Ladies and gentlemen, welcome to the Kuehne+Nagel Q1 2023 Results Conference Call and Live Webcast. I am Sandra, the conference 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 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 Paul, CEO of Kuehne+Nagel. Please go ahead, sir. Thank you very much. Good afternoon, everyone, and welcome to the presentation of our 1st quarter 2023 financial results. I'm Stefan Paul, CEO of Kuehne+Nagel, and I'm joined here in Schindellegi by my colleague and Group CFO, Markus Blanka-Graff. Together, we are happy to present our most recent financial results and to address your questions. Let's go into the 1st quarter results and the highlights. The results for the 1st quarter 2023 mark a solid start of the year. EBIT of CHF 612 million would have been the strongest Q1 ever, if not for the last year's record performance. We achieved this solid start against a backdrop of reduced demand for logistic services, visible in the year-on-year declines versus an extraordinary 2022. This most recent result once again demonstrates our resilience and our ability to manage yield actively in volatile markets. We remain in a strong position to manage through uncertainty, relying on our long-standing experience, technological capabilities, and highly flexible business model. In parallel, our long-term strategy aims are front of mind, including an increased focus on yield management. I will revisit our strategy and our Roadmap 2026 later in this presentation. Let's move into Sea Logistics. Yield management boost Q1 2023. Thanks to effective yield management, average gross profit per TEU in the period broke with a recent trend. This also reflects our concerted efforts to pivot to high-yielding volumes, and we stated that a couple of times during the Capital Markets Day recently. The first quarter average yield marks a 13% increase from the fourth quarter level, and it's roughly double of the average of 2019. Volumes remained below the levels of last year, month-to-month development in the first quarter resembled more normal seasonality, including a volume uptick in March. Against an estimate market development of -7% to -8%, we believe our market share expanded over the period. According to Datamyne, we are the market leader in the Transpacific for the first time ever. In combination with cost reductions, which partly compensated for inflationary pressures, Sea Logistics unit EBIT also improved sequentially with a conversion rate of 50% versus 46% in the fourth quarter and 64% in Q1 last year. Air Logistics yield normalization trend continues. As expected and not a surprise, Air Logistics result in the first quarter percent year-on-year decline in tonnage, broadly reflective of the market development with concentration in general cargo and high tech. Pockets of relative strength include perishables in addition to aerospace. Combined with an incremental expansion of cargo capacity, overall average gross profit declined 13% sequentially in the first quarter. As was the case in Sea Logistics, cost reductions partly offset inflationary pressures. The net result was a conversion rate of 32% in the first quarter, compared to 40 in the fourth quarter and 52 in Q1 last year, 2022. Let's have a look into Road Logistics. Record results driven by high network utilization. The Road Logistics result in the first quarter marks a new all-time high. The outcome is a credit to continued high-end utilization of our network, along with relatively stable volume development, as well as a stringent yield management. That was as well part of the Capital Markets Day discussion. Excluding currency headwinds, organic net turnover expanded by 2% and gross profit by 11 year-on-year. We view our market share as stable. The net result was an impressive EBIT of CHF 52 million and a conversion rate of 15% versus 9% in prior year 2022. Contract Logistics, strong performance with record EBIT. Contract Logistics delivered standout performance in the first quarter with a record EBIT result. Market share expanded over the course of the quarter because we selected new customers from fast-growing sectors. Excluding currency headwinds, net turnover and gross profit grew by 12 and 11% respectively. Idle space at the close of the quarter was below 2%. The EBIT in the first quarter was CHF 602 million versus CHF 4 million last year, including a CHF 9 million profit from a sale of real estate in 2023. Reflecting a conversion rate of 7% or 6% versus 5% in the prior year. Now reflecting to the Roadmap 2026, a quick update on Q1 2023 and what happened after the Capital Markets Day. As I mentioned, our Roadmap 2026 ambitions are front and center with numerous initiatives well underway. Our plan is to provide detailed progress reports annually. On a quarterly basis, we will provide briefer updates on notable milestones. In the first instance, I'm happy to highlight that I personally had the chance to discuss our new strategy with thousands of colleagues and hundreds of customers as part of a global internal roadshow, which only recently the last five weeks I was almost on the road, traveling the globe. The strong positive response reaffirms our conviction in the direction we are pursuing. We have also nominated, in the meanwhile, a very experienced Kuehne+Nagel colleague to lead the Kuehne+Nagel Experience effort, so the cornerstone Kuehne+Nagel Experience customer experience and employee experience. This function will report directly to me and be fully dedicated to this core element of our strategy. As of April first now, Sarah