Kuehne + Nagel International AG

Ladies and gentlemen, welcome to the CUNY NAZAL Health Year 2025 Results Conference Call and Live Webcast. I am Sandra, the call school 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 Kühne Nagel. Please go ahead, sir.

Thank you, Sandra, and good afternoon. Welcome to the presentation of Kühne Nagel's half-year 2025 financial results. I'm CEO Stefan Pohl, and once again, I'm joined today by our CFO, Markus Blanke-Graf. Let's go into page number two, half-year 2025 results, gaining market share in sea and air logistics. In the second quarter of 2025, we accelerated our progress toward our strategic goal of profitable market share expansion. In a challenging market environment, the share gains drove cross-profit growth for the group, with stable underlying EBIT, excluding negative currency effects. C&A Logistics contributed stable EBIT with volume gains. as IMC's performance offset yield pressure and currency effects. Excluding non-recurring items, the combined sea and air conversion rate was 30% over the first half and 29% in Q2 alone. This compares to 35% in Q2 last year and 32% in Q1 2025. The consolidation of IMC has reduced the combined conversion rate by about 100 basis points since January. EPS saw a modest contraction over the period, especially in Q2, mostly as a result of currency effects. Looking at cash, free cash conversion continued to improve over the course of the first half relative to last year. And lastly, we successfully launched two bonds of Swiss range 200 million each in the first half on very competitive terms. Let's go to C-Logistics, page number 3. Continuous market share gains, as always from left to right, volume GP per container unit and EBIT per container unit, always in Swiss francs. In C-Logistics, we gained market share once again in the second quarter. Underlying volume grew by 4% year over year versus estimated market growth of 1%. We more than offset the sharp decline in Chinese exports to the U.S. following Liberation Day by expanding volumes and gaining share in other trades globally. In terms of EBITs, sea logistics generated 158 million Swiss francs in the second quarter. Two factors explain this outcome. First, the challenging market environment after Liberation Day. resulting in a 5% year-over-year organic yield decline, excluding currency effects. And second, we had additional OPEX associated with our investment in stronger growth and with annual compensation increases. IMC, which we acquired in January, continued to perform well in the second quarter. While Liberation Day volatility resulted in some pressure, we mitigated it through the ongoing migration of Cayenne trade volumes from other providers to IMC. As a reminder, IMC strengthens our differentiates the sea logistics value proposition. It also reduces the proportion of our cross-profit that is correlated with sea freight rates. This all resulted in see logistics conversion rate of 31% in the second quarter or 33% on an organic basis. This compares to 36% and 38% respectively in Q1. Looking back at the entire six months, underlying volume growth was 5% or more than twice the estimated market growth rate of 2%. This is early evidence that the growth strategy represented at our capital markets day is working. Page number four, Air Logistics, accelerated and focused market share growth from left to right. Again, volumes and tons, GP per 100 kilo and EBIT per 100 kilo in Swiss francs. Air Logistics also delivered another quarter of market share gains. Volume grew by 9% year over year versus estimated market growth of 4% to 5%. Similar to our success in sea logistics, we offset the sharp decline in Chinese exports to the U.S. following Liberation Day by serving rising demand and gaining market share in other trade lands globally. This outcome is even more impressive considering the decline of low-yielding Chinese e-commerce exports to the U.S. after the de minimis exemption ended in May. We successfully addressed this volume headwind centered at Apex by intensifying our focus on attractive high-growth customers in the Semicon and cloud infrastructure sectors. Turning to profitability, air logistics EBIT in Q2 was 114 million SWF or up by 5% year-over-year, excluding negative currency effects. It was flat year-over-year, excluding the non-recurring cost of SWF 6 million booked last year in Q2. This EBIT outcome in the second quarter reflects a combination of factors. First, the result reflects a challenging period mid-quarter due to market volatility with recovery by June. Second, we grew cross-profit by 8% broadly