Ladies and gentlemen, welcome to the Kuehne + Nagel Management AG Q2 2026 Results Conference Call live webcast. I am Valentina, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 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, Valentina. Good afternoon and welcome to the presentation of Kuehne+Nagel's second quarter 2026 financial results. I am CEO Stefan Paul, and I am joined today by our CFO, Markus Blanka-Graff, and once again by our Chief AI and Innovation Officer, Alireza Nemati. Let's go into page number two, half year 2026 results. Volume growth and cost control drive recurring EBIT momentum. Over the first half of the year, strong volume growth in Air Logistics and disciplined cost control across the group drove a steady improvement in recurring EBIT. In Q2, recurring EBIT rose to CHF 381 million, an increase of 6% year-over-year and 24% sequentially, roughly double the typical seasonal gains. There are several factors behind this momentum. Our cost reduction program, first announced last October and largely underway by year end 2025, delivered savings of about CHF 50 million over the first half, with a modest incremental uplift from Q1 to Q2. We expect this positive trend to accelerate in Q4 to an annualized gross run rate of at least CHF 200 million in savings by year end 2026. Discipline in cost control enhanced the profitability of the faster-growing business units, notably Air Logistics. It also mitigated the effects of annual wage inflation concentrated in Q2 and the slow development of Sea Logistics volume. The net effect was a group conversion rate of 16.9% in the second quarter versus 14.6% in the first and 16.2% in Q2 last year on a comparable basis, adjusting for the IMC reclassification. The combined Sea and Air conversion alone was 30.2% in Q2 versus 26.2% in Q1 and 28.1% last year in Q2, again, on a comparable basis. Recurring group EPS in Q2 improved by 6% year-over-year or 11% excluding currency headwinds. Headline free cash flow generation in Q2 was roughly comparable to last year's. Excluding disposal proceeds, there was a decline because of higher working capital outlays linked to growth, especially freighter-based air freight. Overall, we see continued evidence of market share expansion across multiple business units. Given the momentum in the first half and our expectations for the second, we are lifting our 2026 full year recurring EBIT guidance. As usual, Markus will cover this in more details shortly. He and Alireza will also present our AI update along with our expectations for material productivity improvements emerging in 2027. Let us now turn to our performance by business unit. Page number three, we start with sea freight as always. Cost control drives further recovery of unit profitability. Left volume, then GP per container unit and right EBIT per container unit. In Sea Logistics, unit profitability recovered significantly for a second consecutive quarter, thanks to our cost reduction efforts and improved quarter-on-quarter volumes. Q2 volumes expanded by 8% quarter-on-quarter or in line with the average Q1 to Q2 uplift over the past five years. Year-over-year, volumes declined by 1%. The situation with GCC is still a material drag on volumes. European and North American import rates from Asia were robust in Q2, but countered by weak demand in backhaul trades to Asia. Our share of SME volumes rose to 52% in Q2 from 50% in the first quarter. EBIT in Q2 improved sequentially by 24% to CHF 140 million, mostly due to cost management efforts. Volume growth and improved profitability at IMC Logistics also contributed to the increase. Year-over-year, EBIT declined by 6%, excluding currency effects, mainly due to lower yields. Average yields were stable quarter-on-quarter for the third consecutive quarter, in line with the expectations we shared during our last earnings call. We anticipate a continuation of the solid trend in yield. The Sea Logistics conversion rate was 29% in Q2 versus 30% last year and 25% in Q1. Next is Air Logistics on page number four. Strong EBIT growth driven by higher volumes and better mix. In Air Logistics, strong underlying volume growth, a beneficial shift in mix, and ongoing cost control combined delivered a very robust EBIT improvement. Q2 volumes expanded by 13% quarter-on-quarter. This growth is well ahead of the average 9% sequential uplift over the past five years. Year-over-year, volume grew by 3% in Q2, despite a much tougher comparison of 9% last year. EBIT rose by 39% quarter-on-quarter to CHF 154 million in Q2, a 42% increase year-over-year excluding currency headwinds. A very beneficial mix shift helped drive this EBIT improvement. We gained market share in higher-yielding hard cargo segments, including the technology sector, while the contribution from lower-yielding businesses like perishables and e-commerce declined. This positive mix shift is the main driver of better years, 8% better quarter-on-quarter and 10% year-over-year. The Air Logistics conversion rate was 31% in Q2, versus 26% last year and 27% in the first quarter this year. Next is Road Logistics on page number five. Headline, EBIT growth accelerates on market share gains. In Road Logistics, EBIT growth showed continued momentum in the first half. Building on the signs of demand recovery we first highlighted in Q4 last year. The Q2 EBIT totaled to CHF 36 million, a 29% improvement on last year on an organic basis, excluding currency headwinds of 7%. Net turnover grew by 16% year-over-year in the second quarter or 12% organically, both excluding currency headwinds. This marks a clear improvement on the respective 9% and 5% growth in Q1. These positive trends reinforce the view that Q4 marked an inflection point. We feel that the improved shipment volumes of recent quarters results more from a market share gain than a recovery of underlying demand. Demand for custom solutions remained firm, a consistent trend since Liberation Day in the second quarter last year. This was also the case for demand in the UAE in response to supply chain disruption from the conflict in the Middle East. Lastly, we now see