Status Report

Business units

 

The main contributor to the Group’s result are the business units Sea and Air Logistics. In 2020, major profitability improvements were generated in the Air Logistics business unit.


Sea Logistics

Sea Logistics volumes decreased by 6.8 per cent to 4,529,000 TEUs. Specialised services for temperature controlled cargo in reefer containers, pharma and e-commerce have significantly contributed to the result. In an uncertain market environment during COVID-19 pandemic Kuehne+Nagel maintained its global leading position in Sea Logistics. Customers from the pharma and healthcare industry use Kuehne+Nagel to handle temperature-sensitive products. From a regional perspective, the volume increase of imports in Europe and North America from Asia has continued in 2020. Despite lower SME (small and medium-sized enterprises) volumes a favourable cargo mix and tight cost control contributed to the increased margins. In 2020, the absolute amount of EBIT decreased by 7.2 per cent compared to the previous year, while the ratio of EBIT to gross profit (conversion rate) increased to 29.9 per cent (2019: 29.6 per cent).

It remains the Group’s target to achieve volume growth that is substantially above the market and thereby gaining market shares. Simultaneously, the Group’s focus is on the Sea and Air Logistics profitability and continuous efficiency gains through productivity improvements.

 

Sea Logistics volumes: Market growth ~ –5%
Performance Sea Logistics
CHF million 2020 2019 2018
Turnover 8,973 9,751 9,366
Net turnover 7,091 7,457 7,129
Gross profit 1,417 1,539 1,482
EBITDA 451 485 441
EBIT
In per cent of gross profit (conversion rate)
423
29.9
456
29.6
418
28.2
Number of operating staff 10,393 10,535 10,025
TEUs '000 4,529 4,861 4,690

Air Logistics

Due to the global reduction in Air Logistics volumes, the Group experienced lower levels of volumes by 12.8 per cent with 1,433,000 tons, therewith maintaining the number two position in the global airfreight market. EBIT-to-gross-profit margin increased to 37.9 per cent in 2020 (2019: 25.0 per cent). EBIT increased by 53.5 per cent compared to the previous year. In 2020, the increased demand for transport services of higher yielding crisis related goods contributed to better results. A positive one-off impact related to a former acquisition of net CHF 63 million impacted EBIT significantly. While demand in certain industries increased, volumes in other industries, especially in automotive, aviation and aerospace, reduced until Q2 2020. The automotive and perishables industries show signs of recovery starting in the second half of the year 2020 while the aviation sector remained weak.

The outlook for the time-critical logistics business, acquired through Quick International Courier (Quick) at the end of 2018, was affected negatively by the COVID-19 pandemic, driven from a down-trading of several major aviation customers. The recovery of these customers is uncertain and depending on the recovery of air travel – which is expected to take well beyond 2021 and will not return to pre-crisis levels until 2024 as per the International Air Transport Association (IATA). In the third quarter 2020, a slower than initially expected recovery of the aviation sector and the changed medium and long-term outlook for aviation customers led to an impairment charge of other intangible assets (customer lists) in Air Logistics of CHF 52 million.

In the light of the above, the Kuehne+Nagel Group reached an agreement with the sellers of Quick for an early settlement of the contingent consideration, resulting in the aforementioned net positive one-off impact of CHF 63 million. Further details regarding the measurement of contingent considerations are described in note 45.

The successful global COVID-19 vaccine rollout will heavily depend on an efficient and fast distribution. Most notably, the Kuehne+Nagel Group has entered into an agreement with Moderna, Inc. (NASDAQ: MRNA) to support the storage and distribution of its COVID-19 vaccine via road and air using the existing network of more than 240 pharma certified operations worldwide.

The Group has developed world class expertise in industry- and product-specific supply chain services through various strategic programmes. Organic growth in areas such as perishables and pharma logistics, together with selected bolt-on acquisitions, continue to ascertain the Group’s leading position.

