Status Report

Economic Environment

 

In 2019, the Kuehne+Nagel Group (the Group) expanded its global leading position in Seafreight with 4.9 million TEUs managed in container traffic. The Group confirmed with 1.6 million tons in Airfreight its global number 2 market position, reported significant growth and profitability improvement in Overland and continues its successful reorganisation of the Contract Logistics business.

Kuehne+Nagel is specialised in complex end-to-end supply chain solutions, which are managed in the global network of Logistics Control Towers and performed in cooperation with all Kuehne+Nagel business units. These integrated logistics solutions not only increase transparency and efficiency in the supply chain but also optimise information flows between the participating partners and customers. This allows Kuehne+Nagel to support its customers’ value chain, a key factor in a highly competitive and fast growing market.

In 2019, the world economy grew by estimated 2.4 per cent (2018: 3.0 per cent) impacted by continuous weak trade and investment activities – the lowest rate of expansion since the financial crisis. Geopolitical and trade tensions as well as the implementation of trade barriers not only weakened the trade and investment activities but led to a high level of uncertainty in the markets. Bilateral negotiations between the United States and China and the planned partial rollback of tariffs offered positive factors for the outlook for 2020, however the outbreak of the Coronavirus has added a great uncertainty. For 2020 global growth of 2.5 per cent is estimated.

The remarkable deceleration of the economic growth in 2019 was widespread and affected emerging markets and developing economies as well as mature economies. In mature economies the growth rate in 2019 declined to 1.6 per cent in comparison to 2.2 per cent in 2018. Emerging markets are estimated to have grown by 4.3 per cent in 2018 and a weaker-than-expected 3.5 per cent in 2019. (Based on: World Bank, Global Economic Prospects, January 2020)

In 2019, the international logistics industry experienced world trade volume growth below the level of 2018. The world trade volume growth has slowed down to 1.0 per cent in 2019 versus 3.7 per cent in 2018. Advanced economies’ world trade volume grew at 3.2 per cent in 2018 and is estimated at 1.3 per cent in 2019. In emerging markets and developing economies these indicators were at 4.6 per cent in 2018 and at 0.4 per cent in 2019. (Based on: IMF, World Economic Outlook Update, January 2020)

On the carrier side, the market in 2019 was characterised by volatile freight rates caused by continued imbalance of capacity and demand of carriers and ongoing consolidation in the shipping industry.

Kuehne+Nagel‘s volume growth was above the market despite the changes in market growth dynamics in 2019, resulting in a turnover growth of 1.9 per cent. These gains in market share were made possible through the industry-specific service offerings in all business units. Despite margin pressure due to consolidation in the supplier market and a more competitive market environment, the Group was able to increase gross profit by 3.5 per cent and grew its EBIT by 7.5 per cent in 2019.

The Group’s strategy Roadmap 2022 was presented at the Capital Markets Day 2017 with the focus on creating additional value through customer excellence and expansion into new services and leveraging the Group’s strengths to extend from supply chain to value chain services. The ambition is formulated as growing twice as fast as the market in the Group’s core business, creating sustainable growth in gross profit with new value chain services and selective acquisitions to leverage synergies and expertise.

The overall aim is to reach an EBIT to gross profit margin (conversion rate) for the entire Group in excess of 16 per cent by 2022. The Group will reach this through cost control to ascertain leverage benefits, digitisation as a game changer for productivity improvements, investments in new opportunities connected to value expansion and acquisitions as an accelerator for reaching the strategic goals.

As a pioneer in the industry, Kuehne+Nagel has also decided to proactively address the CO2 footprint of the transportation services performed by its suppliers – airlines, shipping lines and haulage companies. Kuehne+Nagel targets comprehensive CO2 neutralisation (Scope 3 of the Greenhouse Gas Protocol – GHG) by 2030. As a first step, all less-than-container-load (LCL) shipments will be CO2 neutral from 2020 onwards.

Kuehne+Nagel’s Net Zero Carbon program leverages three fields of action: detection, reduction and compensation of CO2. The Group has started its own nature projects in Myanmar and New Zealand and has invested in various nature-based CO2 compensation projects, where carbon is being taken from the atmosphere. The emission credits obtained are in accordance with the highest international standards.

The Group’s sustainability report addresses in detail Kuehne+Nagel’s commitment to the principles of sustainable business practices and performance for the respective calendar year.