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            february 23, 2019

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CILF 2019


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European forwarders find it tough despite volume growth


Rising global trade volumes is only benefiting European freight forwarders to a certain degree since the resulting inflationary freight rates are putting "unprecedented" pressure on yields, according to a report by global investment bank Jefferies.
Last year, air freight volumes increased by 10 per cent over 2016, sea freight was up six per cent, and road freight by four per cent. The outlook for 2018 remains positive, however, the concomitant yield issue is also likely to persist, reported London's Air Cargo News.
Jefferies pointed out: "Estimated organic EBIT growth of 15 per cent for DSV, five per cent for Kuehne+Nagel, three per cent for Deutsche Post DHL and a ten per cent lower EBIT for Panalpina, reflecting differences in customer/product mix, IT functionality and the quality of management, and likely leading to increased M&A in the sector."
The investment bank said: "Our preference remains for diversified, well-managed freight forwarders, with strong IT functionality, best positioned to cope with expected ongoing yield pressure."
Jefferies lists the key risk factors in its valuations as "macroeconomic risks, impacting freight markets, freight rate volatility, which may not be immediately passed on to customers, the ability to maintain competitive IT systems and increasing competition from suppliers, moving up the value chain."
DSV - being less exposed to rising freight rates - remains Jefferies' "top pick" among the forwarders.
Kuehne + Nagel has been upgraded to "hold". Downgraded are Deutsche Post DHL to "hold" because of higher wage inflation in Germany and the expected continuation of yield pressures, and Panalpina to "underperform" due to "takeover speculation after a deteriorating FY17E performance," the analysts said.

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