in line with volume growth as yield excluding currency effects were stable year over year. This was offset by OPEX development similar to what we saw in C-Logistics. logistics conversion rate of 26 in q2 was unchanged from the level of q1 this compares to 27 in q2 last year here as well looking back at the entire six months air logistics volume expanded by seven percent year over year or nearly twice the automated market growth of about four percent again This is an encouraging early indication that we are successfully implementing our growth strategy. Page number five, road logistics, successfully mitigating market headwinds. Road logistics EBIT for Q2 came to Swiss francs 28 million. This was down by 17% on the prior year, result excluding currency effects or by 23% adjusting the prior year results for disclosed one-off costs. The management team continues to effectively mitigate very challenging market conditions with a focus on pricing, capacity management and cost control. We achieved net turnover growth of plus 1% year-over-year in Q2, excluding currency effects. This performance compares to a market where estimated year-over-year turnover growth was flat at best. On an order volume basis, Q2 saw a decline of 2% year-over-year or minus 3% on an organic basis. This compares to flat and minus 3% respectively in Q1. Cost pressures remained an issue in Q2, contributing to 8% conversion rate. This was an improvement on 6% in Q1, but still well below the underlining rate of 11% last year in Q2. And lastly, our acquisition of Spanish provider TDM significantly expands our service offering in our barrier. This acquisition closed at the end of the quarter and therefore made no contribution to the first half financial result. Let's turn to page number six, contract logistics. Record EBIT from operations. Contract logistics generated an EBIT of Swiss francs 42 million in Q2 or 58 million excluding an extraordinary provision. On this basis, this was the strongest Q2 EBIT result ever recorded for contract logistics. Adjusting for reported one-off in the prior year, to a bit grew by 12 year over year and by 17 excluding currency effects net turnover grew by five percent year over year in the second quarter on a constant currency basis unchanged versus the pace in the first quarter this represents ongoing market share expansion with share gains still centered in healthcare and e-commerce. We can also confirm that our large Adidas fulfillment hub in Northern Italy is now ramped up. The solid underlying conversion rate of between 6% and 7% was comparable to Q1 and marked an improvement of the prior year Q2 result. Process re-engineering and automation remains our focus. This concludes my comments on the performance of the business units. I will now turn to a brief strategic update, revisiting some of the key themes from our capital markets day in late March. To do that, I will recall the image which shows a strategic focus on market potential. You see that on page number seven, the four cornerstones. We are emphasizing profitable growth that exceeds GDP, which is a proxy for market growth. The other three cornerstones you see on this page are enablers of this ambition, similar to what we have disclosed and discussed in March. We are pleased with the early success of our efforts. As I noted a few moments ago, both sea and air logistics have delivered market share gains since the start of the year. We grew our core forwarding volumes over the course of the first half at between 2 and 2.5 times GDP. assuming estimated global GDP growth of 2.5 to 3%. These allow me to briefly revisit the key drivers of our success so far. First, our sales-related efforts are succeeding in attractive target markets. These efforts include organization around key sales channels, incentive structures, and adding the right talent. Second, We are expanding our networks. In sea logistics, we continue to improve our physical proximity to high-yield ending SME customer. In air logistics, we are achieving substantial growth in the geographic breadth and frequency of services. Third, we are focused on selling differentiated value-added services across all business examples of technology-centric support to Semicon and hyperscaler customers. Our patient-centered healthcare offerings our extended inland capabilities for sea logistics customers, and our upgraded customs capacity and know-how. We are confident that this approach will continue to drive market share expansions for many quarters to come. With that update, I would now like to hand over to Markus for a closer look at the financials.

