Kuehne & Nagel Profit Growth Halted By Swiss-Franc Appreciation
Kuehne & Nagel International AG’s first-quarter operating profit failed to grow, as the Swiss franc’s gains on currency markets weighed on the world’s biggest sea-freight-forwarder’s revenue.
Earnings before interest and taxes was unchanged from a year earlier, at 190 million francs ($194 million), the Schindellegi, Switzerland-based company said in a statement. The figure lagged behind the average 196.9-million-franc average of seven analysts' estimates compiled by Bloomberg. Revenue net of customs, duties and taxes fell 0.8 per cent to 4.1 billion francs.
Europe’s economic growth has been slower than in other regions in the aftermath of the longest recession since the common euro currency was introduced, weighing on shipping and transport companies. Kuehne is scaling back the number of its supply-chain customers to pursue the most profitable business while restructuring its road activities. The company expanded faster than competitors in air freight and more slowly in ocean freight in the quarter.
“The development of our results is remarkably positive, considering the decreasing import flows of goods to Europe due to the weakness of the euro,” chief executive officer Detlef Trefzger said in the statement. “The strong Swiss franc negatively affected the result.”
The Swiss National Bank gave up on a ceiling of 1.20 franc per euro on 15 January, causing the country’s currency to appreciate by 19 per cent that day. Kuehne & Nagel said that the franc’s strength reduced earnings by 7 per cent.
Sea-freight volume fell 0.7 per cent in the quarter on weak Asian-European trade, which the company said that it didn’t foresee. Air-freight volume rose 6.7 per cent. Net income advanced 3.4 per cent to 152 million francs.
Kuehne reduced its forecast for global sea-freight volume to growth of 3 to 4 per cent, after saying (in February) that the figure would rise as much as 5 per cent. Sea-freight handling will be in line with market developments, it said, in contrast to a prediction in February that volume gains would outpace market growth by 50 per cent.
The company has a medium-term target of raising EBIT to 5 per cent of sales. The measure stood at 4.6 per cent in the quarter, after amounting to 4.7 per cent in 2014.
Bloomberg News, edited by ESM