signs of more robust demand emerging from the tech sector. This was Road Logistics. Now let's move to page number six, our Contract Logistics business. Solid underlying profits with investments in growth. In Contract Logistics, recurring EBIT was solid on an underlying basis. Recurring EBIT totaled to CHF 51 million in Q2, is 14% lower sequentially and 9% lower year-over-year excluding currency effects. This result reflects some additional cost due to new contracts going live in Q2, as well as investments in people and systems to meet growing demand as well here in the tech sector. Net turnover grew by 4% year-over-year in Q2, excluding currency effects. This is roughly in line with the typical underlying growth of 5% over the previous four quarters. We saw continued market share gains once again across geographies and sectors. The conversion rate of 6% in the second quarter roughly matches the underlying prior year result. We are confident that the stable growth trajectory will continue as Contract Logistics currently has more than 30 new contracts in the implementation phase. This concludes my comments on the performance of the business units. I will now hand over to Alireza for an update on the progress of our AI initiatives. Thank you, Stefan. Since I spoke to you in March, we have continued to scale AI across the organization with the goal of creating sustainable operating leverage. We currently expect AI integration to yield productivity gains of at least 5% across our addressable white-collar workforce, and significantly higher output per IT engineer. The material traction emerging in 2027. Winning the future in global logistics means using AI to manage complexity and increase shareholder and customer value. We have built four advantages for exactly that purpose, starting from the bottom of the slide. We own and control our proprietary cloud-based IT platform and have maintained our own TMS systems for decades. We have made our data AI-ready. We are redesigning workflows with AI at the core. We are equipping our people to scale adoption of AI. These mutually reinforcing advantages create a competitive moat that will help drive our future growth, margin expansion, and differentiation. Integrated data enables smarter workflows. Redesigned workflows free people for higher value work. Engaged people build deeper customer relationships. Customer relationships not only generate the data that makes our AI model smarter, but also generate the revenue that will drive our profitable growth. The benefits of our AI transformation will come from four areas of improvement: operational, developer, individual, and customer. These benefits will establish a durable and compelling value proposition for logistic customers. We're increasingly seeking partners who have successfully integrated AI into their own organization. I will start with the operational benefits, because that is where AI translates straight into better P&L performance and stronger customer relationships. Our efforts to centralize and standardize repetitive workflows are already having a positive effect across the group. They lay the groundwork for AI-driven automation with material traction expected in 2027. In sales, AI has begun to generate customer briefings, automate meeting documentation, and assist with contract review of incoming RFQs. Presently, we expect a productivity increase of around 10%. In coding, we are increasing our daily capacity and customer responsiveness. AI is now processing standard spot quotes and automatically escalates complex cases for human review. In customer integration, we can now complete bespoke EDI and API connection in less than a day. This means we have started to onboard customers faster at a lower cost. In our global services, we are using AI agents to progressively automate workflows end to end. This began with ticket handling and will extend to route verification, document management, and proof of delivery validation, just to mention a few. In shipment visibility, AI agents have started to verify transport milestones autonomously. This improves response time and eliminates manual follow-up. In exception management for temperature-sensitive cargo, AI agents work around the clock verifying compliance and shipment conditions across carriers and languages. This will enable us to focus on fast, scalable intervention for high-value goods. Finally, in our warehouses, machine learning dynamically matches labor capacity to expected demand. Beyond operational benefits, AI is also helping our development teams build and maintain higher quality software faster. A growing share of our code is now AI-generated. We already deliver products significantly faster and expect to increase output per engineer over the course of 2027, improving our speed to meet market demand. We are transitioning towards a state where AI orchestrates the entire software development process while our engineers retain ultimate responsibility for validation, decision-making, and oversight. To increase individual productivity through AI, we are putting internal agents directly in the hands of our white-collar workforce, from top management to office employees. As with our other efforts, we expect to see first traction from this efficiency over the course of 2027, although the monetary impact remains difficult to assess. We have begun rolling out an enablement program that helps every level of the organization understand AI, trust it, and use it to augment their own capabilities. As AI literacy rises, the same workforce can take more volume and more complex work, allowing us to grow without expanding our cost base at the same rate. The benefits for our customers will also be significant. By integrating our AI directly with our customer systems, we become embedded in their operations as we expand our strategic partnerships. Speed to market is paramount while the window of opportunity remains open. We have already started to evaluate the readiness of industrial and tech companies for these kind of partnerships. As we co-develop AI capabilities with key customers, the integration deepens with