Kuehne + Nagel International AG

Ladies and gentlemen, welcome to the Q1 2021 results conference call and live webcast. I am Alice, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Detlef Tretzer, CEO of CuneiNagel. Please go ahead, sir.

Thanks, Alice. Good morning, good day, good afternoon, and good evening to all of you, and welcome to the analyst conference on the first quarter 2021 results of CuneiNagel International AG. Our CFO, Markus Blanka, and I welcome you from sunny Switzerland. We published our first quarter 2021 results and the respective slide deck early this morning. And as always, let's get started on slide three. We have seen a very strong demand for our transport and logistics services in the first quarter 2021 and thus have started the year strongly with an increase of net turnover of 22.8%. with an increase of gross profit purely from organic growth of 16.9% and an increase of earnings per share of 130.4% versus previous year. The free cash flow slightly decreased by 7.1% compared to previous year, while in last year's figures we have shown proceeds from a sale of real estate. Let's continue on slide four with some details, slide overview on the group and the business units. The quarter one EBIT resulted at 431 million Swiss francs, which were up 134.2%. Result from pure operational strengths in all four business units. There were no one-offs recorded in the first quarter 2021. with a group conversion rate of 23%, marking an all-time high, we have to say. Sea logistics, EBIT closed at 206 million Swiss francs, very strong operational performance with an increase in service intensity versus an almost chaotic sea freight market. For sure, we will go into more details later on. Air logistics closed the first quarter with an EBIT of 163 million Swiss francs, Strong volume and yield performance in the first quarter led to that result. A very solid operational performance in road logistics led to an EBIT of 24 million Swiss francs, while the European volumes are recovering and continue to grow. Contract logistics closed the first quarter with an EBIT of 38 million Swiss francs. We are back to organic growth on market level. And as expected, the restructuring is bearing fruit. More details now on the business units. And please follow me on slide six. Here you see the sea and air logistics volumes. Let me start with sea logistics first. The KN sea logistics volume is up 2% versus previous year's quarter one. Although exports of commodities like forest, agricultural and recycling product paper, for example, ex-US and Europe were down 20%, a result of the high rates in the market, which could not be bared by those shippers. Focus of KN has been on serving our top customers with a high service intensity. Our LCL, less container load volumes, were up 26%. and the Trans-Pacific Asia to US volumes were up more than 35%. US and partly Europe imports were booming, which were a result obviously of the government stimulus programs. And the market situation is unchanged. We have equipment shortages, we have carrier capacity shortages, and we have a very low port productivity. driven by the pandemic. All those parameters are staying intact, so to say, and we believe that the market situation remains unchanged for the next couple of months. Let's continue with air logistics volumes. First time after two years, we returned to a robust growth with a volume growth of 16.4%. This was mainly driven by automotive, pharma, and high tech, and with a very strong tonnage trend also continuing, while general cargo and especially perishables underperformed. Also here, strong Asia exports, transparent Europe here to mention, and the situation in the capacity supply, the long haul packs, belly capacity is still depressed. while the current depends on dedicated freighters on block space agreement and charters continues. And after the volume overview for sea and air logistics, let's continue with some unit KPIs for sea logistics on slide eight. The strong year that you have seen in quarter one reflects both. a favorable portfolio development small and medium-sized enterprises and no commodity in our mix virtually no commodity delivering second effect delivering an intensified and premium service to meet the exceedingly high customer demand versus a constrained market situation and i said it before a rather chaotic market very difficult to predict so our Intensity also increased. More demanding services require additional cost, additional manpower, additional expertise, and thus leading into a high EBIT per TU, which is 50 to 60 francs per TU higher than the usual guidance that we give for the per TU EBIT that we expect in a normal market environment. The air logistics unit KPIs, slide 10, those to compare with our operational air logistics figures. So it's no one of reported in those KPIs for previous quarters. I'm not talking about quarter one, 2021. This quarter, the last quarter, we delivered a small degree of yield and EBIT per unit normalization. So you'll see that we have a stable, maybe more predictable market environment. Stable unit costs, including first effects of our eTouch initiatives, and we have reported in our last call in more detail on this, and we'll do so in our call on the semi-annual result for 2021. in summer this year and anticipating a much greater degree of stability in the air yields and EBIT per unit. That's for the moment our outlook for this market segment. There's little changes in demand mix and capacity situation, which also drives a more stable but still high market situation. We go through to slide 12, our third business unit, road logistics. And we mentioned that on the previous slide, European cross-border businesses recovering and the demand of domestic transports in Europe started to grow again. And in a nutshell, we could say a weak start, especially in Europe, and especially the Brexit situation, the first four weeks or maybe six weeks, and a very strong finish deliver a satisfactory result. The continuation of our shipment recovery in Europe, but at lighter average weight of shipments, which we mentioned already in our last call driving productivity strain, especially with European in the European road logistics business. North America remains still weak. And we have seen that the rollout of our e-track platform started also successfully in Europe and in other markets. So we see huge booking increases on that platform, not only last quarter, but continuing also in this quarter. The EBIT for the first quarter 2021 at 24 million, which is 41.2% above prior year, purely operational, purely organic, no special effect included in those figures. And then let's move on to contract logistics, our fourth business unit. And we mentioned that also in our press announcement, back to organic and the restructuring bearing fruit. And we have seen, although we grow on market level, especially in the pharma and healthcare sector, as well in e-commerce fulfillment, market share gains throughout the last quarter. EBIT rises significantly thanks to the restructuring, fully concluded and accomplished, and a return to deliberate organic top-line growth. Strong momentum gained in pharma, healthcare, and e-commerce fulfillment. And we repeatedly mentioned that because these are leverage areas, as we call them, which bear fruits across the other business units as well. We have reported an EBIT for the first quarter of 38 million Swiss francs. which is 16 million above prior year, excluding divestment impacts, a pure organic improvement, which shows the strong operational development of contract logistics. Let me summarize. Our group marks a strong start to 2021. Still, the majority of our white color stuff is working mobile or from home so we shouldn't underestimate the situation it's almost two-thirds of the people that are still not in a normal business environment there's only one country globally where we have a normal business environment pre-pandemic which is greater china um And I would like to state once more a heartfelt thank you to all our colleagues worldwide for serving our customers excellently versus the many market challenges and daily challenges we all have to face. Great job. Thank you very much. And now I have the honor and pleasure to hand over to Markus, who will lead you through the key financial figures.

