Kuehne + Nagel International AG

Thanks Steffi. Good morning, good day, good afternoon from the Zurich Stock Exchange with - for the full year 2014 analyst conference of Kuehne & Nagel International AG.

I am guiding you through the day for the overview and business unit insights. Markus will follow with some details on our financial performance and balance sheet and then we finish with a short outlook for 2015 and we’ll go directly into Q&A.

Let's start on page four of the distributed overview of the 2014 full year results of our Kuehne & Nagel Group. Net turnover rose 5.1%, 1.9 net growth asset currency but the underlying growth of the Group, 5.1% in 2014 versus previous years.

Gross profit developments 2.9% underlying growth, 0.5% growth in after currency effect as the EBIT rose 11.1% versus a 7.6% net growth after currencies. These are the key figures of the 2014 years versus previous year and as we always do the constant currency shows the main effect of our operational strength in all of the country organizations.

Before I move on to slide five, page five, let me give you a personal note. Given the comments and the first glance and analysis that we saw this morning I personally have sometimes the feeling I am looking around in the room here and can see remotely but my feeling is that there is a high grade of first plans and speedy analysis in the market and that sometimes speed and quality of analysis are in conflict.

I'll give you an example. We were stated that with our core networks, the two networks, sea and airfreight we lag a certain dynamic in the fourth quarter.

This is true obviously and that's shown in this slide for sea freight and we will comment on that in a minute but that’s for sure not true for the other core network which is airfreight. And I would like you - invite all of you here in the room and remotely quality and speed together make the difference and that is something we focus on at Kuehne + Nagel.

Let me comment on the volume increase in sea freight. 242,000 TEU more, a growth of 6.8% volume growth year-over-year and the next [ph] dynamic quarter four in growth.

The reasons for that are evident. We don't participate in price wars and we step away from business.

I have stated this in summer last year and I got a very nice press resonance on that as well. But that is our approach and you see the effect in the conversion rates and the gross profit margin.

Secondly, we are all aware of the situation at the West Coast, U.S. and it's not easy.

You see a lot of ships waiting to get to the harbor to finish a shipment for the customers. Maybe these are reasons for a less dynamic or controlled dynamic fourth quarter.

The airfreight, very dynamic, the opposite; 5.3% year-over-year volume growth and the fourth quarter, the highest quarter we ever saw in the airfreight development, with a strong year-over-year growth of 20,000 tons. I would like to allude and go into some more detail when we talk about the business units basis.

EBIT; the EBIT performance we saw a stable seafreight performance while in constant currency we have grown the EBIT of seafreight by almost 12%. Airfreight, a growth of CHF60 million and in constant currencies of CHF25 million and we see an over land development that in constant currencies looks like we are showing it.

There is not a big currency effect here with CHF30 million EBIT in 2014 and the contract logistics EBIT of CHF153 million, CHF155 million in constant currency. The seafreight performance 2014, I am on slide seven, so 5.3% turnover growth versus a 4.1% growth of gross profit and an EBIT growth of 2.3% in constant currencies.

Last year in 2014 we have achieved the number one position in the U.S. A lot of growth the volume growth of seafreight, the 242,000 TEU came out of the North American markets, both across the transpacific as well as the transatlantic.

So North America was a driver, partly a driver for the growth. At the same time and that is reflecting by our previous comment on the Q4 volume, we have looked and will look and will continue to look after our conversation rates.

The conversation rate in seafreight remains relatively high with above 30%. The price rate volatility will continue in that market and the rate volatility is what is reflecting our GP growth or GP development versus the volume growth.

CapEx, slide eight, I mean I can tell you nice stories almost on each and every of those figures that you see on slide eight. Constantly growing turnover was 5.5% or 4.3% in gross profit after - in constant currencies, strong volume growth as well as an improvement at the same time of the conversation rate, the EBIT and percentage of gross profit; 27% achieved last year.

