USCO GOODWILL CHARGES SAP KUEHNE & NAGEL’S PROFITS

USCO GOODWILL CHARGES SAP KUEHNE & NAGEL’S PROFITS    Extraordinary goodwill amortization charges on its U.S. logistics subsidiary USCO have eaten into the profits of Kuehne & Nagel, forcing the Swiss forwarding and logistics group to report a breakeven result for 2002, as compared to a net income of CHF160 million in 2001.
   The group charged CHF206 million ($147 million) of extraordinary goodwill amortization in its 2002 year-end accounts to lower the book value of USCO, after experiencing lower profitability than expected at its U.S. operation. Kuehne & Nagel acquired USCO in 2001.
   The charge completely swallowed up Kuehne & Nagel’s 2002 net profit, although it had expected to report a net income of more than CHF150 million.
   However, at the operating level, group earnings before interest, tax and amortization increased by 16 percent in 2002, to CHF304 million ($217 million), from CHF263 million the year before.
   Group gross profit for 2002 amounted to CHF1.9 billion ($1.4 billion), up 11 percent on the previous year’s result. Group revenues totaled CHF8.8 billion ($6.3 billion), an increase of 4 percent over the CHF8.4 billion revenues reported for 2001.
   While Kuehne & Nagel’s international forwarding activities contributed to the increase in its earnings before interest, tax and amortization, the group’s contract logistics business suffered lower profit results.
   International forwarding, comprising seafreight, airfreight,
international overland, rail and customs brokerage, accounts for 85 percent of Kuehne & Nagel’s 2002 revenues and 83 percent of its earnings before interest, tax and amortization.
   In 2002, international forwarding activities increased their revenues by 4 percent, to CHF7.5 billion ($5.4 billion), and their earnings by 23 percent, to CHF251 million ($179 million). Seafreight forwarding revenue was up 3 percent, to CHF4 billion ($2.9 billion), as container volume topped one million TEUs for the first time, and seafreight earnings rose by 13 percent, to CHF142 million ($101 million), from CHF126 million. Airfreight forwarding activities produced revenues of CHF2.1 billion ($1.5 billion), up 5 percent, with earnings of CHF84 million ($60 million), up 35 percent.
   Kuehne & Nagel also said that currencies had a negative effect on its revenues in 2002.
   Contract logistics revenues for 2002 amounted to CHF1.2 billion ($826 million), an increase of 23 percent, following the full-year consolidation of USCO Logistics. However, earnings from contract logistics decreased by about 8 percent due to a decline in profitability of USCO’s operations in the U.S. and Mexico. Results from contract logistics in Europe improved.
   Citing political uncertainties, Kuehne & Nagel expects 2003 to be “another challenging year.”