Kreienbühl started as new member of the management board, responsible for human resources and ESG. I would also like to highlight an early success in our renewable energy growth area. As a reminder from the CMD, we see a huge opportunity for profitable growth in renewables and to build meaningful market share, much as we did the healthcare arena where we had no prior presence eight, nine years ago. With this, I would like to hand over to Markus. Thank you, Stefan. Good afternoon, everyone. Thank you for your interest in Kuehne + Nagel and taking the time today. I think it's important to mention that as Stefan has outlined, we aim to secure a new sustainable level of profitability against the backdrop of the normalization in supply chain conditions in the sea and air freight logistics. Contract logistics and road logistics continue to further increase their profitability levels in quite volatile market dynamics. Let me come to the income statement. As expected, I may say, we can see negative developments on nearly every P&L line compared to last year. I think what matters is the absolute performance in the quarter with an earnings before tax of CHF 628 million, a result that we haven't seen in any year before other than during the pandemics. The gross profit margin was even higher than in 2022, confirming some early successes in our strategy to focus on higher yielding businesses. We look at solid conversion rate of 25.6%, which is additionally supported by a diligent FTE resource management. The headwinds coming from currencies persist with a negative impact of around 3% on a gross profit level, representing CHF 92 million and on an earnings before tax level with roughly 2% or an equal to CHF 22 million. Changes in working capital, one of the topics that has been on the agenda for the last couple of quarters already, quickly contracting due to the reductions of receivables and contract assets together currently at around CHF 5 billion. Receivables, to remind ourselves, have reduced as a function of lower rates, accessorial charges, and of course, lower volumes. Going forward, I anticipate stable networking capital for the next quarters to come. Lower down on this slide, we see the DSOs. They have expanded slightly against the beginning of the year, less so against the same time last year, though. DPOs, on the other hand, have increased quite significantly, mainly due to a reduction on our air freight charter contracts that usually don't offer any payment terms. The spread between the DSO and the DPO have increased to 11.5%. Cash and free cash flow generation. I'm on page number 11 of the presentation. Q1 being traditionally a quarter of relative weaker cash flow generation than the other quarters due to the business seasonality. In 2023, we report CHF 415 million free cash flow. It is 40% of last year's. Pretty much as expected, but three times as much as in 2020 or any year before. This and the strong cash flow generation in 2022 have increased our cash and cash equivalent position to around CHF 4 billion at the end of March 2023. I expect the business to continue to deliver a healthy cash flow in line with the trajectory of previous years. With these few comments, I would like to end the presentation on the Q1 2023 with a couple of key takeaways. Solid results in the first quarter against the known backdrop versus previous year. Volume declines, sea and air freight as expected, offset to a large extent with an active yield management, cost control and ultimately some of the 2026 Roadmap initiatives contributing already to some success, but admittedly in a rather modest space. That would conclude our brief presentation of the Kuehne+Nagel group result for the first quarter 2023. We would open the line now for Q&As. We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only hands if they're asking a question. Anyone with a question may press star and one at this time. The first question comes from Alex Irving from Bernstein. Please go ahead. Hi. Good afternoon, gentlemen. Hope all is well. 3 from me, please. First, on volume trends through the rest of 2023, what are you currently seeing? What are you expecting as we go through Q2 and summer? Second, for all your discussions with customers and employees since the 1st of March, what has common feedback been? Reflecting on that, what risks in execution are you most focused on managing over the next 2 years? Finally, you highlight that you see market share expanding the period even despite capacity constraints becoming less severe, which I might have expected would help smaller forwarders more. What do you think has caused your market share increase, please? Thank you. Hi, Alex Irving. Stefan Paul. From a volume perspective, what we have seen, I alluded to that a couple of minutes ago, when we talk about the sea freight market, for instance, right? January, February, we have seen a negative trend similar to Q4. March was the first month versus previous quarter 2022, where we have seen a little bit of an increase in volume. On the question, how do we see the quarter from a volume perspective? We believe that from a volume perspective, sea freight will be rather similar, maybe slightly above the Q1 figure. Air freight remains a bit more difficult, and we will not see a significant uptake in volumes. Road logistics remain very stable, and there is no difference to be expected for Q2. Same goes for contract logistics. The second question was on customers and employees. I think we have seen with some of the customers, with the international ones, that the