EUR 850.00 For Business Accounts Only

Morningstar | Kuehne + Nagel Company Report

Kuehne + Nagel is the second-largest third-party logistics provider, or 3PL, globally, with a less than 3% share of a highly fragmented market. As a freight forwarder, KN contracts with airlines and ocean carriers for cargo space and then fills that capacity with customers' freight. KN’s strong suit lies in sea freight, where it is the largest operator globally and where its margins are the highest across the four divisions in the group. The company has indicated its willingness to reduce its reliance on the sea freight division by expanding the other businesses in the group, which we believe will strengthen the client offering and ultimately KN's network. Restructuring in the overland and contract logistics businesses has resulted in improved margins and increasing EBIT contributions. We believe there is further room for improvement in these businesses.Until relatively recently, KN was run by the Kuehne family, which avoided debt almost entirely, instead relying on an organic growth strategy supplemented by bolt-on strategic acquisitions. This strategy has stabilised returns, with the company unburdened by debt-servicing costs that more-acquisitive peers in the sector suffered from. Despite suggestions from the company that it is open to adopting a more tax-efficient attitude to debt, we don't expect a material departure from its historically prudent growth strategy. Despite headwinds and overcapacity in freight generally, the 3PL model effectively insulates providers such as KN from pricing volatility, albeit with a lag that can cause issues in the short term. Given also the increasingly global nature of trade, we expect KN to continue taking market share from smaller, less capable 3PLs as demand for sophisticated supply-chain technology and access to reliable capacity expands.