Kuehne + Nagel International AG

Good afternoon and welcome to the presentation of Kühne Nagel's full year 2025 financial results. I'm CEO Stefan Pau, joined once again by our CFO, Markus Blanka Graf, and the guest speaker, Chief AI and Innovation Officer, Alireza Nemati. Let's go to page number to full year result. First of all, I would like to thank our customers for their trust and our colleagues for their commitment as we reinforced our number one position in sea and air freight globally. In the fourth quarter of 2025, we continued to expand our market share in air logistics and further improved our share of SME business in sea logistics. This contributed to stabilization of yields quarter over quarter, We achieved these results despite weak demand and overcapacity. On a full year basis, underlying group EBIT declined by 14%, primarily due to yield pressure in sea logistics in the second and the third quarter. Group EPS declined by 25% year over year, or 15% excluding non-recurring items, and a currency headwind of 3%. The combined sea and air conversion rate was at 28%, excluding non-recurring items. The consolidation of IMC reduced the combined conversion rate by about one percentage point. The improving free cash flow conversion trend continued into the year end with 147% in Q4 alone, the strongest result since 2022. Free cash conversion on a full year basis was 86%. And finally, in October, we announced measures to reduce operating costs by at least Swiss francs 200 billion. We reaffirm that target and now confirm that we implemented all necessary measures prior to year end 2025. As usual, Markus will provide you with more details shortly. But first, let's review our performance by business unit. Let's go to page number three, sea logistics. As always, volume in TU on the left hand, GP per TU in Swiss francs, and then EBIT per TU in Swiss francs as well. In sea logistics, yields stabilized after a period of pressure. We continue to expand our SME market share against a softening market backdrop in our core trade lands. Z-Logistics volume in 2025 was flat year over year. In Q4 alone, volume declined by 2% year over year versus a strong year ago comp supported by front loading to the US. Thus far, this was the best result reported amongst our forwarding peer group. On a quarter-over-quarter basis, the Q4 result was in line with historical seasonality. European import volumes were strong. In contrast, volume was weakest on the Transpac where we are a market leader. We are targeting growth by intensifying our sales efforts across numerous trades, including China-controlled export volumes, complementing our larger European-US-led import business. Average yields stabilized in Q4 after two consecutive quarters of pressure. This stabilization is clearly evident in the middle chart where the average yields ticked up by 1% quarter on quarter in Q4 after pressure in the second and third quarters. Yield have remained stable into early part of this year. Over the coming quarters, we do not foresee a similar degree of yield pressure as we saw in the second and third quarter 2025. A period when rates and yields came under pressure due to a number of factors, such as new-built deliveries, normalization of the Cup of Good Hope routing, the impacts of Liberation Day on U.S. demand, and a sharp decline of the U.S. dollar. The Q4 EBIT was in Swiss francs 59 million or 106 million excluding non-recurring items. Quarter and quarter, this resulted in a broadly stable recurring EBIT per TU. The underlying sea logistics conversion rate stands at 23% in Q4 or 25% on an organic basis. Next is air logistics on page number four. As always, again, volume on the left hand, GP per 100 kilo and then on the right side, EBIT per 100 kilo in Swiss franc. In air logistics, our strong market share expansion continued. Volume grew by 7% in Q4, which is in line with the pace for the full year, and once again, well ahead of estimated four to five market growth. Market share gains were centered in the hyperscaler sector alongside healthcare and aerospace. Average air yields increased by 8% quarter over quarter into the Q4 peak season. This reflected a seasonal uplift in Trans-Pacific trades, as well as slower relative growth of lower yielding perishable volumes. Unit costs ticked down by 1% from the third to the fourth quarter. Absolute operating costs increased by 5% quarter over quarter, but volume grew faster Q&Q with 6%. This resulted in a Q4 EBIT of SwissRank's 107 million or 132 million, excluding non-recurring items related to the cost reduction program. This translates to a recurring air logistics conversion rate of 29%. Next is the view on road logistics, page number five. In road logistics, we see signs of demand recovery in Europe, as well as ongoing strong demand for customs clearance. We achieved net turnover growth of 6% in Q4, excluding currency effects. This is significantly stronger than the 4% growth for the full year. This growth may mark an inflection point for shipment demand in what has been a weak European road market. At the same time, demand growth for custom solutions has been consistently strong since the emerge of tariff uncertainty in Q2. Excluding non-recurring items related to the cost reduction program, road logistics delivered EBIT of Swiss francs 19 million in Q4, reversing the year-over-year 9% decline in Q3 and nearly doubling last year's result. The recurring conversion rate of 6% in Q4 was in line with Q3 and doubled the level of last year. Let's move to page number six, contract logistics. In contract logistics, steady growth momentum drives another record result. Contract logistics produced EBIT of Swiss francs 78 million in Q4, excluding non-recurring items related to the cost reduction program. That is the strongest quarterly result ever and reflects 20% year-over-year EBIT growth or 23% excluding currency effects. Net turnover grew by 5% year-over-year in Q4 on a constant currency basis in line with the growth of the previous three quarters. We saw continued market share gains centered in the healthcare and hyperscaler sectors. The