By Anastasiia Kozlova and Amir Orusov
(Reuters) – Swiss logistics group Kuehne und Nagel posted a bigger-than-expected drop in annual operating profit on Friday, driven by weakness in its ocean freight segment and higher costs, sending its shares 10% lower in early trading.
The group’s operating earnings slumped 49% to 1.90 billion Swiss francs ($2.15 billion) last year, missing analysts’ consensus forecast of 2.01 billion Swiss francs.
Kuehne+Nagel, one of the biggest ocean and air freight forwarders worldwide, said its sea logistics business recorded a 55% drop in fourth-quarter operating earnings, while air logistics saw a 52% slump.
Most of the earnings miss seems to have come from the sea freight business that recorded both lower yields and conversion rate, J.P.Morgan said in a note.
Bernstein analyst Alex Irving pointed to higher costs in air and ocean units.
The ocean shipping industry is bracing for months of upheaval, as disruption caused by Houthi rebels in the Red Sea lifts costs on sea freight shipping across the globe, while attempts to reroute shipments may cause a shortage of vessel space and send short-term transport prices sharply higher.
Kuehne+Nagel didn’t comment on the situation in the Red Sea or provide an outlook for 2024 in the earnings statement.
“Our expectation is that estimates for future years will move lower, with the Red Sea situation producing only a small earnings boost,” J.P.Morgan wrote.
Analysts have said higher rates offer only a temporary uplift for shipping firms, as underlying issues such as low demand and excess freight capacity keep weighing on the sector.
The company, which operates in more than 100 countries, said it had adjusted its cost base in the fourth quarter in response to the tougher market conditions, resulting in one-off redundancy costs of 53 million francs.
That included laying off less than 2% of its global workforce, a company spokesperson told Reuters.
The group proposed a nearly 30% cut to its annual dividend to 10 francs per share compared to a year earlier.
($1 = 0.8847 Swiss francs)
(Reporting by Anastasiia Kozlova and Amir Orusov in Gdansk; additional reporting by Oliver Hirt in Zurich; editing by Milla Nissi and Elaine Hardcastle)