stockpiling basically came to an end. We see, especially in the months of March, we have seen that contract logistics in particular had an order uptick for the first time this year. This will most probably lead as well to a restocking activity, helping the sea freight activities, the sea freight volumes as discussed before. There is a certain confidence in the marketplace from some of our customers in some of the verticals, not overall. As I said, I'm repeating myself, air freight will remain at most probably the same level as we have seen in Q1. I think the third one, if I understood correctly, it was hard to understand, Alex. I think your line was breaking up a bit, but it was about market share expansion, if I understood you correctly, and relative towards smaller competitors. If that was the question, I think the answer is pretty much unchanged to the last years. I think this industry is developing into an area where especially digital capabilities and global reach with scalability. When we add the customer experience and the service component to it is gonna drive a consolidation of the industry, not necessarily because it is through M&A consolidation, but there will be requirements from customers or expectations more than requirements. Expectations from customers where small and medium-sized providers may not be in the in a position to fulfill those anymore. I think that's gonna be a longer term development that we will witness. Thank you. In the interest of time, please limit yourself to two questions only. The next question comes from Robert Kläger from BNP Paribas. Please go ahead. Stefan and Markus, just 2 questions from me, please, Stefan. First of all, in Sea Freight, the GP per TEU expanded during Q1 as you showed in the presentation. That was essentially a function of the freight cost per unit declining substantially, but the revenue per unit declining by less. I guess people may look at that and conclude it's the classical counter-cyclical forwarding model at play, whereby when rates go down, the GP per unit goes up. At the same time, that wasn't the case during Q2 through to Q4 of last year when the freight cost per unit declined sequentially and the GP per unit declined as well. Just in that context, could you maybe provide some color on what was different about Q1 specifically, in that respect? The second question just on the outlook. Now, I appreciate you don't provide EBIT guidance, at least not for the current year. But on the Q3 results call, you spoke about the consensus expectation, as of the time, which was CHF 2.3 billion EBIT, and commented you thought that was on the conservative side. Could you maybe just provide some color on latest thinking in that respect? Thank you. Let me take the first question, Robert. I think it is a, it is a known fact that I think over the last 24 months at least, the traditional way of looking at the business model has been challenged in many ways. I think the first, the first message to you is the Q1 numbers, I think have been supported by the traditional, call it at that point in time, mechanism that falling freight rates would benefit to a certain extent, the GP per unit. I think it's an absolute fair and correct question. Why did it not happen, you know, in comparison to some of the other quarters, be it Q2 or Q4 last year? The answer for last year, at least for Q4, very clearly is in Q4, there were still a couple of quite significant committed volume agreements with carriers in place. Some of that free movement of rates versus the carrier rates or spot rates movement, we have not been able to take benefit from, if you like, versus the committed available space that we have covered, as you may remember, early or mid last year for customers that have asked us to do so. I think the major impact or the difference of the impact is last year we had volume contracts in place that in Q1 have all run out. Q1 was the more traditional, as I said before, spot rate mechanism in place. Let me take the second question. Indeed, Rob, we don't give any corridor or guidance for the full year 2023. The reason why I basically articulated myself in the third quarter 'cause there was so much uncertainty and we got so many questions after the pandemic, is the forwarding industry, in particular our company moving back from a figure perspective to 2019 level, which I clearly denied, and I reiterated that statement a couple of times the last couple of weeks and months. Overall, with the Q1 figures now in, we feel very confident and positive that the full year estimate will be in line with expectations. Thank you very much. The next question comes from Muneeba Kayani from Bank of America. Please go ahead. Thank you for taking my question. Just another one on the sea yields. With the strong performance in the 1st quarter, how are you thinking about the normalization from here? I think at the Capital Markets Day, you'd mentioned kind of something like a $500 per TEU normal level. Is that still your expectation? When do you think you'll get there? The 2nd question on costs. If I look at OPEX per TEU on seats, it was quite high in the 1st quarter, wanted to understand what was driving that, why haven't you kind of cut costs yet, and when will it decline? Thank you. Hi, Muneeba. That is the $1,000 question or the $1 million question, the normalization at the $500 GP per TEU. Just to reiterate that, I think we have given a $500 GP per TEU as target within our Roadmap 2026. On that journey, I would say, I would feel comfortable saying that in some quarters we might even be below