every transaction and creates switching costs that competitors cannot easily replicate. For example, better predictive ETAs and proactive exception management enhances customer trust and the durability of our top-line growth. Let me turn to our cloud-based AI platform, which powers this transformation. Our proprietary platform gives us control over quality, cost, resilience, and speed of deployment. This approach to AI integration is rare in a market where most of our peers depend on external vendors for their core TMS. Instead of every team building its own AI stack, our platform provides the shared infrastructure once. Teams solve business problems rather than rebuilding plumbing. Every new capability deploys enterprise-wide at marginal cost. Our core AI platform has three layers, again, from the bottom of the slide. The foundation layer connects all our internal and external systems. The middle layer lets us ship new AI capabilities across the whole organization at speed by ourselves. No vendor negotiations, no integration queues. Importantly, this means we are not tied to any single model provider. We deploy whichever model is best for each task and swap as the technology evolves. At the top, sits a single pane of glass. One access point that puts our AI agents into the tools our people already use every day. Let me close where I began. Our AI strategy is focused on creating sustainable operating leverage. This includes at least 5% productivity gains across our addressable white-collar workforce, and significantly higher output per engineer, with material traction emerging in 2027. We are embedding AI as a core operating logic, not as a peripheral tool. It is a key enabler for future growth, margin expansion, and competitive differentiation. With that, I'm happy to take your questions during the Q&A, and I will now hand over to Markus. Thank you, Alireza. Good afternoon, all, and thank you for your continued interest in Kuehne+Nagel. I would like to start where Alireza left off with some additional details related to our AI initiatives. The initial traction we expect to deliver in 2027 relates to our core white-collar workforce in Sea Logistics, Air Logistics, and functional areas such as sales, finance, IT, and HR. We are also working on use cases specific to Road Logistics and Contract Logistics, but the focus areas we highlight here are expected to deliver the first visible traction in 2027. On the left side of the slide, you can see four pie charts specifying the addressable workforce and the associated cost base. This is the scope for our short and mid-term opportunities. On a long-term basis, this picture may change to a larger population, and we will continue providing you updates on a half-year basis. The size of this white-collar workforce is just over 25,000 FTEs and represents a cost base of approximately CHF 1.7 billion. That's roughly 35% of our total staff cost. Based upon the initiatives that are underway, we see current scope of productivity improvement of at least 5%. Alternatively, a similar increase in business volume without cost increase. We project an annualized EBIT impact of CHF 100 million-CHF 150 million to be realized by the end of 2027. This estimate is based upon run rate gross profit and staff costs in first half 2026, alongside the number of processed Sea Logistics and Air Logistics orders per FTE and gross profit per order. Let me emphasize that these values are based on current cost levels for AI services. If these costs were to change in the future, we will include these in our regular updates. When it comes to technology, I'd like to emphasize the strategic advantage of TMS ownership and in-house development, as it should afford us greater speed and depth of AI deployment. Our initiatives to develop a broad-based AI literacy and effective use of Copilot at the individual level is a critical foundation for all of our AI efforts. All our initiatives pay into better customer experience and service quality. Lastly, we're assessing additional use cases, including potential top-line initiatives. We will update on these efforts when appropriate to do so. We will continuously assess the scope and provide our next detailed update no later than March 2027, alongside the presentation of our full year results. I would now like to turn to the regular review of our financial performance for first half year and second quarter of 2026. Looking at the income statement for the second quarter, I would like to describe the key drivers behind the year-over-year earnings development. First, we saw an inflection in year-over-year gross profit trends in Q2 with a return to growth led by Air Logistics volumes and yields. Second, a high proportion of this gross profit growth converted to recurring EBIT growth, supported by our cost reduction program, which provided about CHF 50 million of savings over the first half year. Lastly, underlying EBIT growth was masked once again by a 6% foreign exchange translation headwind in Q2 as last year's result consolidated at a significantly stronger US dollar value. Turning to working capital development, we saw the base increase to more than CHF 1.6 billion over the past quarter, an increase of 6%, reflective of strong sequential volume development as well as higher rates. However, the relative development improved with net working capital intensity declining from 6% at the close of the first quarter to 5.5% by mid-year, within our guidance corridor of 4.5%-5.5%. This corresponds with a re-expansion of the spread between DSO and DPO to nearly three days. The CHF 97 million increase of core working capital in the second quarter contrasts with the CHF 86 million inflow during the same period last year. This primarily reflects the growth in Air Logistics, supported by a large proportion of dedicated freighter services. Now have a look at how this fits into overall free cash flow generation in Q2. In Q2, we produced CHF 116 million of free cash flow, including CHF 40 million of cash proceeds from asset disposals, which had no material P&L impact. This was offset somewhat by the cash outflows