EUR 850.00 For Business Accounts Only

Morningstar | Narrow-Moat Kuehne + Nagel Feels the Pinch in 1H

Narrow-moat Kuehne + Nagel delivered a reasonable set of first-half results in the face of increasing economic pressures. While net revenues were up by more than 5%, EBIT increased by just 2% because weak volumes in some segments led to a negative operating leverage effect. Although we may make some downward adjustments to our full-year 2019 expectations on the back of these results, we do not anticipate any material changes to our longer-term forecasts, nor to our CHF 144 fair value estimate. We believe the shares are fairly valued at the moment.

Seafreight continued to grow steadily, with volumes improving by 4.5% in the first half, ahead of reported market growth of just 2.5%. The focus on higher-margin segments within seafreight led to an EBIT improvement of 11.9%, compensating somewhat for the tough operating environment in airfreight, which having witnessed extraordinary growth in 2017, is now feeling the hangover effect. Here volumes decreased by close to 6% in the first half, while EBIT fell by slightly less at 4.4%, with increasing trade barriers cited as one of the key drivers of this decline.

In the longer term, as the logistic needs of customers become steadily more complex, requiring services such as multi-modal transport, tracking capabilities and temperature monitoring, business should naturally migrate to large providers with strong capabilities. As the largest provider in seafreight and second largest in airfreight globally, is well positioned to take advantage of positive structural trends such as these.