that, and in some quarters we might be above that. I think the view of our business, and very clearly our business means with a managed business mix from our side. Actively managed business mix with an actively managed yield is our target to reach or to stay at a 500 as at a $500 line. It's less so a question of normalization. Normalization is something that always needs a reference point. For us, it's really like this is our target with our customer industry portfolio mix and an active yield management with all the cornerstones components that we have put out during the Capital Markets Day. Yeah. Let me take the second question, the cost OpEx per TEU. Let me reiterate what we stated during the Capital Markets Day. We will lead with quality, and we will become the most trusted supply chain partner in the industry. That requires, as I said, a certain level of people. However, we have reduced in the first quarter overall, including temps, close to 2,000 people. If necessary, we could potentially do more. At the same time, particularly in 2 business units, in sea freight and in road freight, but mainly in sea freight, we have increased our sales force, our dedicated field sales force in sea freight significantly. We have hired roughly in the fourth quarter effectively, as new joiners, 100 new people around the globe in order to support our statement to focus more and more on SME customers. These 100 people, part of the field sales sales force, are purely focusing on SME customers and not on the key accounts. Thank you for that clarification. We should expect this kind of level to continue on a per TEU basis? depends on the GP and on the volume uptick, right? If the volume is going further up, as we have seen in March, then you are right. Right? If there is a need, then we reduce. Thank you. The next question comes from Sathish Sivakumar from Citigroup. Please go ahead. Thanks again for taking my questions. I got 2 questions for you. Just to touch upon the cost savings, obviously you said you've taken out 2,000 FTE. Is it your own fixed employees or is it part of the variable model? Where those account protections have happened? Is it on the air or sea or air or contract logistics? The second one is actually around the air logistics. You highlighted that you're seeing weakness in Transpacific market. How much of it is actually related to APAC? Given APAC actually has higher exposure to Transpacific. Any color on how volumes have trended by market would be helpful there. Thank you. I take the first part of the question. The 2,000 people were including temps. 30%, 40% were Kuehne+Nagel FTEs, and the rest was temporary workers, right? This is the flexibility we have at this re-BA to cut cost more easily in the temp arena. As I said, I'm reiterating my statement. If there is a sign that the volumes are weakening further in either or the other business unit, then we are able to cut even more. Currently, we don't see that. The second part of the first question. Can you just repeat it 'cause the line was not- No, it's more about, you took the ed con. Is it in higher logistics? It's equal. No, no. It's equal. It's equal in RNC. It's equal in RNC. The main it impacts RNC. Yeah. Thank you. Yeah. On Transpac, I think the answer is twofold. On the one side, clearly, Transpac is one of the largest and most active trades in the world. Even if there is weaknesses over a period of time, it always has a value to increase market share on Transpac. Let me say that from a sea freight perspective, we are now the number 1 on the Transpac business. We have taken market share quite significantly. Has nothing to do with Apex. Apex's sea freight share is minimal. You could argue, yeah, but hang on, Transpac right now has a rather lower margin expectation. True. That trade being one of the most relevant trades in the world is gonna change also the dynamics, you know, over the next couple of years, and then there's gonna be a quite significant leverage to have a good market share in that. On the air freight side, and this certainly is where Apex is relevant, as we always said, Apex is very much focused on one trade, which is Transpac. Is very much focused around two business models. The one around co-loading and the other one around the high-tech industry. Both of these combinations currently are not growing in a strong way on the Transpac trade. They are over proportionally, if you like, impacted than the overall Kuehne+Nagel air freight business, which is far more balanced, obviously, than Apex that is very much focused in that area. Clear. Thank you. Yeah. Thanks, Markus. Yeah. The next question comes from Samuel Bland from J.P. Morgan. Please go ahead. Thanks for taking the question. I've got two, please. The first one again is actually on this C unit margin. I appreciate you talked about there's some sort of traditional windfall benefit from lower rates, but you did also say that there's some part of it which is from the customer mix and moving towards higher margin categories. Was there some sort of more repeatable change in the mix of the business between Q4 and Q1 that caused that higher gross profit per unit? The second one is on the dividend. I appreciate it's early in the year, but I think consensus has the dividend going from CHF 14 to somewhere between CHF 7 and CHF 8. Obviously we see how the rest of the year turns out on profitability, but might there be an opportunity to sort of smooth that dividend profile given the balance sheet? Thank you. I would like to give it a spin on sea freight more from a year-on-year