K+N defiant despite drop in EBITDA

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Kuehne + Nagel has posted a 13.2 per cent drop in EBITDA to £545.8 million (CHF 885 million) for the year ended 31st December 2009 compared to the previous year. The figure includes £21.6 million (CHF 35 million) related to competition investigations.

However, Tim Scharwath, chief executive of North West Europe, said he does see an improvement, albeit at a low level, in the economic situation for 2010.

K+N plans to enhance its product offering by continuing to develop its value added services during the coming year, but it has stopped its home delivery service after losing its main customer, which accounted for 85 per cent of the business.

Despite a difficult year, the company plans to stick to its strategy of market share expansion combined with strict cost management in 2010. It has estimated an increase in market share of five per cent in Contract Logistics, ten per cent for Road and Rail Logistics and Seafreight, and 12 per cent for Airfreight, all of which are double compared to predictions for the market as a whole.

It plans to grow its Contract Logistics, Seafreight and Airfreight sectors organically, while Road and Rail Logistics will be through a combination of acquisitions and organic growth.

Within the Contract Logistics division in 2009, K+N achieved “stable” results despite demand fluctuations, regional variations in warehouse capacity use and increased price pressure. EBITDA margin remained at the previous year’s level of 4.6 per cent, while operational result fell by 6.9 per cent.

The operational result for Road and Rail Logistics improved by 126 per cent, partly thanks to the acquisition of The French Alloin Group, while the EBITDA margin increased from 0.8 to 2.1 per cent.

Looking forward, Scharwath said the group will continue to focus on integrated logistics solutions. He said: “The more we can integrate different parts of the business the better it is for the customer, particularly in difficult times”. K+N will also continue to invest in sales with the introduction of a sales management system.

The Seafreight business saw a 4.6 per cent decline in volumes, which the group said was “remarkably moderate” compared to the 12 per cent overall market decline in seafreight volumes. K+N bucked the trend by boosting its value-creating product portfolio, customer-focused IT systems and increased sales activities.

Similarly in the Airfreight sector, K+N saw a 9.2 per cent volume decline, almost three per cent less than the market average. This was put down to an increase in sales activities and promotion of its specialised services for niche segments.

Regionally, Europe accounted for the largest contribution at £357.1 million (CHF 579 million), down 1.3 per cent on 2008. The Asia Pacific region accounted for £86.3 million (CHF 140 million), the Americas £79 million (CHF 128 million) and the Middle East, Central Asia and Africa £23.4 million (CHF 38 million).

By aligning cost structures with transport volumes, increasing productivity and optimising processes, K+N increased its EBITDA margin from 4.7 to 5.1 per cent for the year.

Additionally, the “culture of continuous improvement” outlined in the company’s Six Sigma approach, which began in the Contract Logistics division, will be continued in the Road and Rail Logistics, Airfreight and Seafreight sectors in 2010.

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