Kuehne + Nagel speeds up expansion in South America
Buying the leading logistics services provider in Brazil could shut out smaller domestic competitors
Published: July 29, 2011
On the heels of strong earnings, Kuehne + Nagel (K+N), announced in July 2011 it would acquire Brazilian trucking firm Grupo Eichenberg. K+N, the world’s largest freight forwarder, will take over the shares of Eichenberg in a deal reported to be worth US$52 million. The strategic acquisition is expected to speed up K+N’s expansion in the growing South American market.
“This acquisition is in line with our global growth strategy and ideally fits our objective to significantly expand our activities in particular in Brazil, one of the world’s key growth markets,” said Karl Gernandt, chairman of K+N.
Reliability of road transport remains a major logistics concern for shipments throughout South America, especially for bulk commodities such as forest products. If K+N continues to offer their customers more shipment options, especially those that might bypass the typical delays with road and rail traffic, say analysts, they could quickly shut out smaller domestic competitors.
However, say regional observers, the greater challenge for K+N lies in the less-than-optimal road conditions for much of Brazil and South America. Even with the promise of increased integrated services, there is little to be done when traffic congestion and border crossing requirements cause unexpected and lengthy delays.
Grupo Eichenberg is a leading provider in the South American logistics sector, offering daily service between Brazil and Argentina, Chile, and Uruguay. A family-owned business for 75 years, Eichenberg is headquartered in Porto Alegre and managed by the family’s third generation. The company, which also is involved in domestic air freight forwarding, currently operates 14 locations.
“In a dynamically growing market, companies from industry and trade are looking for global logistics solutions, allowing them to create value and increase competitive advantage,” said Gerson Eichenberg, chairman of Grupo Eichenberg.
K+N started operations in South America in 1962 with its first forwarding office in Brazil. Before acquiring Grupo Eichenberg, the company operated 25 locations throughout South America.
Making no significant acquisitions in 2010, K+N has been on a buying spree since the beginning of the year. In January, K+N acquired three South American companies in Colombia and Ecuador, expanding their presence in the perishables markets and strengthening its regional air freight business. The operator also made other acquisitions this year in the perishables markets in New Zealand and the Netherlands.
In March 2011, K+N acquired RH Freight Group, creating the second largest mover of road freight between the UK and continental Europe. The deal expanded K+N’s overland network, gaining RH Freight’s specialization in groupage services along with 32 European destinations and over 30,000 square meters of warehousing space.
“We needed to grow our UK presence and this makes us a major player,” said Jim Hedderwick, managing director of the new firm. “We can now look at our air freight, sea freight, and contract logistics position as there are opportunities to cross-sell and generate volume."
These earlier expansions seemed to have spurred the above-average growth for the first half of 2011 reported by K+N. Over the first six months of the year, the company saw net earning improve by 11% and EBITBA earnings increase 5.7%.
K+N’s sea freight division maintained a high level of container volumes, increasing 12% over the first half of the year, double the market growth rate of 6%. The company’s road and rail segments recorded a 21.4% in net turnover for its European overland activities. Newly acquired RH Freight is estimated to have contributed approximately 10% of the increase in shipments.
“Market analysts anticipate slower growth in the logistics industry,” said Gernandt. “Nevertheless, the K+N group is well positioned to tackle future challenges.
“Considering the debt crisis and currency situation in Europe as well as the volatile world economy, it is not possible to reliably forecast how the global markets will develop in the second half of the year."
Transport Intelligence, in its latest Global Freight Forwarding 2011 report, ranked K+N as the world’s largest freight forwarder in 2010, in terms of combined air and sea freight revenues. DHL was ranked in second place.