perspective rather than Q4 to Q1. What we have seen and we said that this is going to happen, what we have seen, that we have increased the volume with SME customers by almost 10%. We are growing and that is significant with the efforts we are putting in with the additional sales force we have activated. We are growing more now with the SME customers as planned and significant less with the low yield business with the commoditized business. That will have an impact on the quarters to come. On the dividend, Sam, I think, I have to say maybe we are a victim of our of the fact that we never give any written dividend policy. I can only say historically, we would not get to that payout ratio that the seven over eight Swiss franc for 2023 would require, if you like. I think one should still think what we historically did. Our payout ratio historically was, let's say, between 55% and 65%. Ultimately, as you know, the decisions are with the supervisory board and the AGM, but it looks unlikely to me, you know, that for 2023, a number that you have mentioned is something that would fit into this historic pattern. Understood. Thank you very much. Thank you. The next question comes from Alexia Dogani from Barclays. Please go ahead. Thank you for taking my questions. Just firstly on your drive of kind of increasing SMEs for your Roadmap 2026. These 100 salespeople, what are they incentivized on? Is there kind of some SME retention target that they get paid on? Just secondly, on Stefan's opening remarks in the press release, he mentions macroeconomic environment remained extremely challenging at the start of 2023. Would you describe the environment at this point in time the same way? If not, why not? Thanks. Incentive for salespeople. Basically salespeople in our organization they have a fixed salary and then they have a bonus component as you normally have in sales, right? It's purely on new revenues on new customers and less on the retainer because we have, and I think Otto mentioned that during the Capital Markets Day, we have CCLs, the customer care locations, which is close to our operational setup. This is in our operations. These CCL organization, these CCL people are responsible for the customer retention and salespeople are responsible and accountable for bringing in new business, new trade lanes, new customers and new trade lanes from existing customers. They are purely incentivized when it comes to the bonus, right, on new business and less on a retainer, right? That is how we drive the growth in SME. The second one was, the challenging economic environment, and that was pretty much related to the volume decline we have seen, since a couple of months now, in particular in airfreight, that was reflecting to the sentence. I would reiterate that's still the case. Thank you, Stefan. Can I just ask on your comments about the kind of the team that is responsible for kind of customer retention. My takeaway from the CMD is that you have historically been able to win SME business, but the challenge has been historically to retain and grow. I guess I'm a little bit surprised that, you know, the 100 SME salespeople are there to win new business, but they hand it over. When they hand it over, how can you be confident that actually you retain this SME investment and keep it growing? I guess, can you then talk about what is the ECL incentives to retain those SMEs? I thought that was a key tenet to the, you know, SME yield boost we expect for Roadmap 2026. Yeah, you have both. You have the customer retention, right, and the impact on the erosion. We mentioned a number which is Roughly 25%. That's the reason why we came up with the cornerstone Kuehne+Nagel Experience, the customer experience and the employee experience. This cornerstone will help us to ensure that we have a lower customer erosion than in the previous years. We mentioned as well that everybody here in this company who is bonus related, a certain share on these cornerstones, so the CX and EX. If you as a CCL person are reducing the customer churn, the customer erosion, you will automatically benefit in your bonus payout by a less customer erosion factor or number in the future. The SME salespeople, they are clearly incentivized on bringing new volume, additional volume with a higher yield into the company. That, for me, makes absolutely sense. Clear. Thank you for that. Thank you. The next question comes from Gian-Marco Werro from Deutsche Bank. Please go ahead. Good day, everyone. Thank you, and congratulations for the strong results, Markus and Stefan. Two questions. One on the personal side, also a follow-up, and on the second question is on your view on the inventories again. From a personal cost perspective, you mentioned now it is 100 additional sales employees. Is it now the fact that your HR bottleneck to really also increase the volumes as necessary for your midterm guidance, is this now this problem is solved? Do you have now enough workforce to really also go back to historic volume growth? At the same time, you mentioned also that you might be able to further reduce your FTEs. For example, if we now hitting a recession, can you elaborate about by how much you could further reduce the personal costs? The second question is also on the macroeconomic environment. You mentioned that you see also the inventories levels to maybe being reduced again. Could that also be due to some also recession risks that most or some of your customers might face? How do you assess this risk of the global trade and especially the volumes potentially declining now