Thank you, Detlef. Also, ladies and gentlemen, welcome from my side. I start on number 16, income statement. And indeed, it's a very strong quarter. We can report in absolute terms and also in relative terms to last year, of course. I have to say, I will keep presentation short. It's easier to talk to good numbers, obviously, than anything else. Anyway, a little bit into the details of the development in the first quarter. I want to point out two specific numbers. The first number, the gross profit increase on the nominal side, 141 million. If you look through the divestment impact of our contract logistics customer portfolio in the UK, which we closed in January 2021, you have actually a growth of 16.9% on the gross profit line, which translates into roughly 285 million Swiss francs. Jumping down to the line of EBT, earnings before tax, so the incremental 285 million gross profit have resulted in around 248 million EBT. Two effects, yes, air freight and sea freight, of course, delivering extremely strong results. On the other side, also, the effect out of the deconsolidation where one may say we have exchanged a business that has a lower conversion rate with additional business in CNF rate that has higher conversion rates. Brings me to the second point I want to point out, conversion rate. You can see here our conversion rate of 21.3% for the group. This relates and compares to our target of 16% for the year 2022. So now, of course, one could say that was an easy target. You know, you have reached it already now. I just want to make sure we understand this also correctly. This was a very strong quarter. We started off in 2021. For sure, the money that has been done in that quarter will not disappear, but I would be careful in just extending 21.3% over the year 2021. Moving on to the balance sheet, page number 17, three topics. One more technical information you still see here in December 31st, the asset held for sale and the associated liabilities in the extended 400 million. That, of course, after the consolidation in January has disappeared. Secondly, you see a huge increase in trade receivables from 3.4 billion at the year end to 4.1 billion at the end of the first quarter. Function of, and we may talk about it in the Q&A session then, it's a function of additional volume and, of course, significantly higher rates for sea and air freight cargo. Last but not least, cash and cash equivalents, yes, 1.8 billion on the balance sheet. you're well aware that we are in the process of closing with our acquisition in Asia with Apex. There we will need a certain liquidity out of this bucket. And as well, the next liquidity reduction that we will see is the dividend payment in 2021. Which leads me straight into the cash flow statement, page number 18, free cash flow. Two items that I would like to pick out here. This is changes in working capital, 291 million. I come back to what I said on the trade receivables. Yes, there is a huge increase in volume and rates. That is pushing up the working capital requirement. And we will see that also on the statement for the net working capital intensity, we have a slight increase in DSPs of around one day, which leads as well into some of the increases of the changes in working capital. Second, I wanna point out the free cash flow for the first quarter is here reported for the year 2021 with 145 million compared to 156 last year. Just want to mention that in last year's numbers, we have a cash inflow from disposal of real estate of 164 million, which in broad terms, you could say, The first quarter last year was, with exception of the real estate inflow, a flat quarter, whereas this year we have created 145 million. Moving on swiftly to working capital, page number 19. comparing year over year, end of March 2020 and end of March 2021. And it is quite amazing that we work on the same net working capital in absolute terms, around 900 million. that we need for the working capital requirements. So, same level of networking capital and double the profitability. So, that's certainly a recipe that all of us like and all of us are striving for. Going further down on the lines on the DSO, what I referred to previously, a slight slippage in the DSO, 1.2 days, which certainly has also contributed to what I said before in the changes in working capital. So, overall, we have a picture of strong operational performance, stable networking capital, and some benefits from the divestment of assets that we sent in the UK, which you can summarize and you can visually very easily see on the page number 20. Return on capital employed has absolutely topped here at around 90%. Also here, I don't want to be the one that issues disclaimers too many times, but I think my calculations, and I repeat what I said also in the past, the technical return on capital employed rate for the balance sheet is around the 70%. Of course, when we have huge improvement in profitability, this moves upwards. But I think that is the 90% number is a number that we should remember as one of the top end of our expectations. With that brief run through the numbers, I would hand back to Daniel.