recurring conversion rate of 8% in Q4 is also a record, improving on the rate of 7% both last year and most recently in the third quarter. With the fourth quarter result, the rolling last 12 months ROC for contract logistics is stable at a level of 25%. This concludes my comments on the performance of the business units. I would now like to turn to a strategy update, including a closer look at our AI efforts. Page number seven. I would like to briefly touch upon key developments and targets for each of our four strategic cornerstones. Starting with the market potential, we now have a strong foothold in attractive markets, such as Semicon and Hyperscalers, as our results of the past few quarters show. We remain confident on our capabilities to increase market share building upon our strong momentum. This is also true for customs, where we aim to scale rapidly and globally on this solid foundation. Similarly, we aim to scale our suite of sustainable offerings and make even more progress in boosting customer satisfaction. I would now like to spend a bit more time on the fourth cornerstone, digital ecosystem. We completed the migration of our powerful in-house transport management system to the cloud. Now, we are building a flexible architecture to accelerate AI deployment at scale and expect a material impact to emerge within the next 18 months. Let me now hand over to Alireza Nematy, our Chief AI and Innovation Officer, who will provide more details on how we will expand our technology leadership in our sector, including the full deployment of AI. Welcome, Ali Reza. The floor is yours.

Thank you, Stefan. As part of our roadmap to 2026, we have successfully migrated our in-house transportation management system and our key legacy systems to the cloud. Today, every order-to-cash transaction runs through that cloud, supported entirely by our own software stack. This independent platform is the foundation of our AI stack, strengthening our market position in the most practical way, by offering superior customer experience and productivity every time customers interact with us. Our confidence in successfully leveraging AI is based on four structural advantages we are executing against with urgency. Allow me to walk you through each of them on this slide. First, our proprietary IT platform. We control our own destiny because we have an independent cloud-based proprietary IT platform. built and operated on the back of our internal technical and engineering skills. This allows us to innovate and scale without depending on third parties. We will remain a leader in these areas because technology has always been the core of our success. As the AI landscape evolves to integrate text, image, video, and audio, we will evolve with it on our own terms. As such, our AI journeys are complicated, but they need to consult in multiple TMS systems or migrate to other systems, challenges that a number of our competitors are navigating. However, as we assume with time, many of our peers may succeed in moving towards a position like ours. And therefore we must leverage our advantage that we have it and maintain our lead. Second, the data. We control large proprietary data streams that power our platform and provide context for every AI-driven decision. We have applied AI to cleanse and standardize master customer data in weeks rather than months, materially accelerating data readiness. At the same time, we are converting tribal expertise into structured, reusable institutional intelligence, ensuring that the judgment of our best operators becomes scalable across the organizations. More than 10,000 employees access this consolidated intelligence each month through our internal AI knowledge platform, embedding it directly into daily workflows. Both elements, the clean master data and digitizing of our tribal knowledge, are prerequisite to fully exploit AI. Lastly, our workflow and people. We are in the midst of further centralizing, standardizing, and automating repetitive workflows to maximize AI's ROI, a credit to effective change management. To drive AI adoption, we have formed an AI board consistent of global IT and the business and function units. This setup ensures that AI remains a high priority group initiative at Cunanago, not an isolated one. You can already see that initial impact of our AI efforts in customer-facing processes. In AI logistics, our AI-powered pricing tool delivers quotes twice as fast as before, improving responsiveness and quote capacity. In C logistics, AI is embedded into MyKN, reducing booking time from minutes to seconds and lowering human errors at the same time. In customs, AI-driven automation is reducing handling time per declaration, improving service levels and delivering meaningful cost savings. In contract logistics, machine learning for dynamic workforce planning is showing double digit productivity gains in pilot sets. These positive results only scratch the surface, and it's a big surface. We see more upside on the horizon as these solutions are fully deployed across our global operations and as a host of other AI development projects are implemented. We expect our efforts to yield material AI-related productivity gains over the next 18 months. At present, it is too soon to provide you with a specific quantified productivity estimate, but we will provide more clarity over the coming quarters. To reiterate, we're not stopping with a handful of examples I just mentioned. We are already rethinking how logistics can become faster, more predictable, and more responsive by bending AI into each operation decision with a priority on the largest ROI opportunities. Doing so will expand the scope of further improvements with every customer interaction. We see AI as a flywheel. Every transaction improves our AI platform. Every improvement enhances our customer experience. And every better experience drives more transactions. AI is the foundation of an evolving operating model at Cuninago that can continuously compound value. I'm more than happy to answer your questions in the Q&A section, For now, allow me to hand over to Markus.

