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Kuehne + Nagel takes hit from higher rates caused by Hanjin's collapse

FORWARDER profits in September and the third quarter have been squeezed by rate hikes triggered by the loss of shipping capacity by the financial collapse of Hanjin.

"Rates went up virtually within 24 hours of the Hanjin bankruptcy and we were committed to our customers to ship on certain volumes that we had agreed," said Kuehne + Nagel CEO Detlef Trefzger.

"Therefore, we had to buy more expensive rates than those we would have negotiated one, two, three weeks in advance. And that led to the margin dilution, mainly in September," said Dr Trefzger.

This contributed to KN losing an average of CHF16 (US$16.1) per TEU in gross profit (GP) in the third quarter to September 30, he revealed, although volume growth in K+N's sea freight business during the quarter meant that overall gross profit had remained stable at CHF362 million.

But Dr Trefzger expects K+N's gross profit per TEU to return to the levels the company had seen in the second quarter before year-end. He said that K+N's 'exposure" to Hanjin "has only been with goods that were not time-critical. We were surprised, but we were not affected a lot by the Hanjin bankruptcy."

The world's largest sea freight forwarder saw its third-quarter earnings before interest, taxes, depreciation and amortisation decrease by 3.6 per cent, year on year, to CHF270 million, after its sea freight profits were impacted by low freight rate levels and liner consolidation.

KN said its Q3 ocean container volumes rose 4.5 per cent, but gross profit per TEU fell by 4.4 per cent. "The low rate levels in most of the trade lanes continued and the impact of the further consolidation of the shipping industry increased pressure on the margins," said the company.

In the third quarter the company increased its air freight tonnage by 3.8 per cent and gross profit per 100 kilogrammes by 1.4 per cent, "mainly due to further scaling its industry-specific solutions," it said. Its contract logistics division saw vertical-specific solutions produce a 4.4 per cent increase in Q3 gross profit.

The company's overland unit benefited from strong demand out of Europe to see "growth momentum in turnover and gross profit from the previous quarters?continue in the third quarter.