnover was sustained at the previous year’s high level, further consolidating the market position. Falling demand from a number of large customers in the United States, Canada and Great Britain, however, resulted in reduced capacity utilisation and increased margin pressure. In addition, start-up costs in some Eastern European countries negatively affected the operational result, which was 12.2 per cent lower than in the previous year. EBITDA margin was at 4.6 per cent (2007: 5.3 per cent). A new production system and better management tools are being implemented to increase productivity and better adapt costs to volume fluctuations.

Dividend
At the May 13, 2009 Annual General Meeting, the Board of Directors will propose the distribution of an increased dividend of CHF 2.30 per share, up 21 per cent from CHF 1.90 in the previous year.

Turnover
In 2008 Group turnover grew by 3.0 per cent to CHF 21,599 million, despite negative currency effects of 6.7 per cent. CHF 374 million resulted from acquisitions.

All Kuehne + Nagel regions contributed to this increase; most significantly the Middle East, Central Asia and Africa, where turnover improved by 14.6 per cent (currency adjusted: 27.5 per cent). Increases in the Americas amounted to 7.0 per cent (currency adjusted: 15.5 per cent) and in Asia-Pacific to 5.4 per cent (currency adjusted: 12.3 per cent). In Europe, turnover was 0.6 per cent higher (currency adjusted: 6.1 per cent) than in 2007.

Gross profit
Gross profit – a better indication of a logistics provider’s margin and volume performance than turnover – improved by 4.0 per cent to CHF 6,253 million despite the negative currency impact of 7.3 per cent. Acquisitions accounted for CHF 132 million.

Gross profit improved by 12.7 per cent (currency adjusted: 23.8 per cent) in the Middle East, Central Asia and Africa; by 5.1 per cent (currency adjusted: 11.6 per cent) in Asia-Pacific, and by 3.9 per cent (currency adjusted: 10.8 per cent) in Europe. In the Americas, the increase was 2.5 per cent (currency adjusted: 11.3 per cent).

Operational result (EBITDA)
Earnings before interest, tax, depreciation and amortisation of goodwill and other intangible assets (EBITDA) increased by CHF 1 million (0.1 per cent) compared to the previous year. Organic growth, amounting to CHF 59 million, was nearly eliminated by a negative exchange rate impact of CHF 60 million. Europe delivered the largest EBITDA contri­bution of CHF 626 million (61.4 per cent), followed by the Asia-Pacific region with CHF 182 million (17.8 per cent). The Americas contributed CHF 174 million (17.1 per cent) and Middle East, Central Asia and Africa CHF 38 million (3.7 per cent).

Despite the cyclical reduction in volumes in the second half of 2008, the EBITDA margin of 4.7 per cent was almost maintained at the previous year’s level (4.9 per cent).

2009 Outlook
For the time being there are no indications that world economy will recover quickly; therefore further volume reductions are expected in all business units. Kuehne + Nagel will counteract this with rigorous cost management and process efficiencies.

“At an early stage, the Management Board decisively framed a course of action within the sphere of its influence to enable Kuehne + Nagel to sustain its market position even in difficult times,” said Klaus-Michael Kuehne, Chairman of the Board of Directors. “The Group remains committed to its traditional principles of operating economically, while being guided by a forward-looking, entrepreneurial spirit. Thanks to Kuehne + Nagel’s strong position across the globe, our logistics competence and our financial strength, we have reason to be confident about the further development of our the company.”

Datasheets

Arnhold and S. Bleichroeder Advisers, LLC, 1345 Avenue of the Americas, New York, NY 10105, USA, holds a total of 3.01 per cent of the share capital of Kuehne + Nagel International AG, Dorfstrasse 50, 8834 Schindellegi SZ, Switzerland.

Arnhold and S. Bleichroeder Advisers, LLC, holds 3,613,114 nominal shares.