 

Air Logistics volumes: Market growth ~ –11%
Performance Air Logistics
CHF million 2020 2019 2018
Turnover 5,817 5,465 5,620
Net turnover 5,194 4,653 4,870
Gross profit 1,331 1,317 1,202
EBITDA 600 394 380
EBIT
In per cent of gross profit (conversion rate)
505
37.9
329
25.0
355
29.5
Number of operating staff 7,845 8,115 7,412
Tons '000 1,433 1,643 1,743

Road Logistics

Road Logistics experienced a strong decline in net turnover by 10.2 per cent in 2020, due to down-trading caused by the COVID-19 pandemic measures with reduced land transport activities in Europe. The Group continued to expand its service offering through the acquisition of Rotra in Belgium and the Netherlands to further intensify the Europe-wide road transportation. The key performance indicator EBITDA to net turnover margin deteriorated to 3.7 per cent from previous year’s 3.8 per cent. EBIT decreased to CHF 62 million (2019: CHF 78 million).

While the second quarter of 2020 was characterised by a significant decline in Road Logistics volumes, the third quarter marked a significant increase in the number of shipments. In particular, the demand for national transport capacities in Europe was at pre-crisis level. In North America, demand for all product segments, with the exception of pharma & healthcare and e-commerce, was well below the previous year. In the last quarter, however, a further recovery in the market was evident.

Further, the digital platform “Your Easy Brexit Solution” developed by Kuehne+Nagel enables uninterrupted shipping of goods to and from the UK. With this digital solution, Kuehne+Nagel customers can handle customs processes automatically.

With the expansion of services to industry-specific solutions, Road Logistics has significantly contributed to the success of the Group’s integrated logistics offering.

 

Performance Road Logistics
CHF million 2020 2019 2018
Turnover 3,633 4,102 4,009
Net turnover 3,222 3,586 3,526
Gross profit 1,089 1,121 1,088
EBITDA 119 136 118
EBIT
In per cent of gross profit (conversion rate)
62
5.7
78
7.0
76
7.0
Number of operating staff 9,363 8,781 8,456

Contract Logistics

The focus on specialised end-to-end solutions for industries such as high-tech, consumer goods, pharmaceuticals, healthcare, and e-commerce fulfilment led to numerous new customer contracts. However, overall lower demand caused by COVID-19 down-trading, impacted net turnover (net of currency impact) negatively and the Group recorded a negative growth of 9.7 per cent for 2020. Market share gains in pharma & healthcare services and in e-commerce fulfillment as well as productivity gains improved the operational results.

At the same time the Group has focused on a customer portfolio that allows leveraging the other business units and makes use of scalable and sustainable logistics solutions. This has led to the reshaping of business size in some European countries including adaption of the real estate footprint. This initiative was successfully completed in 2020.

EBITDA to net turnover margin improved to 15.4 per cent versus 15.1 per cent in 2019. The sale of a major part of the Contract Logistics business in the UK had a negative one-off impact on EBIT of CHF 62 million. Hence, EBIT decreased by 59.6 per cent.

Kuehne+Nagel further strengthened its global leading position in the field of integrated logistics. The Group offers specialised global end-to-end supply chain management solutions, which are managed from logistics control towers and performed in seamless operation with other business units, supporting customers to optimise their value chain. Integrated logistics experts develop, implement and manage solutions that streamline the customer’s supply chain to make it lean, agile and demand-driven.

 

Performance Contract Logistics
CHF million 2020 2019 2018
Turnover 5,389 5,977 5,830
Net turnover 4,875 5,398 5,249
Gross profit 3,638 4,004 3,937
EBITDA 750 8141 270
EBIT
In per cent of gross profit (conversion rate)
80
2.2
198
4.9
138
3.5
Number of operating staff 39,360 43,661 43,694
Warehousing and logistics space in sqm 11,343,955 11,388,643 11,587,597
Idle space in sqm 227,889 336,696 343,081
Idle space in per cent 2.0 3.0 3.0

1  Figures prior to 2019 have not been restated for the impact of IFRS 16 Leases.