Kuehne + Nagel Group

First half 2010

First half 2009

CHF million

Turnover

9,849

8,498

Gross profit

2,961

2,929

Operational result (EBITDA)

475

466

EBT

358

337

Net earnings

281

258

“The entire logistics industry has capitalised on the economic recovery, resulting in rising transport volumes and increased warehouse utilisation,” said Reinhard Lange, CEO of Kuehne + Nagel International AG. “Thanks to our highly dedicated workforce we were able to smoothly handle our significantly increased volumes and considerably improve productivity levels. Furthermore, in the still volatile, challenging market, we benefited from our customer focus.”

Seafreight
Following strong volume growth in the first quarter 2010, demand in the global seafreight market accelerated in the second quarter, leading to shortages in shipping capacity and containers resulting in significant rate increases. With a volume growth of approximately 20 per cent in the first  six months of 2010, Kuehne + Nagel clearly outperformed the market and returned to its pre-crisis growth dynamics. The Group gained market share in all trade lanes, performing particularly well in the export business to  South and North America. Due to sharply increased freight rates, the operational result of CHF 204 million remained at previous year’s level, while the EBITDA margin declined from 5.5 to 4.7 per cent.

Airfreight
The international airfreight market experienced surprisingly high growth rates in the first half of 2010. Across all regions and industries shippers turned to this more cost-intensive transport mode to handle their orders as fast as possible. Kuehne + Nagel’s growth rate of 31 per cent marked a record high. Volumes grew in all trade lanes, especially on the routes to and from Asia-Pacific. The  Group benefited from its market-oriented airfreight products and proactive capacity management. EBITDA margin, which had been exceptionally high in the previous year’s period, normalised in the first half-year of 2010 to 5.4 per cent. Process efficiency and productivity increases led to a 7.1 per cent increase of the operational result.

Road & Rail Logistics
During the first half-year, the rapidly improving economy resulted in considerable volume growth in the European overland transport market. At the same time, providers were exposed to high pressure on prices and fierce competition. Kuehne + Nagel delivered encouraging overland business performance.  Expanding activity in groupage, and less-than- (LTL) and full-truckload (FTL) services led to a 13.3 per cent increase (excluding currency impact) in net turnover. Improved network utilisation as well as process standardisation and optimisation contributed  to an increase of 52.6 per cent in the operational result. EBITDA margin improved from previous year’s 1.6 per cent to 2.1 per cent.

Contract Logistics
In contract logistics, the favourable market environment supported improved capacity utilisation and accelerated warehouse throughput. In particular multinational companies showed great interest in providers offering global competence and standardised services. The 4.7 per cent increase in net turnover (excluding currency impact) reflected new business wins Kuehne + Nagel concluded and implemented in the first half of 2010. Warehouse utilisation was optimised, especially in North America. Due to start-up costs, however, the operational result decreased by 8.0 per cent. EBITDA margin was at 4.2 per cent (previous year: 4.6 per cent).

Outlook
Karl Gernandt, Executive Vice Chairman of Kuehne + Nagel International AG, said: “In the first half of 2010 the Kuehne + Nagel Group achieved its ambitious goal of gaining market share in all business units while demonstrating strong profitability. As a result of the previous year’s investments in sales and product development, Kuehne + Nagel over-proportionally benefited from the improvement in global trade. Due to this convincing start, we are optimistic about the further development of our business. However, continued credit risks in some southern European countries and the situation in international finance markets still require great vigilance.”

In its first construction phase the state-of-the-art facility provides 14.000 sqm of warehousing space, including a special part dedi­cated to cross-docking activities, as well as modern offices. A further extension of up to 40.000 sqm on the same site will be possible. The facility is equipped with enlarged security standards in order to store high value goods. Kuehne + Nagel offers its warehouse services currently to large customers from the high-tech and the FMCG industry.

Karlis Soika, National Manager of Kuehne + Nagel Latvia, said: “The new distribution centre will enable Kuehne + Nagel to better serve the increasing demand for integrated contract logistics solutions in the Baltic States and further raise the efficiency of our processes. All our operations in the new warehouse will be based on powerful IT solutions allowing us to secure optimal information flow towards our customers and best performance quality.”

The agreement between Kuehne + Nagel and SNC-Lavalin covers the complete logistics services for the construction material and equipment in connection with the project, originating from different locations in Europe, Asia and North America. Kuehne + Nagel is delivering the services in cooperation with its Tunisian partner S.M.T.I. – Trans­port & Logistics, a leading contractor for project services and heavy haulage operations in the Maghreb region.

