Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kuehne + Nagel International AG (KHNGF, Financial) achieved a sequential improvement in group EBIT in Q3, marking the first year-over-year quarterly increase in two years.
- The company reported a significant reduction in unit costs for sea logistics and stable costs for air logistics, driven by ongoing cost control efforts.
- Contract Logistics showed solid EBIT growth, with a notable increase in market share in key healthcare and e-commerce segments.
- The company successfully migrated its core transport management system to the cloud, enhancing its technological capabilities.
- Kuehne + Nagel International AG (KHNGF) has streamlined its management structure and refocused its sales force, creating a solid platform for future growth.
Negative Points
- The company faced inflationary pressures that mitigated the benefits of cost-saving measures.
- Working capital expansion due to rising sea freight rates softened the effect on free cash conversion.
- The anticipated peak season did not meet expectations, partly due to front-loading of cargo demand.
- Air Logistics saw a modest increase in operating expenses, which offset gross profit growth.
- The Road Logistics segment experienced a relatively weak EBIT contribution during Q3, reflecting soft market conditions in core regions like Germany and France.
Q & A Highlights
Q: Can you provide insights on the current market growth for Sea and Air Logistics and how Kuehne + Nagel plans to address any market share losses?
A: Stefan Paul, CEO, noted that seafreight volumes are growing between 4% and 5%, and airfreight around 5%. The difference in growth rates is attributed to the e-commerce sector, which Kuehne + Nagel serves primarily through Apex. The company plans to focus on organic growth by leveraging its new structure and enhancing customer focus to regain market share.
Q: How is Kuehne + Nagel addressing cost reductions and workforce rightsizing, and what impact does this have on operations?
A: Markus Blanka-Graff, CFO, explained that the company has rightsized its workforce and restructured its organization to improve efficiency. This includes ongoing customer portfolio optimization and leveraging automation and digitalization to enhance productivity. The structural changes are sustainable and will continue to benefit the company.
Q: What steps is Kuehne + Nagel taking to accelerate growth, particularly in the SME segment?
A: The company is increasing its focus on SMEs by opening customer care centers and enhancing customer proximity. This initiative is part of a broader strategy to improve service offerings and operational efficiency, which is expected to drive growth in the SME segment.
Q: Can you elaborate on the relationship between Apex and Amazon Air, and how it impacts Kuehne + Nagel's operations?
A: Stefan Paul, CEO, stated that Apex collaborates with Amazon Air by utilizing its domestic fleet for e-commerce and standard cargo distribution within the US. This partnership is mutually beneficial, allowing Kuehne + Nagel to leverage Amazon's network for efficient distribution.
Q: What are the expectations for seafreight and airfreight volumes in Q4 and 2025, considering current market conditions?
A: Markus Blanka-Graff, CFO, mentioned that Q4 is typically lighter for seafreight, but there might be some compression of orders due to an early Chinese New Year. For 2025, the company expects trade volume growth to align with GDP growth, considering trends like onshoring and regionalization.
Q: How does Kuehne + Nagel plan to maintain its conversion rate in seafreight amidst changing market conditions?
A: The company aims to sustain a conversion rate between 35% and 45% by investing in efficiency, automation, and customer portfolio improvements. The current market and operational efficiencies support maintaining this target.
Q: What is the impact of restructuring on Kuehne + Nagel's cost base, and are there any expected benefits in the coming quarters?
A: Markus Blanka-Graff, CFO, indicated that the restructuring and rightsizing efforts are complete, with minimal impact expected in Q4. The company has built a leaner organization that is better positioned to react to market changes and capitalize on opportunities.
Q: How does Kuehne + Nagel view its dividend policy in light of current financial performance?
A: While it's too early to provide specific details, Markus Blanka-Graff, CFO, suggested that the company aims to maintain its historical payout ratios. The final decision will be made by the Supervisory Board and announced at the Annual General Meeting.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