Thank you, Stefan. Good afternoon, everyone. Thank you for your interest, once again, in Kuninago and taking the time today to review our latest financial results. As Staffan mentioned, we are encouraged to see our strategy delivering targeted market share gains. And this is against a current business environment that continues to be impacted by high levels of uncertainty and volatility. And I will shortly update you on our outlook. But first, Let me start with a quick review on second quarter 2025. On the income statement, I would like to draw your attention to one of the most significant developments in the second quarter, which is the impact of currency headwinds. Since Liberation Day at the start of Q2, we have seen the devaluation of our key functional currency, like the US dollar and the euro. Relative to our reporting currency, the Swiss franc, the average exchange rate for these currencies declined by 8% and 4% year-over-year, respectively. This resulted in a 6% EBIT headwind in the second quarter alone, or 3% on a half-year basis as depicted in the table. I will come back to this topic when reviewing our updated outlook and guidance in a few moments. But before that, let's take a quick look at working capital. We can see a modest improvement on the net working capital intensity to 4.8% at the close of the second quarter versus 5.1% at the end of the first quarter. DSOs and DPOs improved. and deteriorated respectively in equal measure, but resulting in a rather stable spread of just over three days. I will elaborate a bit on working capital development with the review of free cash flow generation. My expectation is for a rather stable level of networking capital intensity over the near term. Continuing with cash and free cash flow in second quarter, we generated 122 million Swiss francs of free cash flow or a cash conversion rate of 47% versus 37% in the same period last year. The year-on-year improvement reflects reduced expansion of working capital. For a better illustration, Let me just move on to the next slide. Overall, networking capital expansion was 67 million CHF less in the second quarter, as core networking capital swung from an outflow of 68 million last year to an inflow of 86 million this year. All of the network businesses delivered net inflows offset only by outflows in country logistics and customs. Taking a longer-term perspective, Q2 cash conversion was below the historical average of 68% for second quarters in the decade leading up to the pandemic. From a year-to-date perspective, the cash conversion of 52% in the first half is above the historical average of 45% as to the relatively strong conversion in Q1. Looking ahead, notes that the second half typically delivers more robust cash conversion, well in excess of 100%, with a peak in the fourth quarter. Let me now turn to our 2025 earnings guidance. Based on our year-to-date financial performance and our current perspective on the factors which are likely to dictate performance in the second half of the year, our underlying expectations for recurring full-year EBIT are broadly unchanged. The one exception is accounting for the sizable currency headwinds due to the weakening of our key currencies relative to the Swiss franc, notably the US dollar since Liberation Day in early April. The result, as mentioned, was a 6% drag on a group EBIT in the second quarter in contrast to a neutral effect from currency translation still in the first quarter. Based upon year-to-date currency developments and assuming current swap rates through year-end, We project a drag of around 5% on our full year 2025 group EBIT from currency translation alone. This informs our updated full year recurrent EBIT guidance range of 1.45 to 1.65 billion Swiss francs. The midpoint therewith is 5% lower than the midpoint of our previous guidance range. and is comparable to current consensus expectations. We have also narrowed the width of the guidance range by around 20% to 200 million this month, which shouldn't be as amazing as half of the year is behind us. For the remaining half year, our current base case assumption is that we entered the second half at a relatively stable level of profitability, with the fourth quarter likely to deliver a greater contribution than the third. Lastly, given the material impact from currency development and still heightened uncertainty as to how they may develop over the coming months, we are also now providing a sensitivity table to approximate the impact of currency translation effects on full-year group, cross-profit and EBIT. With this more technical part, I would now like to close our presentation with a summary of our key takeaways. In the second quarter 2025, we gained market share, accelerating the trend from the first quarter. At the same time, sea and air yields were broadly stable relative to the prior year with some sequential pressure. Our market share gains reflected and intensified focus on attractive sectors, whereby the volatile market environment has also demanded increased agility and diligence so that we can reach these ambitions. And lastly, our expectations for recurring full-year EBIT are unchanged, but we have adjusted our guidance range to reflect the material devaluation of key functional currencies. With this, I want to thank you for your attention and hand back to the operator to open the Q&A session.