further in the second and third quarter? Thank you. Good, Gian Marco. Good to hear you. On the personal cost, I think, especially sea freight, I mean, that is, I think, what you were also referring to. We have three drivers, more or less. You know, costs go up because salespeople are being hired. Secondly, we have inflationary costs. I mean, everybody knows inflationary pressure is there. The third component is offsetting or partially offsetting the first two, which is the FTE reduction, so the efficiency gain. I think when we talk about, and you have addressed it, do we find the right people? Yes and no. We find the right people for the incentive of sales. Is every single new sales guy or is every single existing sales guy exactly the correct person in the correct place with the correct job description? Well, I think that is something that every organization has to assess on a permanent time. Yes, we are assessing that, and we are trying our best that the employee as much as ourselves being in the right spot for the right job. The other side is the operational workforce. The operational workforce, I think that what you have referred to was difficult to find over the last couple of quarters or over the last two years because the pandemic has changed people's access to the labor market. At the same time, have changed the way to work. I think we have undertaken that journey to, you know, get back into a more standard operational execution pattern with what we mentioned in the Capital Markets Day, with Operational Care Centers. You know, we have high efficiency by bundling certain functions and processes. From that perspective, I think not only did we find more people in the market, I think we have also changed our way how we operate, and that is giving more opportunities to bring people into the organization. From that perspective, I think we're more confident. Inventory levels, that is the other $1 million question. Yes, inventory levels had been very high at the beginning of the year. We do see some outflows, or we have seen some outflows at the back end of the first quarter, which is good. I think that's good news. Is that already a sign for optimism for the second half? I don't know. It's certainly an indication. I think it's gonna be interesting over the next 2 months to see how expectations go into the, into the second half. I think at that point in time, the next milestone, if you like, is gonna be by the end of May, beginning of June, when longer term contracts are being negotiated also with carriers and customers. That will give us a view on what is the expectation for the second half. Right now, I can only say what we see. We started with high levels and we see a certain outflow right now, that gives us careful indications. Thank you. The potential cost cutting on the personal side? The potential is as much as we need. Let me step in. As I said... Okay, thanks. 10 minutes ago, if there is a volume reduction, which we don't see at present, right, we act immediately. Thank you. The next question comes from Lars Heindorff from Nordea. Please go ahead. Yes. Afternoon. Thank you for taking my question. To follow up on the yields, both in sea and air. Markus, I think you mentioned earlier that you had some committed contracts with carriers which affected yields negatively in the fourth quarter, which have now been, at least as I understand you, correct, path to sold. How will that play into the second quarter? I mean, do you still have less committed contracts there and the trend that we have seen here with at least quarter-on-quarter improvement in sea freight. Will that also be applicable to the second quarter? A little bit about the same question, basically in air freight. If you also have there, if you have committed contracts going forward on the capacity side, which will make you basically be long in the market or how you are positioned there. Thank you. Sure, Lars. Good to hear you. I think the answer is pretty clear. A, we do not have any committed volumes anymore going into the year 2023. That's not gonna impact the profitability neither way, positively or negatively. It's just not there. In Q2, I do not see that benefit to extend for a simple reason, because I would expect that freight rates in Q2 will not continue to fall with the same speed as it did in Q1. With the assumption that freight rates will remain at a stable level, that benefit, if you like, is gonna dissolve or dilute quite significantly. From a sea freight perspective both- And And from an air freight That's from a sea freight perspective, sorry. Come again? Yeah, sorry. That's from a sea freight perspective, I assume. Correct. Correct. Both of my statements were around sea freight. Yeah. Okay. Sorry. So on the Yeah. On the air freight side, I think we are entirely, you know, in the spot market, with the exception of the of our long-term charters with the 2 747s that one operates for Apex, one operates for KN. Both actually for KN, but one under the brand of Apex, the other one for KN brand. These ones have committed customer contracts. Okay. Very clear. Thank you. The next question comes from Michael Foeth from Vontobel. Please go ahead. Yes. Thank you. Thanks for taking my question. Two actually. The first one on networking capital. Just a clarification. You mentioned you expect stable networking capital. Is that in absolute terms or in relative terms? The second question is around road volumes. How come you can keep your road volumes so stable in an environment where sea and air freight volumes are down quite significantly? Can