related to our cost reduction program. For a closer look at the cash conversion, let me move on to the next slide. Here we see the usual comparison of free cash flow conversion in the most recent quarter versus historical average. What is new in this presentation is a focus on history since the first full year of Apex consolidation, an event which changed the pattern of our free cash flow generation with a larger proportion of freighter-based airfreight activities. The second quarter is typically the second weakest cash conversion quarter after Q1, with an average conversion rate of 54% since 2022. In the current second quarter, conversion was 28%, or just above 30%, excluding the effect of the cost reduction program outflows. The weaker relative conversion in Q2 is a product of high growth in airfreight volumes supported by dedicated freighters. Looking forward, we expect a continuation of normal underlying free cash flow conversion trends over the coming quarters and would highlight a long-term average of 90%+ conversion rate, heavily weighted to the second half of the year. Turning to our financial guidance for 2026, we are raising both the lower and upper ends of our recurring EBIT guidance by CHF 100 million and CHF 150 million, respectively. This results in a new recurring EBIT guidance range of CHF 1.35 billion to CHF 1.55 billion. Our upgraded guidance for the year implies a stronger recurring EBIT result in the second half of the year versus the first half. This is in step with the historical average distribution of earnings power, given that peak demand is typically weighted to the back half of the year. We continue to see global GDP growth, but with persistent uncertainty across geopolitics, macroeconomic policy, and trade. Our cost reduction program is on track with a faster than anticipated start in Q1. I reported about that. Some incremental progress in Q2 to deliver approximately CHF 50 million of savings so far. We expect a run rate in Q3 similar to that of the second quarter, with acceleration into Q4. The target is unchanged, with an annualized run rate of more than CHF 200 million of gross savings and an impact of more than CHF 120 million in 2026 alone. Moving to currencies. In terms of currency translation headwinds, our financial guidance assumes no more than a 5% negative impact with the bulk of this headwind in the first half. Our expectation for a 25% effective tax rate is unchanged. One final note regarding capital structure. Please remember that our long-term preference for a small net cash position remains unchanged. That leads me to the key takeaways. Namely, our unchanged strategic focus is on market-beating growth in targeted, attractive sectors. Air Logistics is currently a key driver of profit growth thanks to market share gains and attractive mix development. Yields in Sea Logistics and Air Logistics remain stable, respectively significantly improved. Our cost reduction program is on track with continued confidence in targeted savings. We reiterate our expectation of material AI productivity gains emerging in 2027. Today, we provided you with further details around specific initiatives and business areas that will contribute to this initial traction with the scope of annualized EBIT impact by year-end 2027 in the range of CHF 100 million to CHF 150 million. Lastly, we are raising our full year earnings guidance range for 2026 to CHF 1.35 billion to CHF 1.55 billion. With this, I want to thank you for your attention and hand back to the operator to open the Q&A session. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. The first question comes from James Hollins from BNP Paribas. Please go ahead. Yeah. Thanks very much. I was just coming on the Contract Logistics side and the EBIT phasing there. Clearly, you flagged a lot of investments, and new contracts starting in Q2. Is that the peak headwind, as it were, this year? Maybe should we be thinking about Q3, Q4, seeing something similar, I guess, as a headwind to the overall divisional EBIT in 2026? Secondly, I see relative to the Q1 presentation, you removed the comment, sea and air freight market demand growth in line with GDP at best. Am I reading too much into that? Is that, I guess, the uncertainty around that is why you've widened the range on full-year guidance? Thank you. Hi, James. It's Markus. Let me talk about Contract Logistics quickly. Q1, I think we call that also a non-recurring effect of CHF 36 million. That has obviously moved the first quarter result quite substantially. Going forward, Stefan has alluded to contract wins. Contract Logistics is a business that needs a couple of weeks, if not months, to start implementing these businesses. Usually, what we see is that as we speak back end of the second quarter and going into the third quarter, we have 300,000 sq m under implementation for various customers. You should see a bit of a startup cost situation, which goes into the third quarter and will see the first positive impact on the P&L in the fourth quarter. It's really a matter of growing the business in a Contract Logistics way. Yeah. James, Stefan speaking. I take the second question in terms of, first of all, is the GDP growth the 1.5x GDP expectation still our focus, still our commitment? Yes, it is. We have seen a little bit of a dip in sea freight, we remain confident that this is coming back. We have expectations on positive volume development for the third quarter and as well for the fourth quarter. Overall, most likely we will end up the year positive. In air freight, there is a very strong demand still coming in. That's the reason why we are rather confident to deliver the 1.5x GDP growth in terms of volume and air freight on a constant basis. Hopefully that answers your question on the uncertainty around 1.5 GDP growth. Yes, no. Yes, is a clear yes. Thank you. Can I just confirm you're talking sea volumes expected to grow in Q3 and Q4? Yes. Okay, cool. Lovely. Thanks a lot. The next question comes from Alex Irving from Bernstein. Please go ahead. Good afternoon. Two from me, please, both on AI. First of all, thank you for the