By Dominic Chopping

Kuehne + Nagel shares fell Tuesday as earnings at the freight forwarder's sea logistics business disappointed investors and dragged on the group's overall profitability.

Sea logistics had a rise in fourth-quarter earnings as it benefited from continued efforts to manage costs. But volumes fell and profitability per container that it shipped declined from the third quarter, leaving earnings at the unit shy of forecasts.

Shares traded 5% lower in early European trade.

The smaller air-logistics business had a good quarter though, as it had better volumes with stable market share and improving profitability thanks to demand from the aerospace and pharma industries and as it transported more perishable goods.

Analysts at JPMorgan noted that the air logistics performance was strong as profitability came in ahead of expectations, but sea logistics profitability was below expectations and overall volumes declined.

"We continue to see the backdrop as challenging for EBIT growth in 2025 and 2026 and remain cautious," they said in a note to clients.

The company has right-sized its cost base and streamlined its organizational and sales structure. It said Tuesday that more measures have been initiated for 2025 as it aims to accelerate growth in all of its business units, with the aim of growing faster than the market.

The freight industry spent 2024 dealing with increasing supply-chain congestion as container vessels are still having to avoid the Red Sea after attacks on commercial ships from Houthi rebels, as well as Russian airspace remaining closed due to the war in Ukraine, an underlying macroeconomic slowdown, and moderating but persistent inflation.

The year ended in fear of global trade tariffs and the company said it had an increase in demand for sea and air freight, with Chinese e-commerce companies the major source of volume increases offsetting the weakness in industries such as autos.

The company last year discontinued its regional structure, creating a new direct reporting line of its units to simplify responsibilities, allow quicker responses to rapidly changing market developments, and allowing business decisions to be implemented faster.

It has also sought new growth opportunities through acquisitions in North America and Asia.

"In short, we have created a more efficient organization with a broader offering to achieve our future ambitions," Chief Executive Stefan Paul said.

The Swiss logistics group plans to grow average annual earnings before interest and taxes by 17% to 19% in the period to 2026, from 2019 levels, while achieving a conversion rate--the ratio of EBIT to gross profit--of 25% to 30%.

It reported a conversion rate of 19.0% in the fourth quarter, up from 15.6% in the same quarter a year earlier. The conversion rate fell to 19.1% for full-year 2024 from 21.7% in 2023.

Kuehne + Nagel will report on strategic progress and provide a financial outlook at its coming capital markets day on March 25, it said.

"Kuehne + Nagel is well positioned at the start of the new financial year. We are confident that the positive development will continue in 2025," Chairman Joerg Wolle said.

The company reported a net profit of 315 million Swiss francs ($351.2 million) in the final quarter of 2024, up from 283 million francs in the same period a year earlier as turnover rose 19% to 6.76 billion francs. A FactSet poll had forecast net profit of 329 million francs on turnover of 6.41 billion francs.

It proposed a dividend of 8.25 francs for 2024, down from 10 francs in 2023, but better than the 7.60 francs expected in a company-compiled consensus.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

March 04, 2025 03:42 ET (08:42 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.