you just explain the mechanics there, where the demand comes from? Thank you. Hello? Michael. Hello, Michael. Hello, hello. Hello? Is it live, maybe? Hello? Ladies and gentlemen, please hold the line. We lost connections with the speakers. Okay. Not busy. Hold. Okay, we hold. Yeah, maybe you can hear. I will. Ladies and gentlemen, the connection with the speaker has been reconnected. Should be able to speak, gentlemen. Hello? We're still hearing- We can hear you. Gentlemen, we can hear you. Yes, we can hear music. Maybe I have to. Okay. They can't hear us if you don't. Okay. Can you hear us? We can hear you, yes. Okay. We go over to backup line. Okay. Okay. Good. We are ready again. This is Michael. I'm not sure you got my questions. Lars? This is Michael. Oh, Michael. No, sorry. Yeah. We didn't got your question. Sorry. Okay. Okay. The first question was on net working capital, just to clarify if you expect stable net working capital in absolute or in relative terms. The second question is on road. You seem to have very stable road volumes in an environment where sea and air volumes are down quite sharply. Can you explain the mechanics there? Why is it disconnected? Thank you. On the net working capital, the comment clearly is on absolute terms. We try to limit ourselves here on that CHF 800 million level, give or take, which should carry us for the rest of the year. Road? I think, from my perspective, road, we have our clear strategy the last couple of years, and we are focusing in the U.S. market, on brokerage business. I think I mentioned it back in Q3. We have a pretty good product in the meanwhile, due to the acquisition of ReTrans in 2015 on the brokerage and on the TLM, the Total Logistics Management. We leverage that for our air freight and sea freight customers. That's the reason in particular in the U.S., why we see still a very stable development of our volumes, not connected to any sea freight or air freight inbound volumes. Same with our footprint in Asia and the Middle East Africa, where we have a clear growth plan. Europe is very stable currently, and we do not see any volume reduction in Europe either. That's the reason. It's decoupled from sea freight and air freight, but that is clear a driver or clear driver from our strategy, which we have started already quite some time ago. Thank you. The next question comes from Parash Jain from HSBC. Please go ahead. Mr. Parash Jain, your line is open. You may ask your question. I will take the next question from Mr. Sebastian Vogel from UBS. Please go ahead. Hello. good afternoon. Can you hear me? Yes, we can hear you. Perfect. Many thanks. The first question would be again on sea freight and gross profit per TEU in US dollar. Given this, your sort of view for the remainder of the year, how low do you think it can go at some stage? Okay. Sebastian, I think also here what I said beforehand prevails. It's possible that we probably go below the CHF 500 line at a certain point in time in the quarters. I'm not sure when it's gonna happen and how low it's gonna be. Our clear target is that with mix management and yield management, we should not see that too often, let me put it that way. Can we exclude it? No. Are we gonna backdrop or drop back to maybe CHF 300 like pre-pandemic times? I think, the whole management board is working very diligently that that's not gonna happen anytime soon. Got it. Many thanks. My second question would be on the minorities line. Do you think Q1 is a fair run rate or maybe a bit much higher for the next couple of quarters for now? I think the minority is, I mean, very transparent. The minority is the minority out of the Apex ownership. As I mentioned, Apex is specifically impacted over the Trans-Pacific weakness and also the air freight or the air market softness. I would think that's not a representative run rate for the next quarters. We would expect that to be a higher number. You know, I know it's a negative number in our P&L, but a higher number to go forward into the next quarters when that business is gonna pick up again. Got it. Many thanks. Sorry if I may squeeze in a quick follow-up to one of your first earlier questions. When you mentioned your confidence about 2023 expectation, and you meant that, or you said that you are sort of in line with what currency, what consensus currently has in mind. You mentioned or you had like the 1.8 in mind in that regard? Just to be on the same page? Yeah, that is a, that is a tricky one, right? I don't say now, clearly, I don't say then take the first quarter four times, right? You have it, right? That is not my message. My message overall is we are confident that we will deliver a decent number for the full year 2023. Got it. Many thanks. That has been all my questions then. Thanks, Michael. The next question comes from Patrick Creuset from Goldman Sachs. Please go ahead. Hey, Stefan, Markus. Congrats on a good first quarter. Just three questions from me. First, can you comment on how the gross margin, not the GP per TEU, just the margin in Sea developed through the quarter, particularly how the March exit rate looked versus the quarter average. Second, when you look at the air division, can you comment on GP per unit developments that you expect in the coming quarters versus Q1? Last one, just a quick update on your M&A appetite, how the pipeline looks and where you'd focus. Thank you. Hi, Patrick. I think our message was two questions per caller. We make an exception for you. Gross margins in FS, can you in sea freight, what exactly do you mean if you don't mean