ANNUAL REPORT 2011 - Kuehne + Nagel

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Report of the Business Units _ _ _ _ _ _ Contract Logistics
Contract logistics: Large regional variations in development of business
In correlation with the uneven world economic development, the contract logistics
business unit was confronted by a number of challenges. Fluctuations in demand and high
price pressure impacted the business. While the currency-adjusted net turnover increased
by 7.8 per cent due to new business wins, the operational result was adversely affected by
the costs of restructuring measures.
Global contract logistics market
The main factors opposed to a revival of the global contract
logistics market were the volatile economies in North America
and a number of European countries together with growing pressure
on prices in trade and the consumer goods sector. The
rising demand for production supply services for industrial
companies, however, stimulated market demand. In relation to
the previous year the global contract logistics market grew by
approximately 3 per cent.
Differences in development of business
between the Kuehne + Nagel regions
Insufficient utilisation of warehouse capacity in Canada and the
weak demand in the USA as a result of the economic situation
prevented a sustained improvement in the result in North America,
although the restructuring measures, started in the previous
year, proved to be effective. The proportion of idle space was
substantially reduced due to new business and the closure of
unprofitable locations.
In South America, the contract logistics activities were expanded.
The new facility, taken into operation in Cartagena, Colombia
in October 2011, and the acquisition of Grupo Eichenberg in
Brazil, improved the range of integrated logistics services in this
region of dynamic economic growth.
In Europe, the situation of demand was extremely uneven. The
contract logistics business of the German and Dutch Kuehne +
Nagel organisations experienced an above-average development.
New customers were gained, and contracts with major multinational
customers substantially expanded. The mix of industries
with different cyclical sensitivities proved advantageous.
After the completion of the third and fourth expansion phases,
the enlarged logistics campus in Duisburg – with a total area of
160,000 sqm – was officially opened. The continuing strong
demand in this strategic location calls for a further expansion of
capacity. In the current business year, an additional warehouse
will be established and managed for a major customer of the
consumer goods industry.
Whereas in the United Kingdom results remained stable, the
economic situation in France resulted in pressure on margins,
deterioration in contract logistics results and the need for an
extensive restructuring. Capacity utilisation was good in Southern
Europe, but the national companies were subjected to enormous
pressure on prices. The investments in the development of
contract logistics all over Eastern Europe led to a number of successful
business transactions, primarily with customers from the
automotive and consumer goods industries. In this region too,
the integrated business model will have a positive effect on the
result.