Financial Statements 2007 - Another record result

Klaus Herms, Chief Executive Officer of Kuehne + Nagel International AG said, "Our comprehensive service portfolio attracted attention worldwide and generated sustained growth and remarkable results in 2007. In sea- and airfreight we met our ambitious objective to achieve profitable growth above the market average. Contract Logistics has become the company's third pillar and increased margins as well as significantly raising volumes. In the overland business, our focus was on growth and network expansion. The European hub system, launched in March 2007, already has considerably contributed to increased volume and strengthening of our market position. Kuehne + Nagel's success is based on its global capabilities, as well as its ability to provide single-source integrated services."

Seafreight

Seafreight maintained its momentum. Kuehne + Nagel outgrew the worldwide market and increased volumes by 15 per cent, handling more than 2.6 million TEUs. Growth in virtually all trade lanes was driven by the company's value-adding IT-based products, effective transport management, and strategic securing of freight capacity, which particularly benefited customers on the Asian routes. Despite investments in infrastructure, sales and IT, the operational result improved by 13.7 per cent. At 4.4 per cent, the EBITDA margin nearly equalled the previous year (4.5 per cent).
Airfreight
Airfreight exceeded all expectations. With a volume increase of 14 per cent, Kuehne + Nagel's organic growth was more than three times the market rate. Productivity increases and cost efficiency led to a 31.6 per cent improvement in the operational result. The EBITDA margin grew from 4.9 to a record 5.9 per cent. Key factors were intensified sales activity in all regions, cross-selling, and product improvements.
Road & Rail Logistics
Volume growth in the overland business was above the market average. Turnover rose by 14.0 per cent compared with the previous year. Successful integration of the companies acquired prior to 2007 and the launch of the European hub network, which generated strong demand due to its competitive cost structure, contributed to this favourable development. The operational result, which was 11.1 per cent below the previous year, was affected by planned investments to expand the overland network and standardise IT systems. The EBITDA margin was 1.2 per cent. A revaluation of goodwill and intangible assets led to an impairment charge of CHF 55 million. The Road & Rail Logistics business plan remains unchanged: to achieve an annual turnover of CHF 5 billion in the coming years. Following the late 2007 acquisition of two German groupage service providers with a strong regional foothold, the company is now focused on expanding its network in western and southern Europe.

Contract Logistics

With a 19.1 per cent turnover increase, Kuehne + Nagel solidified its position among the leading global contract logistics providers. The network, which embraces strategic locations in 55 countries, proved a good foundation for successful cross-selling activities. As a result, new business was won and existing contracts with major international companies were extended to other countries. Productivity increases from the standardisation and optimisation of operational processes contributed to a 28.5 per cent improvement in the operational result. The EBITDA margin rose from 4.8 to 5.2 per cent.

Cash flow

Operational cash flow increased from CHF 857 million to CHF 1,043 million year-over-year, due to the strong operational result, lower than expected capital spending, and optimal working capital management.

Dividend

At the April 30, 2008 Annual General Meeting, the Board of Directors will propose to distribute an increased dividend of CHF 1.90 per share, up 26.7 per cent from CHF 1.50 the previous year.

Turnover

In 2007 Group turnover grew by 15.3 per cent to CHF 20,975 million, with acquisitions accounting for CHF 80 million and currency effects for CHF 404 million.
All Kuehne + Nagel regions contributed to this increase; most significantly Europe, where turnover improved by 16.8 per cent. Increases were also achieved in the Americas (9.9 per cent), Asia-Pacific (14.7 per cent), and the Middle East, Central Asia and Africa (16.9 per cent).

Gross profit

Gross profit - a better indication of a logistics provider's margin and volume performance than turnover - improved by 14.5 per cent to CHF 6,014 million compared with the previous year. This increase was mainly achieved through organic growth; currency effects accounted for CHF 142 million and acquisitions for CHF 13 million.
Europe delivered the largest gross profit contribution (75.4 per cent) followed by the Americas (14.7 per cent) and Asia-Pacific (7.5 per cent).

Operational result (EBITDA)

The considerable volume and productivity increases resulted in an operational result improvement of 18.3 per cent to CHF 1,012 million; organic growth accounted for 16.4 per cent and currency effects for 1.9 per cent.
The European national companies' operational results increased by 19.6 per cent due to the good performance in all business units. The 10.5 per cent rise in the Americas mainly was due to intensified cross-selling. In Asia-Pacific, EBITDA improved by 16.1 per cent, particularly due to the expansion in China and India. In the Middle East, Central Asia and Africa, the operational result grew by 68.4 per cent as a result of the considerable increase of business volume, especially in South Africa and Saudi Arabia.
The EBITDA margin rose to 4.8 per cent from 4.7 per cent in 2006. The number of employees increased by 10.3 per cent to 51,075.

2008 Outlook

For the current business year, Kuehne + Nagel's objective in sea- and airfreight, as well as in Contract Logistics, is again to clearly outperform the market while maintaining stable margins.
The company will continue to make considerable investments to expand European overland activities. Acquisitions in France, Italy and Spain are being evaluated to strengthen the market position in these countries. Improving productivity and profitability remains a key focus.
"While 2007 was characterised by a favourable global economy and strong global trade, forecasts for 2008 are cautious," said Klaus-Michael Kuehne, Executive Chairman of the Kuehne + Nagel International AG Board of Directors. "In view of these circumstances, we will intensify our efforts to improve internal processes and optimise cost management. Our global presence and flexible structures should allow us to maximise overall growth opportunities, regardless of varying regional economic environments. In times of economic uncertainty, efficient supply chain processes are more crucial than ever, leading to increasing customer demand for the logistics services provided by Kuehne + Nagel. Against this background, we remain confident of the future performance of our business."