(Adds company and analyst comment; rewrites throughout)
* Kuehne & Nagel shares slump after sharp Q1 profit drop
* Kuehne eyes price hikes to counter higher freight rates
* Company freezes hiring through year-end, CFO tells Reuters (Adds details from statement)
By Katharina Bart
ZURICH, April 16 (Reuters) - Kuehne & Nagel said it would step up the pace of cost-cutting after a drop in first-quarter profits on higher spending from growth initiatives, lower margins and a fine from the European Commission.
Shares in the freight forwarder slid after the company reported a slump in net profit to 68 million Swiss francs ($73.98 million) from 155 million francs in the year-ago period, hit by a 65 million franc fine levied by the European Commission last month for cartel activities.
“We are confident that the measures implemented as well as solid growth will contribute to an improvement of results in the second half of the year,” chief executive Reinhard Lange said in a statement.
Kuehne’s stock opened sharply lower on the unexpectedly sharp drop in profits. At 0741 GMT, the stock traded 5.2 percent lower at CHF112.90, bucking a 0.4 percent rise in the European industrial goods and services index.
Bank Vontobel said Kuehne’s poor results confirmed its cautious stance on the stock, which it rates at hold.
“The benefits of Kuehne & Nagel’s growth strategy continue to reflect in high volume growth but at a cost which depresses margins,” Vontobel analyst Michael Foeth said. His target price is 125 Swiss francs.
Kuehne’s profits and margins are suffering because the company cannot pass on higher freight rates it must pay for capacity quickly enough to clients by hiking prices.
Kuehne’s revenue rose to 4.83 billion francs from 4.82 billion francs on seafreight volume growth of 9 percent in the quarter. The company’s airfreight volume grew by 4 percent in the quarter.
Specific cost-cutting measures include a freeze on hiring new employees through this year at least, which is expected to reduce total staff rates, financial chief Gerard van Kesteren told Reuters on Monday.
Rival Panalpina reports on May 4.
$1 = 0.9192 Swiss francs Reporting By Katharina Bart; Additional reporting by Oliver Hirt Editing by Matt Driskill and Helen Massy-Beresford