Kuehne + Nagel International AG

Ladies and gentlemen, welcome to the Q1 2025 Results Conference Call and Live Webcast. I'm Sandra, the Chorus Call Operator. I would like to remind you that all participants have been listened on remote and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stefan Pohl, CEO of Quinenagel. Please go ahead, sir.

Thank you very much, Sandra, and good afternoon and welcome to the presentation of Kühne Nagels First Note. So we had a technical. I start again. Thank you very much, Sandra. Good afternoon and welcome to the presentation of Kühne Nagel's first quarter 2025 financial results. I'm CEO Stefan Paul. And once again, I'm joined today by our CFO, Markus Blanka Graf. Let's move to page number two. First quarter 2025 results, market share up, profits up. In the first quarter of 2025, we made progress toward our strategic goal, which is to expand our market share with a close eye on profitability. Market share gains and improved yields drove 8% year-over-year growth in top-line gross profit and 7% uplift of EBIT. C&L Logistics alone delivered 12% year-over-year EBIT growth, excluding the first-time consolidation of IMC, The organic sea and air EBIT growth was also robust at 8% on the back of 5% cross-profit growth. The combined organic sea and air conversion rate improved modestly to nearly 33%. This contributed to bottom-line EPS growth of 6% year-over-year or 4% on an organic basis. Looking at cash, we have seen improved free cash conversion rates in recent quarters. That trend continued in Q1. The free cash conversion rate of 55% is well above the historical average for the first quarter, which is seasonally the weakest of the year. Working capital was the key contributor to this large positive year-on-year development. Finally, The first quarter results once again demonstrate the value of adhering to our flexible, light business model, utmost market volatility. Next is slide number three, Z-Logistics. Return to year-over-year volume growth. Z-Logistics EBIT rose by 7% year-over-year in Q1 to SwissRank's $210 million. On an organic basis, Q1 EBIT matched the prior year level of SwissRank's 197 million. Overall, volumes were up 3% in the quarter, marking a return to year-over-year headline growth for the first time since Q1 2024. Excluding the effects of these selected volumes, underlying growth was 6% year-over-year versus estimated market growth of 3%. This marks an acceleration of the underlying growth trend after 4% year-over-year in Q4 and 2% in Q3. This is an outcome of our continued effort to grow market share through a focus on customer proximity, network expansion, anchor trade lands, and a stronger differentiated value proposition. The average yield increased by 11% due in large part to the first-time consolidation of IMC our US drayage acquisition. Excluding IMC, our average yield of SwissRex 497 per TU was comparable year-over-year and up 7% sequentially versus Q4. The result was organic growth profit growth of 2% year-over-year or 15% including the contribution from IMC. Turning to OPEX, organic unit costs were flat year on year. This suggests an absolute cost increase in line with volume growth. Organic unit EBIT of CHF191 per TU was down 3% year over year, but up 6% sequentially versus Q4. This all translates to a conversion rate of 36% in Q1, or 38 on an organic basis versus 39 both last year in Q1 and Q4. Lastly, IMC's contribution in the first quarter was in line with our expectations. IMC has made a positive earnings and cash flow contribution before any material synergies have been realized. As a reminder, IMC strengthens and differentiates the seed logistics value proposition. It also reduces the proportion of our cross-profit that is correlated with sea freight rates. Next, slide number four, air logistics. Better yields, better volumes year over year. Turning now to air logistics, Q1 EBIT totaled Swiss francs 160 million. A strong 23 improvement year over year. Volume growth of 5% in Q1 is unchanged from the year-over-year pace we reported for Q4. However, this does mark a shift to market share expansion. The overall market grew by an estimated 4% in Q1 versus roughly 9% in Q4. Notably, e-commerce volumes appear to have been flat in the overall market in Q1, corresponding with what we saw in our network. Once again, APEX and perishables were key volume growth drivers in Q1 alongside our focus growth verticals. Hard cargo volumes, excluding automotive, also grew year over year. Yields improved by 7% year over year to SWIFT's ranks 85 per 100 kilo. This reflects broad-based improvement across our segments. The sequential decline of 4% largely speaks to the more highly seasonable development of APEX yields and masks a healthy improvement of the KN yield, excluding APEX from Q4 to Q1. This resulted in a year-over-year cross-profit growth of 12% in Q1. Looking at OPEX, unit costs expanded by 4% year-over-year and 1% sequentially versus Q4. However, cross-profit grew faster, resulting in an 18% year-over-year increase in unit EBIT of SwissRex 23 per 100 kilo. This translates to a conversion rate of 26% versus 24% last year, and 30% in Q4. Next is road logistics page number five. Market headwinds persist. Road logistics EBIT for Q1 was Swiss francs 19 million or down by 37% on the prior year result. This reflects a still challenging operating environment. Organic net turnover declined by 1% year-over-year, excluding the accretive contributions of our acquisitions. Customs broker Ferro and road operator Cityzone Express. We estimate that the overall market development was flat year-over-year. On an order volume basis, growth in Q1 was 6% versus 8% in Q4 2024. Excluding acquisitions, the result was minus 4% year-over-year in Q1 versus minus 3% in Q4. The result on EBIT was further strained by year-on-year cost pressures, resulting in a conversion rate of 6% in Q1 versus 9% last year. Turning to contract logistics, page number 6. Contract logistics results as expected. Contract Logistics delivered EBIT of Swiss francs 57 million in Q1, a new all-time high for first quarter. This marks a 5% improvement on last year's result, excluding currency effects and continues the strong and consistent earnings growth trend. Constant currency net turnover growth of 5% compares to estimated market growth of 3%. Market check remains centered in healthcare and e-commerce. Our large Adidas contract logistics fulfillment hub in northern Italy is nearly fully ramped up. The solid conversion rate of between 6% and 7% was stable year over year and is the product of a continuous focus on process reengineering and automation. This concludes my comments on the performance of the business units. I will now turn to a brief strategic update, mirroring some of my remarks from the recent Capital Markets Day on March 25th. On page number 7, Roadmap 2026. The implementation of our Roadmap 2026 strategy is progressing well. Just to remind you, these are the four cornerstones. The Kuninagi Experience Initiatives, aim at increasing customer satisfaction, while our employee experience is driving a high-performance mindset that strengthens our customer service. Through the digital ecosystem, we are making better use of data and are further automating processes to make our organization more efficient and scalable. Living ESG includes our tangible solutions to support our customers' efforts to reduce their carbon emissions. Finally, we had not fully capitalized on the opportunities within our market potential initiatives. To address that, we are now focused on market share gains and the Q1 results show early signs of our progress. And with that, I will now hand over to Markus.