That is for sure the result of the solution selling, the complexity we are looking for in the airfreight business and the strong business development sales approach yet also with new products or new solutions in e-commerce back [indiscernible]. A very strong performance and I have to say to both teams, the seafreight team as well as the airfreight team they have done excellent job from our perspective last year.

Overland, we look into Overland for many years as you know and we had comment and questions on that during our Q2 and Q3 calls last year. This year I am happy to say it is the fifth quarter in the row and we see that on the bottom right of the slide the fifth quarter in a row where we have a positive EBIT, constantly improving and developing and the restructuring measures of the relative profit, strategy, that Stefan Paul has implemented with his team.

Globally the procumbent activities, the network optimization as well as the solutions selling in Overland had create off and we are, as one comment said, we are through the tunnel now with Overland and now it’s on us to develop that further. Last, but not the least, Contract Logistics on slide ten.

Strong growth in net turnover, 6% and gross profit mainly driven in the second-half of the year as promised, as we told you in summer. GP growth quarter-by-quarter which you see in the detailed factsheet, as well as the GP growth of CHF18 [ph] million in Q4 2014.

So the reshuffling of our solution portfolio, the new projects that we have won as well as the market location connectivity, which have been finished has paid off and we are standing here in a good shape. And I’m happy to announce that beginning with February Gianfranco Sgro, our new colleague in the Board has started and took over responsibility for Contract Logistics globally and he will now drive this strategy, they approach that we have established further for the years to come.

So this is the short overview on the performance 2014 and some details on the business unit. And I’m happy to handover to Markus now for some details on the figures.

Thank you, Detlef. Also from my side a very good afternoon here from Switzerland to everybody on the phone.

I am now on page number 12 of the presentation, the income statement and I want to say something about the momentum and the dynamic. I want to just lead you quickly on the quarter three and four on the gross profit development and you will see quarter three and four gross profit is up CHF19 million respectively CHF17 million and that translates into earnings before tax and deferred in fourth quarter of CHF17 million and CHF10 million plus.

So I think there is a distinctive dynamic throughout the quarters from the first through the fourth. And what you will see is on the earnings before tax versus during this period the tax impact of the fourth quarter is the one that actually makes some difference.

So we have last year had an effective tax rate in the fourth quarter of below 18%, around 17.5% which was obviously not sustainable going through. We have this year 21.8% sustainable through the year.

So that really is where your fourth quarter net earnings impact is coming from. Going forward, full year couple of financial overview data.

We talked gross profit for the full year is up from CHF6,257 million to CHF6,288. That doesn’t sound much and it isn’t much.

It’s CHF31 million give or take. But then when you go further down on the income statement, you will see on the EBIT line, the CHF31 million have transformed in CHF58 million.

I think that is quite a nice leverage, when I look through the difficulties of the year 2014 we started with and I think the dynamic will ultimately end with in the third and fourth quarter. We intend to forget and I include myself when I say we obviously, that the year 2014 was not a very good start.

We have been having some headwinds and when I say now we talk about a strong dollar, I can remember, and it’s not that long time ago that in 2014, we said we have a dollar problem. And I can remember that in August or September, or help me on the [indiscernible] we were celebrating that Germany had the highest export output ever in history and about two months later we were all thinking like the world is going to come to a stop because export volumes have been declining.

So that year 2014 where I stand today has fully a different flavor than the year 2014, that we went through. Why do I say that and all of you or most of you know me quite well in the meantime, I’m preparing us for 2015 as well because today I’m standing here in the - I know eight weeks, not even four in 2015 and I have a feeling that some of you will ask me either here or on the phone, what I think about the currency impact of the 2015 year.

So you will have to forgive both of us going forward maybe that we are going to be wrong, or we are going to most definitely going to be wrong whatever we say today about the currency impact of 2015 going forward. Operational cash flow seems that I think our EBIT easier to understand for us, operational cash flow going up from CHF966 million to CHF1 billion and indeed I can confirm because with my control of the finance department it is exactly CHF1 billion.