helpful detail. Third question, why would you be able to hold onto any cost reduction from AI in the margin rather than using the cost advantage to take volume share? Second one, you highlight your advantage in deploying AI if you have full workflow ownership, TMS ownership, and clean data. What scope do you see for third-party software vendors and AI startups to help other forwarders match your capabilities? In other words, is it a lasting structural moat, or is it merely a head start as the rest of the market? Thank you. Hi, Alex. It's Markus. First question on the cost reduction. Spot on. You're absolutely right. I think I'm a believer in when the cost benefits are being created, eventually they will move on to the customer's benefit, rightfully so, over time. You have benefits as a first mover. Hence, I think Stefan's comments were clear. Our clear preference is to take on over proportionally more business with the existing well-educated expert workforce, rather than not growing or leaving some of the business opportunities on the table and just chase cost opportunities that might transfer to the customer. Answer is very clear. Preference of growing over proportionally the business with our experts than the second option. Hi, Alex. This is Alireza. I take the second one. As I mentioned, one of our strongest moat is that we have the in-house development, as you rightly called out on the TMS and on the data layer that we currently have. There's a couple of plays that we are playing right now. One is that we are currently developing initiatives in-house, obviously. Given that this space is moving so fast, we also partner with external companies and startups to either co-create together or utilize the latest technology and bake that entirely into our AI core stack. That is one of our biggest advantage, so that we don't have to negotiate with third parties and can straight implement the effect of the latest AI models right into our systems. When it comes to partnering up, it's obviously important for us to be mode-agnostic because, for example, it does not make sense to use a very expensive frontier to read a field in a database. Here, we're looking at the latest models that are currently available and can either use a small language model to do that, which is cost-efficient and lower cost, or develop the technology in-house to exactly execute on that. All right. Thank you very much. The next question comes from Marco Limite from Barclays. Please go ahead. Hi, good afternoon. Thanks for taking my question. I have a follow-up question on your estimate of CHF 100 million to CHF 150 million cost savings on AI. Shall we think about it as addition to EBIT? In other words, how have you been factoring in your calculation also some pricing dilution as most of the other freight forwarders will also try to implement some cost savings? Is the CHF 100 million to CHF 150 million a net EBIT increase, or that's just a cost gross of some possible pricing dilution? Would be my first question. Second question is on Apex. There have been some headlines out there where you're suggesting, or headlines suggesting a potential disposal of a 20% stake or an IPO. Can you just clarify what's going on there? Clearly, you bought Apex, then you sold a minority stake, then the pull-up option was triggered, and now this headline. Yeah, just why you're considering a disposal. Is there anything going wrong there or you just think that it makes sense to crystallize value? Thank you. Hi, Marco. It's Markus. First the question on the CHF 150 million and how they arrive into the EBIT line. I think however you want to look in at it, I can confirm that this is a gross amount at the current stage. I'm emphasizing the gross because we are currently not 100% sure how the cost development of AI services will continue into 2027. This is something we will see as we go into the year. How it's going to get into the EBIT line can be different routes, right? One can be the straight-out cost reductions, manpower reductions, FTE reductions, or alike. The other one is, again, our preference, growing the business. We have assumed in our models that growing the business we would do at the current productivity and unit economics that we currently enjoy. It can be through both ways. Clear in our mind is that the CHF 100 million- CHF 150 million will arrive at EBIT level. That's, I think, your view on, you can probably look into this from a calculation or modeling perspective in both ways. Apex, I can only say Apex continues to be our strategic investment. It's a massive growth opportunity and growth organization within the network of Kuehne+Nagel. I have also seen commentary out in the market, there is nothing that we could comment or confirm or make any statements around that other than Apex is a part of Kuehne+Nagel organization and a very high valued growth machine for us. Marco, let me add, Stefan speaking. I think we have mentioned it already a couple of times. Since now almost two years, we are leveraging Apex Logistics as well as our carrier. The Kuehne+Nagel legacy basically is using their expertise in the terms of the charter capacity and the operation, which is managed out of Hong Kong. This is as well an enabler, was an enabler, and still is an enabler for our significant growth, in particular in the tech sector. This is an integral part of our business offering. The next question comes from Muneeba Kayani from Bank of America. Please go ahead. Yes. Good afternoon. Thanks for taking my questions. Just coming near time, I wanted to talk a little bit on what you're seeing in the ocean market right now. Do you think the strong demand we've seen was pulled forward? You talked about volumes higher, growing year-over-year in ocean. I just want to make sure, how are you thinking about ocean yields in the third quarter at this point? Secondly, just on Contract Logistics. With this growth on the hyperscaler side, where do you see potential for the Contract Logistics business, and how much can it grow, not just this year but as you think about the next couple of years? Thank you. Thank you very