Thank you, Stefan. And also from my side, good afternoon, everyone. Thank you for your interest, as always, in Cuninagel and taking the time today for our first quarter 2025 results. As Stefan has mentioned, we hosted our capital market stage just recently and outlined our strategy in great details. First quarter showed an increase in market share and yield expansion. We also delivered an unusually seasonally high free cash conversion, to which I will speak shortly. The current business environment is marked by the highest levels of uncertainty and volatility. Based on our experiences through countless economic cycles and periods of unforeseen volatility, we remain vigilant, but we will not act hastily. For now, let me start with a quick review on the first quarter 2025. On the income statement, we can see an improvement on every single line driven by both organic and inorganic growth. The organic growth has been driven by volume and yield expansion. That led to an overall earnings before tax improvement of 35 million or 9.5% for the first quarter. The combined CNF rate conversion rate was 33% in Q1. The most important driver of inorganic growth was the acquisition of IMC, which closed on January 4th, 2025. Please also take note of the increased demands of non-controlling interest line due to the 51% ownership in IMC. Currency effects have developed from an initial positive at the beginning of the year to a neutral effect as of the end of the quarter. Working capital remains at the top of the agenda and has increased by 132 million compared to last year. The major part of this increase, around 100 million, is attributable to the consolidation of IMC. This clearly shows that the rest of the business has been operated with only a modest increase of working capital. The expected release of working capital due to the reductions of charter activities in APEX has not taken place due to the fast changing conditions in tariff policies. DSO and DPO have both extended since the beginning of the year so that we are looking at a similar spread between them of 3.3 days at the end of the quarter. Under these unusual trading conditions, we have exceeded the top end of our self-set corridor. Excluding the IMC impact, the net working capital intensity would be at 4.9%. Continuing with cash and free cash flow generation. In Q1, we reached a cash conversion rate close to 55%. In a quarter of seasonally lower cash conversions. However, the anticipated cash inflow from the reduction in charter activity has not yet occurred due to the ongoing activities in that operation, as I just mentioned. For a bit better illustration, let me move on to the next slide. Looking more closely at free cash generation, once again, free cash flow conversion in Q1 was 55%. which is well above the historic average for a first quarter, roughly 15% usually, and well above the prior year result. The bulk of the year-on-year improvement was from core networking capital, with contributions from all business units, including a net inflow from C-Logistics. While the current market outlook is uncertain, we anticipate typically strong annualized free cash flow generation for the coming quarters, unless there are very large spikes in freight rates for the month. Let me now come to our short-term outlook for the year 2025. Based on all our reliable information about future trends, we don't see a compelling reason to change the upper and lower bounds of the EBIT range that we presented at our Capital Markets Day in March. Let me explain our rationale. The challenge with forecasting is not only that uncertainty is increasing, but that the level of uncertainty is fluctuating often from day to day. This shows up in the capital markets indices that measure uncertainty or volatility more accurately. Evaluating the upper and lower bands of our EBIT range requires a sufficient amount of information on the course of future trends. If not enough information is available to make reliable assumptions, it would be irresponsible to make any changes to the guidance. That leaves us with two options. We leave the guidance unadjusted or we suspend our guidance. Leaving our guidance unadjusted, which we have done, is our expression of confidence that in the foreseeable future, we do expect to have enough information or at least a lower degree of uncertainty to provide either a hard confirmation of the range or to adjust it. With this, I would now like to close our prepared remarks with our key takeaways. In the first quarter 2025, we took market share and expanded yields in sea and air at the same time. We are closely monitoring the level of uncertainty and making frequent assessments. We focus on customer proximity. to manage this uncertainty and make the right decisions. We are confident that in near future, we will be in the position to update our guidance, which remains unchanged for the moment. With this, I want to thank you all for your participation and attention and hand back to the operator to open the Q&A session.