Thank you, Arisa, and good afternoon, everyone. Thank you once again for your interest in Kuninaga and taking the time today to review our latest financial results. Looking at the income statement for the full year 2025, One can see very clearly an abrupt slowdown of the global business environment after the liberation date in April, amplified by the drop in US dollar value versus the Swiss franc. Looking at the income statement for the most recent quarter, it is important to call out non-recurring effects. Most notably, a positive 72 million Swiss franc effect on GP from an IMC accounting reclassification effect versus direct expenses with no effect on earnings before tax. And a net drag of 122 million Swiss franc at EBIT, chiefly due to provisions related to the cost reduction program. excluding these effects we see that underlying gross profit increased by 90 million swiss franc and ebit by 50 million quarter over quarter from q3 to q4 the seasonal uplift of air logistics volumes and yields were the largest driver of our growth i will revisit this theme shortly in the context of our working capital development but first Let's have a look at the progress of our cost reduction programme. And let me re-emphasise, these measures are designed in a way not to impede our ability to grow in line with the strategy we have communicated. As Stefan has mentioned at the start of the call, we have completed the implementation of our cost reduction programme and we reaffirm targeted annual gross savings of at least 200 million Swiss francs. That said, the composition of savings has evolved since we first presented the plan in late October. Here you can see that a greater proportion of savings is now linked to FTE reduction. This means that an even greater majority of targeted savings are structural rather than variable. And we still expect to achieve the full run rate by year end 2026. Lastly, we do not anticipate any significant additional one-off costs, although we cannot rule out relatively smaller amounts being recorded in 2026. We will inform if and when these will be recorded. Let us now have a look at the working capital development and how it has been impacted by the transformation of the business responding to the macroeconomic changes. We can see an increase of the networking capital intensity to 5.2% at the close of the fourth quarter versus 5.1% at the end of the third quarter and 4.4% at the end of 2024. Whilst DSO remained stable over the last quarters, DPO have improved from Q3 to Q4. Compared to 2024, both dso and dpo came under pressure whereby the spread between has been similar in 2025 compared to 2020. this and the volume growth contributed to an eight percent year-over-year increase in the networking capital due to the over-proportionate increase of air freight charter business for cloud infrastructure customers that we started to enjoy over the last two quarters 2025, we will adjust the network in capital intensity corridor to 4.5% to 5.5%. What does that mean for our free cash flow generation? In Q4, we produced 396 million Swiss francs of free cash flow or a conversion rate of 147%. versus 93% last year. Let me just, for better illustration, move on to the next slide. In Q4, overall networking capital generated a net positive inflow of 13 million Swiss franc, despite an expansion of our core networking capital. Free cash flow of 396 million was generated, this against a value of 306, in the fourth quarter 2024. That all resulted in a significantly improved fourth quarter cash conversion of 147%, which compares to the 93 last year, which is above the historical average for a fourth quarter that you can see on the slide. We do expect the strong free cash flow generation along the usual seasonal pattern to continue also in 2026. Now, based on this strong development, the supervisory board has decided to propose a dividend distribution of six Swiss franc per share to the annual general meeting on May 6th, 2026. It reflects our healthy profitability, well-managed cash conversion, and our success in balancing future cash needs for adapting the workforce for the markets, investing into AI solutions, as well as supporting our ambitions for growth. Turning to the financial guidance for 2026, we expect recurrent group EBIT in the range of 1.2 to 1.4 billion Swiss francs. In terms of expectations for recurring EBIT in Q1, note that it is typically a weaker relative to the seasonal peak in the second half. In the current quarter, we expect a result comparable to that of the third quarter 2025. And as an additional information, we expect already now a further 5% pressure on currency translation due to the US dollar depreciation 2026 versus 2025. Looking forward, our expected effective tax rate for 2026 remains approximately 25%. Our underlying core guidance assumptions include global GDP will grow, but with persistent uncertainty across geopolitics, macroeconomics policies and trade. And base case, global sea and air freight volume demand growing no faster than the GDP. Our own cost reduction program is on track and we will expect more than 200 Swiss francs of gross savings. The savings will ramp up over the course of 2026 with an estimated impact of net 100 million in the current year. With this, I would now like to close our presentation with a summary of key takeaways. Our focus remains on market beating growth in targeted attractive sectors. Yield pressure moderated in the most recent quarter, a trend which has continued into the early part of 2026. Our cost reduction program is on track, fully implemented with savings to ramp up over the course of 2026. We have a strong foundation to achieve AI productivity gains and project material attractions from 2027 onwards. And lastly, We introduce our 2026 recurring EBIT guidance of 1.2 to 1.4 billion Swiss francs. With this, I want to thank you for your attention and hand back to the operator to open the Q&A session. Just one more housekeeping information. We will move the analyst call for the first quarter 2026 by one day to Friday, April 24th. Please take note of this. Back to the operator.