much, Stefan. First of all, as we all know, we have seen strong demand coming into the second quarter, especially in Transpac business. A lot of demand in Asia, especially China, to the U.S. The benefit from, and this is the second question, from a yield perspective will be seen in the second quarter. The yield will go up. I have mentioned, I think the last two calls, that we have started to focus pretty much on the new giants in China and on the prepaid market. We see already decent success. That's the reason why my statement was made a couple of minutes ago that we expect a positive volume development for us. Low single digit, of course, but positive development supported by the Chinese prepaid market into Europe, but particularly the U.S. when it comes to the sea freight. Overall, rather or slightly positive in terms of the volume outlook driven by these trade lanes. The yield will be higher going into the third quarter. The hyperscaler question on the Contract Logistics side. We have mentioned, or maybe take it a little bit different spin here. We have started one and a half, two years ago with air freight first with the inbound legs to the U.S., then followed by the last mile, the installation activities leveraging our Road Logistics business unit, and then on some of the power lanes, as well as sea freight. Now, last but not least, but a very important aspect, is the nomination of some of our customers, large customers, very large customers. For the Contract Logistics business, we have in implementation roughly 300,000 sq m in the U.S., which is brand new to us. The question was, is that to be replicated and what is ahead of us in terms of how many contracts do we believe we can gain in this marketplace? I think this is the beginning. We expect that looking at the pipeline, in the U.S. and other markets for this tech hyperscaler marketplace, that the stickiness of our Contract Logistics organization and the capability now, including vendor management, has been proven. I have no doubts that we see more contracts coming in our way. Thank you. The next question comes from Alexia Dogani from JP Morgan. Please go ahead. Hi. Good afternoon. Thank you for taking my question. Firstly, Markus, very helpfully you mentioned about the cost development of these AI tools. We're hearing kind of increased cost inflation for cloud, for tokens. Can you give us a sense of what the basically cost base that is relevant for this kind of inflation trends and how do you see the evolution forward? That's one. Secondly, if possible, can you give us a little bit of a sense of these CHF 100 million-CHF 150 million annualized growth savings by the end of 2027, how they phase in? Do these give you confidence that basically the organization has enough levers to offset any potential kind of pressure on the Sea Logistics vanilla brokerage yields? Thanks. I can take the first question on the token side. This is Alireza. We can all see an ongoing public debate around the future cost of compute, especially around AI deployment. Given the rapid pace of technology development, we emphasize the flexibility built in our AI stack and that our approach is model agnostic. This affords us to have the freedom to deploy a wide range tools with varying capabilities cost that are best suited to the task. I double-click on the example I mentioned before. If you consider that you want to utilize AI for small tasks, it's not necessary to use the most expensive frontier models. Instead, you would focus on a so-called small language model that could give you the same results at a lower cost base. Alexia, I take the second question on the phasing. Practically what we're looking at is where processes have been already standardized, automated to a certain extent. I think these are the first areas where we can see quick wins, I would call it low-hanging fruits. Typically, these are already situations where we took benefit from wage leverages from higher cost countries and the lower cost countries. I would look at the phasing of when you look at the two pie charts that we have provided, that may be from a pure FTE perspective. Things are going to move a little bit earlier than on the cost side because the juicy, I would say, the juicy opportunities we have might actually only get into full scale in the second half of 2027. That's why we have a phasing that is, I would call it backloaded in a very traditional sense. Thank you. The next question comes from Kulwinder Rajpal from Baader Europe. Please go ahead. Hello. Good afternoon, everyone. Two-part question on Road Logistics. Firstly, I wanted to understand how much of the EBIT growth in Road Logistics stemmed from you going from sea to road in the Middle East, because if I remember in the last quarter, we had 90%-95% of EBIT coming from the base business in Europe, plus some growth in U.S. Wanted to understand how that's changed sequentially. Then when you talk about the emerging demand from tech sector within Road Logistics, is there any carry through from your other businesses that is translating into that demand on the road side? Thank you. Yeah. Stefan speaking. No change to my statement during the Q1 call. The business in the Middle East is good and developing quite nicely, but it is far too small. 