gross profit? Just gross profit versus sales, just the margin. Not the GP per TEU in absolute terms. I think the average margin came out at 23% or so. Q4 you were at 15%. Just curious how, if you looked at it month by month, you know, what the exit rate would look like in terms of the margin. I think that's, that is a number that we can calculate, but we don't manage a margin versus a rate. We make our gross profit margin, certainly to an extent with the brokerage of the space. Much more is on the service capabilities on the value add and other components. Our gross profit margin, as you know, is not a percentage of the freight rate. From that perspective, it's nothing I'm, we're even managing. I think from a GP per unit on an air freight basis, you were asking how it's gonna look like into the next quarters. I think we are in the first quarter on around 103. On around 103 GP per 100 kg. Can you hear us again? I can hear you. Okay. So good. All right. We are on a around CHF 100 or CHF 103 GP per 100 kg. Given the soft market and, let's say the careful outlook into Q2 from a volumes perspective, I would currently expect that we probably are staying somewhere around that CHF 100 line, maybe below that slightly, and reach maybe the lowest point somewhere in the middle of the second quarter. If we were, and that is obviously speculation, but if we were right that the second half is gonna be improving also on a volumes perspective, I would think that that air freight will, as an early reaction to that, will also benefit from additional business in that area. On the M&A strategy, I think nothing has changed on this one, clearly, bolt-on acquisitions. Asia is one of the main target areas, e-commerce, pharma. These are the themes that we are continuing to focus on, also from a size perspective, maybe to anticipate some of the thoughts around in the call. From a size perspective, you have seen one of the largest deal we have ever done was the Apex deal. I don't think we are talking that magnitude in our mind. We are talking smaller than that. Great. Thanks for the bonus question. Can I just come back to the first one? Don't wanna talk about margin, we just look at the GP per TEU then. How does the exit rate from the quarter look compared to the quarter average? Can you comment on that? No, no, I cannot. All right. Thanks very much. Thank you. The next question comes from Nikolas Mauder from Kepler Cheuvreux. Please go ahead. Hi. Good afternoon. First of two is coming back to Road. Margin performance was quite impressive, record in recent history, I think. You mentioned that high network utilization is the main driver here. What does the way forward look like? Will you add capacity due to perhaps some growth plans going forward? Is this some sort of high watermark on the margin, if volumes develop less strongly going forward, the margin should also come down? That's the first question. The second one, we've seen Bolloré Logistics going to CMA CGM/CEVA as perhaps another example of a carrier going after traditional blue-chip customers of yours. Do you face more competition for them? Is this also part of the industry consolidation that we talked about earlier that in-incentivizes to go, you to go after SMEs? Thank you. Let me take the first question. on the capacity side, on the volume side, coming back to everything outside of Europe. Road freight in Europe, outside of Europe, is a brokerage business. We have a certain yield. We focus on yield, and we can grow without adding any capacity from a cross-dock perspective, as we have to look into from a European perspective. In other words, the sky is the limit in the US, and we only need to add a certain manpower in order to execute the orders. There is no impact basically on the yield, on the GP, if we grow significantly outside of Europe. And in Europe, we have a certain capacity with our cross-dock network. We have a couple of hundreds, right? For instance, 56 in France alone. What you have to do and what we are doing currently is if the network comes to a certain capacity constraint, then we either increase the network or alternatively, you have products like FTL and LTL, not terminal-based LTL, where you can grow without adding any capacity. That's, that's for me, not a big problem statement in terms of is a certain capacity reached and then we do not have the possibility to grow further. I would decouple the yield question from a volume and growth opportunity point of view. That is not a problem statement, especially not outside of Europe. From a Bolloré point of view, we have seen competition the last decades. As I mentioned, I did that during the Capital Markets Day, 50% of the volume is BCO volume with carriers directly, and 50% is 3PL business and by OCC business. One thing is pretty clear, carriers will not enter in the SME business so much. They will focus pretty much with everything, what they do on the BCOs rather than the SMEs. That's the reason, not only that the reason, but the reason is that 1.8 times more profitability with the SME customers, and that is the key driver and not what anybody of our competitors or a liner is doing with acquiring further in our space. Thank you very much all of you for all the questions. Whoever heard me singing is now aware of the fact that I'm better as a CFO than as a singer. Apologies for the breakup of the lines. Thank you for joining us for this quarterly update call of the Kuehne + Nagel Group. Thank you very much, and bye bye. Bye bye. Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect the lines. Goodbye