Kuehne + Nagel’s anchor emblem evokes dependability as well as the name of a founder. But good skippers run before storms rather than moor to the seabed. The fate of the Swiss logistics group depends how skilfully newish head Stefan Paul does so. Trade winds have given way to an inflationary hurricane.
Supply chaos during and after the pandemic was good for logistics groups. Their rates soared, as did their shares until late 2021, before falling bumpily this year. Never mind that turnover in the first half of this year rose 55 per cent year on year, as the world recovered from lockdowns. Operating profits (ebit) more than doubled.
Markets prefer to focus upon the global economic slowdown ahead rather than celebrate today’s profits expansion. Kuehne + Nagel is an asset-light logistics provider — it does not own the ships or trucks. Without any leverage, it generated high teen percentage returns on its relatively slim asset base in the 12 months to June, a record for the group.
Even so, it has struggled with difficulties thrown up by widespread supply chain disruption. Rising energy costs are the latest bugbear, which not only have direct effects on its business but affect the wider economic background.
Paul claims that Kuehne + Nagel’s figures as yet show no signs of a slowdown. But already analysts have marked down operating profit estimates for 2023 by 42 per cent to SFr2.2bn from the current record year. That explains why its forward price/earnings multiple near 10 times plumbs decade lows. Though higher than the mean for comparable logistics companies, it is lower than that of Denmark’s DSV, a larger rival.
In rough economic weather, such a rating might be battered by the winds. Global economic worries are replacing the supply chain squeeze. Shares in Kuehne + Nagel have priced in a worst-case scenario. It is up to its new captain to prove the market wrong.
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