95% of the business is still, again, Europe and U.S. and Asia. Even if we see growth based on the current situation, that is not moving the needle significantly on EBIT level. That's the first one. The second one is, I think what we need to understand and what we really push, is the cross-selling between the different business units. As I mentioned before, it's not only the inbound for the tech sector when it comes to air freight. Is as well, certain power lanes, where we come in with our sea freight offering, in particular, the last mile opportunities leveraging our Road business unit. Last but not least, very important, vendor management and Contract Logistics capabilities with large warehouse operations coming in for us in the U.S. Here you clearly see that we leverage all the four business units in order to support the customer end-to-end, and we cross-sell as much as we can between the different units in order to get a higher share from this industry. Thank you, Stefan. Just a quick clarification on volumes in air. Was there any element of pre-ordering that you saw in air freight volumes? Do you see that happening in your current discussions with customers? This is difficult. You mean in tech, most probably, right? Pre-ordering. The second quarter was definitely strong, and we had a discussion with some of you already. Is that front-loading or is it sustainable in terms of restocking? I would exclude the tech sector on that because, the dynamic here is completely different. I would not believe, or we do not see that from a tech sector hyperscaler, there is any shift in demand or softening in demand coming into the next couple of quarters. I would say this is an ongoing high demand request from customers on the inbound flows. Thank you, Stefan. Super helpful. The next question comes from Sebastian Vogel from UBS. Please go ahead. Hello, good afternoon. The first question is on the air volume side. You mentioned there are some positive volume growth ambition for the third quarter and second half. Is there any chance that you give a little bit more granularity what you have in mind there? Something like mid-single digit up year-over-year or something in that direction? The second question is on the sea side. Of course, there is additional container ship capacity coming into the market over the second half and also beyond. Is that, in your understanding, a risk to rates over time, or do you see that can be being used by incremental demand or there is more scrapping or what's your thoughts there? I take the second, Sebastian. This is an ongoing debate, right? Since now more than a year. Is the additional capacity larger than the incoming or substituting the incoming demand from customers? So far, I would say with all the disruptions we see in the Middle East, the shortage of boxes, steel boxes in Asia, the high demand in Asia, I would not basically bet on that there is a significant change of rates. Of course, the volume demand is cooling down a little bit right now, but I would not say this is a shift, and I do not yet see that the additional capacity coming in the second half, will change the picture significantly. On the air freight side, I think, yes, we have higher growth in percentages than in the second half. I think what we should also see is air freight has typical seasonality. The third quarter is a bit of a lower quarter. I think that seasonality still holds true. I would phase if I was to look into that, still into a very solid growth continuation and good performance into the second quarter with maybe a relative stronger fourth quarter. Got it. Thanks. Just to one figure, maybe, right? I’ve forgotten to mention, right? The congestion and the disruption currently is absorbing or taking 70% of the global sea freight capacity out of the market. Just to give a little bit of a flavor what I have said, right? Got it. Much appreciated for the additional color. The next question comes from Marc Zeck from Kepler Cheuvreux. Please go ahead. Thank you for taking my questions. Two, if I may. Could you provide a bit more color on Apex and IMC? What is their current trend development. I would assume that the cost savings you enacted are more for the, let's say, core of Kuehne+Nagel, not so much for IMC and Apex themselves. Is the Apex development for those two branches or subsidiaries going up from last year, recovering from all that happened in the U.S. for IMC and the abolishment of de minimis for Apex? The second question is on Road Logistics. I guess when you discussed Road Logistics, you said that you saw some market share gains. Would it be fair to assume that those market share gains were kind of taken from one of your larger competitors in Germany/Denmark? Would you expect to hold on to those market share gains? Is there a chance once this competitor gets this house in order that they will take back this market share? That's my two questions. Thank you. Marc, I take the Road Logistics question. The Road Logistics business traditionally is in Kuehne+Nagel very much SME-related business, 60%, 65%, in certain markets up to 70% is SME, small and midsize customers, less of the larger ones. It's difficult to see from who do we take market share. Of course, in certain markets, let's take France, maybe a little bit Germany and others, there is an inroad from the competitor you have just mentioned, but I wouldn't overstate it too much. Overall, we see that there is quite some nice volumes coming our way, especially in the SME. I do not want to point at one particular competitor, but we see that now since a couple of quarters. I believe, from everything, all the signals, everything, the booking patterns from customers, this is an ongoing trend, and we should see that continuing in the next couple of quarters. Very good. Marc, I take the questions around Apex and IMC. I think Apex we have described and answered quite extensively already. It's clear it's one of our strategic elements in our air freight strategy, very much centered around good performance or very good performance on Transpacific. I think also how Stefan has already talked about it, the way how the business operation is being integrated gives us additional leverage. The IMC side, we haven't talked about it yet. We can say that since acquisition, we have developed that business jointly, and it is currently certainly at the strongest that we have seen since the acquisition. Driven is that surely by volumes and also, most recently, I would say, some pricing power, due to the reduction of certain driver groups from the U.S. market because of the well-known government actions. Clearly, also here, the outlook for the second quarter is, we expect a very strong performance to that. Maybe just for everybody on the IMC side itself, the acquisition was mainly driven from our wish to extend services alongside the supply chain and the value creation, that certainly is a very strong argument for that. Thank you. The next question comes from