“The signing of this contract is a further milestone in our strategy to expand our integrated logistics services for the global oil and gas industry,” said Nils Wolf, Kuehne + Nagel’s Senior Vice President for Global Project Logistics. “On the basis of our complex and fine-meshed global logistics network and our state-of-the art IT-solutions we will combine our in-depth forwarding know-how and our long-standing experience in this specific industry to con­tribute to the success of SNC-Lavalin in Algeria.”

Moët Hennessy is part of the LVMH group, a world leader in luxury goods, with head­quarters in France. The group offers a unique portfolio of over sixty prestigious brands such as Louis Vuitton, Dior, Zenith, Givenchy, Moet & Chandon, Dom Perignon, Veuve Clicquot, Sephora, Fendi, Pucci, Loewe and other well-known brands in the wine and spirits, fashion, perfume and cosmetics, watches and jewellery as well as the retail industries.

This new award with Moët Hennessy, for whom Kuehne + Nagel also manages logistics operations in Miami, USA, demonstrates the success of Kuehne + Nagel’s global strategy to develop the drinks industry sector by providing specialised solutions to the global players in this market.

For the implementation, Kuehne + Nagel has adopted its successful “customer transition and integration model”, which includes multi­disciplinary project management and dedicated resources from the logis­tics provider’s national, regional and corporate organisations. In order to ensure a continuous process improvement, Kuehne + Nagel’s advanced Production System KNPS will be introduced.

Alvaro Nebreda, Director of Contract Logistics Division at Kuehne + Nagel in Spain, said: “Taking over Moët Hennessy’s logistics activities in Spain is a proof of confidence in us by a globally leading company in the wine and spirits market and demonstrates our strong capacity to optimise processes and add value, enabling the customer to focus on its core business. We are committed to further developing and investing in our integrated solutions for the global wine and spirits industry.”

Martin Whitcombe, USCC’s European Customer Logistics Director, said: “We are extremely happy to have chosen Kuehne + Nagel and believe their expertise in starting similar distribution facilities will ensure that the go-live of the new distribution centre will be very successful. As we use Kuehne + Nagel in a number of different European locations, we are confident that service levels will be equally as impressive as in all opera­tions we manage together. Our consumers in South Eastern Europe will benefit hugely from this partnership, as we will be now even closer
to serve their local demand.”

“We are very proud to have been appointed by USCC for South Eastern Europe as this represents a quantum leap in our strategy to further develop Kuehne + Nagel’s contract logistics services in the region”, said Pierpaolo Sironi, Managing Director of Kuehne + Nagel Romania. “Together with USCC we will create innovative logistics solutions with a cost-efficient operational approach.

In the dedicated 5,500-sqm facility, Kuehne + Nagel is responsible for the management of around 10,000 SKUs and 170,000 units of John Deere’s products. Kuehne + Nagel’s comprehensive services include inbound transportation from the three factories to the distribution centre, inventory management, domestic distribution to the manufacturer’s dealers in China as well as a series of value-added services, such as inbound receiving, quality control, labelling, pick & pack operations and order processing.

“Kuehne + Nagel has proven itself to be our partner of choice. Not only is it a professional leader in the China logistics market, its solutions demonstrate a high degree of customer orientation and flexibility,” commented Luke Gakstatter, Director of China Operations of John Deere (China) Investment Co. Ltd. “Based on its efficient set-up, the facility will serve as the regional distribution centre for other countries in the Asia-Pacific region.”

“We are pleased to be supporting John Deere in its initiative of providing efficient and responsive after-sales services in China. Centralised management of service parts and excellent performance of the logistics facility will foster the continued optimisation of John Deere’s supply chain,” said Jens Drewes, National Manager of Kuehne + Nagel in central and northern China.

The strength of the MTS brand was recognized internationally in 2008, when it became the first and only Russian company to enter “BRANDZ™ Top 100 Most Powerful Brands”, a ranking published by the Financial Times and Millward Brown, a leading global market research and consult­ing firm. MTS is one of the two official distributors of Blackberry as well as a big importer of telecommunications equipment.

