Effective strategy: new record levels achieved

<media 6347>Consolidated Financial Statements 2010</media>

Karl Gernandt, Executive Vice Chairman of the Board of Directors, said: “The company’s strategic parameters are set to achieve growth above market average while at the same time increasing efficiency and productivity. This approach proved successful in 2010. Due to our industry-specific product portfolio we gained market share in all our business units and strengthened our global competitive position. Efficiency increase, documented by the improved ratio between gross profit and EBIT, indicates the internal strengths of the Group and provides a resilient basis for further development in the years to come.”

Economic environment
In the first half of 2010, there was still no certainty of a sustained global economic recovery due to the lasting recession in the U.S., the credit risks in some southern European countries and the volatility in international finance markets. Emerging countries, primarily China, significantly contributed to the growth of global trade, which closely correlates with the international logistics business. While the economy in Asia picked up significantly, a diverging gross domestic product development was seen in the other regions. In this environment, the Kuehne + Nagel Group concentrated on its strengths: customer orientation, detailed industry know-how, operational excellence and internal efficiency.

Development of the business units

Seafreight
In 2010, Kuehne + Nagel’s seafreight business recovered its growth momentum of the pre-crisis years. With an increase in container volume of almost 16 per cent, the company outperformed the market (between 10 and 12 per cent), and gained market share in almost all trade lanes. Kuehne + Nagel fully participated in the Asia export and import boom and recorded highest growth in the trades between Asia and Latin America. Important factors were its IT based products, efficient route and transport management, as well as strong demand for the LCL (less-than-container-load) activities which contributed significantly to the results in this business unit. Increased productivity and strict cost discipline resulted in a 17.3 per cent rise of the operational result. EBITDA to gross profit margin improved to 36.0 per cent (previous year: 31.3 per cent).

Airfreight
The recovery of world economy, market-oriented airfreight products and proactive capacity management resulted in a significant upturn for Kuehne + Nagels airfreight business. Cargo increased on all routes, particularly in the traffic from and to the Asia-Pacific region high growth was recorded. The Group achieved new record levels of cargo volumes handled (almost 1 million tons – a 25 per cent increase compared to the previous year) and productivity. The development of solutions tailored to specific industries, e.g. pharmaceuticals, high-tech and perishables, proved successful. The operational result increased by 47.2 per cent, EBITDA to gross profit margin improved to 31.2 per cent (previous year: 25.0 per cent).

Road & Rail Logistics
In the European overland transport market, the strong economic upswing led to a marked increase in freight volumes. At the same time, service providers had to cope with fierce competition and increased price pressure. Kuehne + Nagel faced up well to the situation. The expansion of activites in the groupage, less-than-truckload (LTL) and full-truckload (FTL) businesses led to a 16 per cent rise in net invoiced turnover (currency adjusted). However, investments in additional locations in France adversely affected the operational result of this business unit, which was 17.3 per cent lower than in the previous year. EBITDA margin decreased from 2.1 per cent (2009) to 1.5 per cent, presenting a challenge for the time to come.

Contract Logistics
After the global slump in demand in the preceding year, the contract logistics market recovered slightly in 2010 with a 3 per cent growth, although pressure on margins remained. Kuehne + Nagel gained a number of new contracts worldwide, resulting in a 5 per cent (currency adjusted) increase in net invoiced turnover. Idle space, caused by the 2009 crisis, was reduced significantly. However, negative exchange-rate effects and still insufficient result development in North America impacted the operational result. EBITDA margin remained almost stable at 4.4 per cent (previous year: 4.6 per cent).

Turnover
In 2010, turnover increased by 16.4 per cent to CHF 20,261 million, despite a negative currency effect of CHF 928 million, which was much higher than in previous years.

All Kuehne + Nagel regions contributed to the turnover increase. Asia-Pacific recorded highest turnover growth of 32.3 per cent, followed by the Americas with a 25.5 per cent increase and Middle East, Central Asia and Africa with 15.2 per cent. In Europe, turnover improved by 12.1 per cent.

Gross profit
Gross profit rose by 1.6 per cent to CHF 5,958 million despite a negative currency effect of CHF 338 million.

The Asia-Pacific region recorded a gross profit increase of 22.2 per cent, and Middle East, Central Asia and Africa of 12.3 per cent. In the Americas gross profit increased by 10.8 per cent. Due to negative currency effects (7.2 per cent), in Europe gross profit decreased by 2.3 per cent.

Operational result (EBITDA)
Earnings before interest, tax, depreciation and amortisation of goodwill and other intangible assets (EBITDA) increased by CHF 119 million (13.4 per cent) compared to the previous year. This includes negative effects of CHF 52 million from currency exchange rates.

With CHF 593 million (59.1 per cent) the biggest contribution to the operational result came from Europe, followed by the Asia-Pacific region with CHF 221 million (22.0 per cent), the Americas with CHF 152 million (15.1 per cent) and Middle East, Central Asia and Africa with CHF 38 million (3.8 per cent).

Dividend
In view of the very good development of business and results as well as the high cash flow of the Kuehne + Nagel Group, the Board of Directors will propose to the Annual General Meeting of May 10, 2011, to distribute a dividend increased by 19.6 per cent to CHF 2.75 per share (previous year: CHF 2.30).

Outlook 2011
The economic outlook for the current business year is favourable, although potential for a setback is still present, including such factors as currency risks and rising commodity prices.

“The 2010 results have established the direction for the further implementation of our growth strategy,” said Reinhard Lange, CEO of Kuehne + Nagel International AG. “In 2011 again, our goal is to achieve profitable growth above market average in sea- and airfreight. In contract logistics we also target growth above market average while keeping margins stable. A combination of organic growth and strategic acquisitions will result in further progress in European overland transportation. In addition, strategy implementation will focus on the expansion of regional operations, in particular in China, India, Brazil and Colombia, and the extension of tailor-made solutions for selected industries. The Kuehne + Nagel Group is customer-orientated, powerful and innovative. Therefore, we are very confident that we will accomplish our goals for 2011.”

In addition to the publication of the Financial Statements 2010 Kuehne + Nagel announced today an acquisition in the UK, which is a further important step in the scope of its growth strategy.

Please note our press release:
“Kuehne + Nagel to acquire RH Freight”