Peter Ajose- Adeogun for Morgan Stanley. Please go ahead. Thank you. Just one question from me. I just wanted to ask around pricing power. How would you describe pricing power for your business? Do you think it's better or worse versus the peer group, say, from two years ago? If I can just ask around that. It's Stefan, I answered it in the following way, right? We have only three large competitors left, right? That has definitely increased our pricing power as the largest in volume in Sea and Air. We have a certain pricing power. I think we should not overstate that, but at least, we see in certain markets, where we really have a high market share, it helps us in terms of the pricing towards the market. Thank you. Maybe just a follow-up. Outside of market share, is there anything where you think maybe your business position has changed versus peers that has helped with that at all? Yeah, the consolidation helped definitely, on the two lanes to Europe, but more to the Transpac. If you look at the statistics, we are amongst the top two now, in terms of the Transpac volumes are concerned. This has considerably changed over the last two or three years, much stronger than in the past. For air freight, I would say it's the quality stamp, right? Which is convincing and the quality which we are executing, and producing is second to none in the marketplace. Thank you. The next question comes from Harishankar Ramamoorthy from Deutsche Bank. Please go ahead. Hi. Good afternoon, everyone. Thanks for taking my questions. Just a couple, please, if that's okay. Firstly, on the AI benefits, it's helpful to have a range of number for 2027. Do you think it's slightly too early to think about how this progresses into 2028 or beyond. Maybe I missed this, but did I miss any numbers on the cost around the AI benefits? I believe you said it was a gross amount. Just wondering what the costs might be. Maybe one another question on air freight. I believe you've mentioned that yields probably in Sea Logistics hold up really well into H2, but any indications on yields in the air freight segment? Thank you. Hi, Shankar. I hope that was right. Air freight, Stefan is going to talk about it. I'm going to do the AI part. Cost savings, I think I would call them structural by nature. When you think about when we have processes that are currently being executed by a certain workforce, and tomorrow they're going to be executed through AI, I think it is inconceivable that in two or three years' time, we would go back and reinstate workforce for that. I think once these processes are being put on an AI execution, they will not come back. Savings that we generate in 2027 should, compared to the baseline where we started, should stay savings also going forward as a structural change. On the cost, you are spot on. We currently, and I think Alireza has talked to it, we currently and certainly enjoy as a global phenomenon, I would call it, relatively low cost for AI services. I think everyone's expectation is that's going to raise. Frankly, I've got no idea what's going to be the next cost level or what's going to be the cost level next year. Hence we said, for the time being, we consider that as gross savings, and we will have to update you on the cost during our next update in March 2027. Unfortunately, I can't tell more than that. On the air freight yields, last part of the question is, I believe that, and what we see is that the yields will stay somehow stable into the third quarter with a stronger peak in the fourth. Third quarter stable, fourth might be a little bit higher. Thanks. Very helpful. Thank you. The next question comes from Lars Heindorff, from Nordea. Please go ahead. Yes, afternoon. Thank you for taking my questions. It's on the tech vertical and the hyperscalers. I realized that you are now investing a bit in that area for the reason for the results in the Contract Logistics. Can you say anything about the length of those contracts that you engage with these hyperscalers? Normally, I would say that contracts in Contract Logistics will be at least three years. Are these significantly longer or shorter? How's the contract backlog looking? That's the first part. The second is on the share volumes. I don't know if you want to reveal or say, if you can or will say anything about it, but both in Air Logistics and Contract Logistics, how much is the tech vertical and specifically the hyperscalers? If you can say it or will say it, will there be any growth in the air freight markets, both for you and in the market if it wasn't for those hyperscalers right now? It's Stefan, I take the first one, the Contract Logistics question. Our Contract Logistics normal lifetime or contract time is 10 years, sometimes with a break clause after seven years. Similar here to the hyperscalers, right? It's a long-term engagement. It's not three years or short, right? We only engage if we have to have a back-to-back for longer than five. Normally, we go for 10 years, in our investment or co-investments with customers. It's not a short-term engagement, as well not for this industry. On the volume side? Lars, you were asking around the share on the tech vertical, right? Yeah. More specifically, the hyperscalers. I don't know if you've heard of it or, yeah, I don't know. Sadly, silence is going to be our answer to this. Okay. You have to live with that for a moment, unfortunately. Sorry about that. Okay. I thought so, but can you say, what would it be if, would the growth there, would there be any growth, if it wasn't for this vertical right now? Yes, absolutely. Okay. Let me put it in a different way. Hyperscaler is not the only area of growth. We do grow in quite a number of other specific areas very solidly as well. Okay. All right. Thank you. Thanks, Lars. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Paul for any closing remarks. Thank you very much for your interest in Kuehne+Nagel. Thank you very much for your questions. Much appreciated. I wish you a good summer break and talk to you soon. Thank you and goodbye. 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 your lines. Goodbye