“One of the reasons why MTS has chosen our integrated transport and logistics solutions is because we meet their high needs for security and reliability,” said Perry Neumann, Managing Director of Kuehne + Nagel Russia. „In the CIS region, the high-tech industry is one our strategic focus segments and the MTS project fully complies with this approach. Kuehne + Nagel is strategically expanding its logistics activities and man­power in the CIS and, through its well-organized global network and employees with industry-specific expertise, both companies will strengthen their position in the region.”

About MTS
Mobile TeleSystems OJSC (MTS) is the largest mobile phone operator in Russia and the CIS. MTS services over 97 million subscribers (as of February 31, 2010). MTS provides mobile communications in Russia, Ukraine, Uzbekistan, Turkmenistan, Armenia and Belarus, a territory with a total population of more than 230 million.

The Chairman is confident regarding the further business development,  although setbacks in the economic recovery could not be excluded. “We have decided to continue our dual strategy of process optimisation and stringent cost management on one hand, and extending market shares by specific growth initiatives on the other.” In this context, Klaus-Michael Kuehne emphasised the benefits of Kuehne + Nagel’s global logistics network, which enables the Group to take advantage of business opportunities in growth regions. The company will extend its activities in such growth markets as China, India, Vietnam and in various countries in South America and the Middle East.

Clear majorities for proposals

The shareholders approved the annual report, the financial statements and the consolidated financial statements for 2009 and followed the Board of Director’s recommendation to distribute a dividend at the same level as 2008 of CHF 2.30 per share. The dividend will be distributed as of May 26, 2010.

The Annual General Meeting granted discharge to the Board of Directors and the Management Board for the 2009 business year.

Elections to the Board of Directors

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

Newly elected to the Board of Directors was Dr. Joerg Wolle, Swiss citizen, for a one-year term. Dr. Wolle is President and CEO of DKSH, the leading Market Expansion Services Group with a focus on Asia.

Approved Capital

The Annual General Meeting extended its authorisation of approved capital up to a maximum of CHF 20 million until May 8, 2012. This measure provides Kuehne + Nagel with the required flexibility to finance strategic investments.

Statutory Auditor

KPMG AG, Zurich, was confirmed as the statutory and Group auditor for the business year 2010.

The next Annual General Meeting will be held on May 10, 2011.

“We are very satisfied as, during our collaboration, Kuehne + Nagel has always responded in a reliable, fast and easy way,” said Sandra Bjelic, Logistics Manager at Rehau Croatia. “The positive experience we have made with Kuehne + Nagel can be transferred to other nearby Rehau organisations in South East Europe. Therefore an extension of our partner­­ship in other countries is very likely.”

Rainer Weeger, responsible for Business Development at Kuehne + Nagel Eastern Europe, said: “The new business is an important milestone in our partner­ship with Rehau in Eastern Europe. By further strengthening our good relationship with the customer we have been able lately to also expand our cooperation in Bulgaria and in Austria.”

About Rehau
Rehau is the premium worldwide brand for polymer-based innovations and systems in construction, automotive and industry. About 15,000 employees around the globe ensure our growth and success. With more than 170 locations, we are always close to the market and our customers. Forward-looking developments and innovations are our area of expertise. For further information, please visit www.rehau.com

“As one of the leading pharmaceutical companies we need a logistics service provider who combines thorough industry know-how with experi­ence in the East European market,” says Martina Brzjchaczek-Koternetz, Head of Supply Chain Management at Boehringer Ingelheim. “Kuehne + Nagel is the partner of choice to accompany us on our course for growth.”

Bernhard Schilling, Director Business Development Pharma & Healthcare at Kuehne + Nagel, says: “In recent years we have specifically invested in our systems, facilities and employees in order to guarantee our high service and quality standards for the transport of thermolabile products. To have been chosen by Boehringer Ingelheim as their logistics partner for these five Eastern European countries is proof of the success of our efforts. This important cooperation confirms Kuehne + Nagel’s strategy to invest further into specialised products and grow particularly in market segments such as Pharma & Healthcare and High-Tech / High-Value.”

About Boehringer Ingelheim
The Boehringer Ingelheim group is one of the world’s 20 leading pharmaceutical companies. Headquartered in Ingelheim, Germany, it operates globally with 138 affiliates in 47 countries and 41,300 employees. Since it was founded in 1885, the independent, family-owned company has been committed to researching, developing, manufacturing and marketing novel products of high therapeutic value for human and veterinary medicine. For further information, please visit www.boehringer-ingelheim.com