K + N earnings slightly below analyst expectations in first quarter – warns economic growth may slow noticeably

World’s largest ocean freight forwarder sees volume growth thanks to Asian export markets and its niche plays in pharma and healthcare.

Kuehne + Nagel (K + N) (SIX: KNIN) reported first quarter 2019 earnings that were slightly below analysts estimates due to a one-time charge related to the value of warehouse leases.

Overall volumes for the world’s largest ocean freight forwarder continued to grow, save for some regional market weakness. But Chief Executive Officer Dr. Detlef Trefzger warned that 2019 does bear the risk of economic growth “noticeably slowing.”

K + N reported first-quarter 2019 earnings per share of CHF 1.50 Swiss francs ($1.47) per share, a 2 percent drop from last year and just slightly below the CHF 1.52 per share consensus estimate. But the results included a one-time CHF 115 million non-cash charge for unutilized warehouse space due to an accounting rule change.

The freight forwarder reported gross profit net of transportation expenses rising 7.3 percent for the year to CHF 1.98 billion, with operating profit rising 45 percent to CHF 418 million due to the accounting rule change.

In ocean freight, K + N was able to grow volume by 6.2 percent, handling 1.146 million standard containers in the quarter. It said Asian exports to North America and Europe showed double-digit gains, which offset the declines on the backhaul trade due to import restrictions on recycled materials and agricultural products. Operating earnings in the ocean freight segment were CHF 112 million.

The airfreight segment saw earnings before interest and taxes flat with the first quarter of 2018 at CHF 80 million. K + N’s volume dropped 3 percent to 409,000 tons as the overall market was softer. It said the acquisition of Quick International Courier, which handles pharmaceutical, healthcare and aviation customers, helped profit margins for the quarter.

K + N’s surface transportation sales increased 6 percent and gross profit also increased due to new customer wins for intermodal transport in North America. It also credited strength in its European intermodal business, along with expansion of its pharmaceutical dedicated fleet.

In the contract logistics segment, K + N said sales increased 6 percent with gross profit rising 5 percent. It is still implementing a new global warehouse management system and restructuring its contract logistics portfolio, which resulted in weaker operating profits from a year earlier.

“Kuehne + Nagel got off to a good start in 2019. Once again, we increased our net turnover, gross profit and earnings before interest and taxes,” Trefzger said. “However, we find ourselves in an environment in which global economic growth is noticeably slowing.”

But with new digital initiatives and focus on niche logistics, Trefzger said K+ N will “remain on course to grow as a Group and further increase our results.”