Dr. Trefzger, Mr. Blanka-Graff:
How do you assess the 2017 business year?
Dr. Detlef Trefzger (DT): Kuehne + Nagel closed the 2017 business year successfully. We are particularly pleased with the business units airfreight, contract logistics and overland. I would like to highlight the performance in airfreight, with volume growth of 20 per cent and increased productivity. Contract logistics has also set new record highs in all key figures. In overland, our systematic approach to implementing our strategy is effective. The very good results of this business unit are clear evidence. Seafreight faced challenges due to the changes in the operating environment. In the last decades there has not been such a rapid and extensive consolidation of container shipping companies as in 2017. We successfully coped with this difficult situation, not least due to volume growth in seafreight clearly above market average. We again saw productivity improvements in seafreight, as in all other business units.
In parallel we developed our new strategic programme KN+ NextGen, communicated it internally and externally and started implementation. We completed four acquisitions and seamlessly integrated these companies into our Group.
Markus Blanka-Graff (MBG): In 2017, we have witnessed a major strength of Kuehne + Nagel: managing four business units, each with very different operating dynamics; simultaneously closing and integrating acquisitions; developing a new strategic approach and extending the business organically.
What are the main reasons for the strong results?
DT: We implemented our go-to-market strategies very systematically. Our clear focus on target customers and target markets is a major factor behind our success. We have high levels of industry-specific competence and a strong global presence. Our customers from different industries benefit from our scalable industry-specific solutions, which we implement with outstanding operational excellence. I am thinking of the automotive, aerospace, high-tech, pharma and healthcare industries and e-commerce. Strongest growth was achieved in the latter two segments in 2017.
We are also pleased with the performance in the regions. Our main business continues to be in Europe but growth momentum outside Europe has accelerated considerably. At the same time our domestic footprint is to be expanded in Asia where we see further potential.
MBG: We achieved stable conversion rates, the EBIT-to-gross-profit ratio, in all business units and further solidified our balance sheet structure.
Kuehne + Nagel is the number one in global seafreight. Why does profitability for seafreight lag behind compared to the other business units?
DT: There has been a fundamental transformation in the operating environment for seafreight. There are now just three container shipping alliances, likely to be joined by a fourth in the course of 2018. This consolidation has an impact on capacities available in the market and on the rate structure. It was not possible to pass on the very significant rate increases that occurred in rapid succession in almost all trade lanes to customers as quickly as we originally thought would be possible.
MBG: We managed to partly compensate for the negative effects of the rate increases and resulting margin pressure. Further efficiency improvements enabled ongoing productivity gains, leveraged with significant volume growth. The conversion rate is amongst the highest in our industry in 2017.
In seafreight, we will focus more on industry-specific and integrated solutions, which in addition to continuous automation and digitalisation is a factor that will increase the added value per container.
The Capital Markets Day was also one of the highlights of the past year.
MBG: Yes, we held our first Capital Markets Day in three years to introduce our new strategic programme KN+ NextGen. We presented how we are going to extend the supply chain to the value chain with more complex technology and data-based solutions. This approach goes beyond conventional network business and provides new impulses in our industry. It will secure growth and our company’s future success. Feedback from participants was entirely positive, and they valued KN+ NextGen as the right strategy for a leading company in our industry.
KN+ NextGen is Kuehne + Nagel’s strategic programme to 2022. What are the focal points?
DT: All markets, both our customers’ and the global transport and logistics markets, are undergoing a substantial change. This transformation is enabled by technology and driven by consumer behaviour. We are launching KN+ NextGen to align our company with the changes in the market environment. Our ambition is: “Leading the Transformation.” KN+ NextGen itself is a transformative programme, as we are adjusting every business unit in anticipation of future structures and customer requirements.
MBG: The strategic programme has been developed in-house in parallel with day-to-day business. We took the conscious decision not to involve external support, since the authenticity is crucial for the programme’s success. The enthusiasm with which KN+ NextGen is being received within the company is impressive. That is important because our business is and always will be a people’s business that thrives on our employees’ passion.
How will KN+ NextGen work?
DT: We will speed up and expand automation and our use of technology. In this field, our company has always played a pioneering role. Kuehne + Nagel has been the first logistics provider to bring a digital platform, KN FreightNet, for quoting, booking and tracking shipments onto the market. Now, we will be marketing more and more eTouch solutions to gain new customers over new distribution channels. Automated processes will be used for standard shipments and commodity freight. The use of big data and predictive analytics is also increasingly important. We showed our pioneering spirit with the establishment of our data company LogIndex. In future, we will be able to optimise supply chains predictively, including influencing customer-side processes such as resource planning. We are extending our activities beyond the supply chain to the value chain.
MBG: One example of the extension of the supply chain into a value chain is our finance solutions offering. Access to liquidity is currently a major market obstacle in many parts of the world. We have therefore developed a platform for microcredits where customers, for whom we organise transports, can obtain trade finance in an integrated process.
What is changing for your employees?
DT: We have excellent employees, who belong to the best in our industry. They do not just produce outstanding work every day, they drive our digitalisation and the company’s transformation. At this point I would like to thank our employees for their excellent work. They are the ones who will shape the transformation we have described. We will give them the tools they need. Last year, we launched an internal platform for collaboration, communication, training, learning and internal professional development to strip out and modernise their working environment. As a result, our employees can concentrate on specialist work and provide customers with maximum added value.
What are the main objectives for this business year?
MBG: The objective is to achieve double the market growth across all business units, hence gain additional market share. We are aiming towards a conversion rate of 16 per cent by 2022 for the Group.
DT: We set this target very deliberately for the whole Group since we are in the business of selling integrated services. Customers from all industries benefit from Kuehne + Nagel’s specialised competence and global networks across all business units. This is what allows us to make an active contribution to our customers’ success.
Dr. Detlef Trefzger,
Horst Joachim Schacht,