K+N air growth ramps up but margins still under pressure

Double-digit percentage air cargo demand and revenue growth at freight forwarder Kuehne+Nagel (K+N) helped offset margin pressure in the third quarter of the year.
The Switzerland-based forwarding giant continued its good run of form in 2017, with third-quarter airfreight demand increasing by 20.6% to 391,000 tonnes, while air revenues were up 25.8% to Sfr1.2bn.
Results were helped by the acquisition of Kenyan perishables forwarder Trillvane, which was included in figures from September.
However, profit growth lagged behind volume and revenue improvements as margins continued to come under pressure – earnings before interest and tax (ebit) for the quarter increased by 4.1% to Sfr76m and gross profits were up 6.7% to Sfr255m.
Its third-quarter air revenue/gross profit margin for the period stood at 21% compared with 24.8% last year. The figure for the quarter was also down on its air revenue/gross profit performance in the first half when it achieved 22.8%.
In a press release accompanying its results release, the forwarder concentrated on the positive demand and revenue performance.
“In the first nine months of the year, K+N increased volumes by 19%, growing more than twice as fast as the market," it said.
“A key factor for this positive development was the company’s comprehensive offering of industry-specific airfreight solutions.
“New business was won in the pharmaceutical, high-tech and automotive industries. Perishables logistics continued to develop very successfully, thus further expanding K+N’s position as the global market leader in this segment.
“With strict cost control and productivity increases due to process automation K+N compensated for margin pressure and maintained the conversion rate with 30.3% at previous year’s high level.”
Overall, the company saw third-quarter revenues improve by 14.8% to Sfr4.7bn, while ebit was up 4.5% to Sfr233m and net profits increased 3.9% Sfr184m.
K+N chief executive Detlef Trefzger said: “With strong volume growth and active cost management we further improved results in the third quarter in line with our expectations.
“In seafreight a margin improvement was achieved in the third quarter. The airfreight, overland and contract logistics businesses contributed to significant profitability increases.
“The business development in the first nine months of 2017 confirms our strategic focus on value-creating solutions and makes us confident to reach our profitability targets we have set ourselves for the full business year.”
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