Kuehne + Nagel Says Market Remains Challenging Despite Slight Demand Uptick — Update

By Dominic Chopping

Kuehne + Nagel saw slightly improving demand for sea transport and air logistics during the first months of 2024 but the overall environment remained challenging, it said.

The Swiss logistics company said cost-efficiency measures were intensified during the first quarter and that its previously announced reporting structure reshuffle will allow for further efficiency gains and profitable growth.

Earlier this month the company said it was discontinuing its regional structure, creating a new direct reporting line of its units to simplify responsibilities, allow quicker responses to rapidly changing market developments and enable business decisions to be implemented faster.

"Our focus on efficiency and streamlined structures allowed us to reduce costs per unit by 12% in sea logistics and 14% in air logistics," said Chief Executive Stefan Paul. "By discontinuing the regional structure, we have laid the foundations for further growth and enabled more direct access to our customers worldwide."

Earnings in the company's sea logistics business fell by 44%, though it transported slightly higher volumes in the quarter as transpacific and Americas trade routes continued to see a pick-up in volumes.

Its air logistics unit also saw a similar trend, with earnings in the unit dropping 39% while volumes rose slightly as it carried more perishable goods.

Logistics providers are contending with a market fraught with headwinds, as Russian airspace remains closed due to the war in Ukraine and as Red Sea tensions continue forcing shippers to add thousands of miles onto journeys to avoid the area.

The company said Tuesday that customers were using its supply-chain planning tool to help optimize their transport amid the Red Sea situation.

The company reported a net profit of 273 million Swiss francs ($299.3 million) in the first quarter of 2024, down from CHF456 million in the same period a year earlier as turnover fell 18% to CHF5.51 billion.

Analysts polled by FactSet had seen net profit of CHF282 million on turnover of CHF6.4 billion.

The freight forwarder last year presented a plan to grow average annual earnings before interest and taxes by 17% to 19% in the period to 2026, from 2019 levels, while achieving a conversion rate--the ratio of EBIT to gross profit--of 25%-30%.

It reported a conversion rate of 18% in the first quarter and noted the figure is significantly above the 12% achieved prepandemic in the first quarter of 2019.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

April 23, 2024 02:56 ET (06:56 GMT)

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