I was triple checking this because always these numbers they look a bit awkward, when they come around so nicely, but it is for what it is. Financial targets, profitability, Group EBIT margins, the net turnover of 5% and we were both taking the bashing in half year results, where the response of our target to reach 5% was not deemed very challenging because we have already 4.7%.

So bear with me for a second on the mathematics of that 4.7% to 5%, I’m being generous with myself here, is around 10% increase. So on the net earnings 10% increase is another $60 million.

So that is not something that we're going to do between now and next week Monday. There is work and challenge behind that and the volatility and the uncertainty around some of the parameters we're working in the year 2015 will not make it easier.

CapEx for 2015, at CHF 228 million versus CHF 196 million in 2014, again anticipating a question does that mean we're going to put more money into fixed assets. No, this or yes for one year let me correct that, that is a project that we have in [indiscernible] a build to suit warehouse that we're currently building, that is driving that CapEx number.

From our standard from that CHF180 million to CHF 190 million up to CHF228 million. Working capital I'm going to talk about it in a minute, we stick with the target our 3.5% to 4% working capital intensity during the year.

You will see at the year-end position that we have been able to improve that number quite significantly. Cash and I'm proud about the line and deterred at the same time to achieve a high cash position currently comes in certain circumstances with a price.

The price in the past was totally a lack of a real cash outflow than it is today. It was more an opportunity.

Pricing, now it is a real pricing. So negative interest is an topic when we talk about cash position of $1 billion plus.

At the same time, through the - I think is known with my previous answer is - myself we look for stability, we look for security, we look for safety. We are not going into the instrument that would not provide these standards that we are aiming for.

Tax, effective tax rate around 21% to 22%. Again a lot of movement around in the world.

We talk profit shifting, base erosion, OECD, we talk in the - style from three all these things which are obviously also fixed developments and what the future is going to bring we will see. Balance sheet, and jumping straight to equity ratio, equity ratio 37%.

Other than that, that is remains and hopefully will remain a very balance sheet, biggest assets trades receivables and cash trade receivables just to confirm what we always factor into year and during the last decade, I guess we are running a very, very safe receivable policy, crediting policy with more than 60% in short trades receivables, around 30% of blue chip, so investments grade companies being our customers and the remaining 10% odd being secured through other main fees, linked bank guarantee, the currency guarantees et cetera. Cash flow, again I’m starting with a $1 billion, biggest cash outflow, the $738 million around the middle of the slide that were or includes the $701 million dividend payment for the year 2013 paid in 2014.

Working capital development, as I alluded to quickly, working capital intensity at 3%, growth is 3.1% at the same period in 2013. Our DSOs 44 days and what looks like - just one of these many numbers on all these slides.

This probably is the number that caused most of efforts and pain and sweat and decisions because this means you have to affect credit risk, credit worsening, payment terms versus profitability of a customer. So we let go, as I said earlier we let go customers that are asking for extended payment terms with elevated risk.

That is the decision that protects balance sheet and potentially arguably when I look into business or pure business, operational people would be conflicting. But for us security and collectability and reasonable payment terms are paramount.

Exchange rates; exchange rates is one of the topics that I think everybody has an opinion to and is entitled to. Everybody has the same on security about what are they going to be tomorrow, because I can, and I again include myself on that, if anybody here in the room would know exactly what the exchange rate is in two weeks from now, we would not have to sit here.

So, exchange rate in 2014 and I talk translation impact, the exchange rate impact was 3.6% of which as usual we have picked out the three major currencies that we are having in our income statement, euro, U.S. dollar and British Pound, the variance 1.2 minus for the euro, 0.9 for the U.S.

dollar and 4% plus for the British Pound, again this is 2014, so this is Swiss [ph] national bank [indiscernible] or removing floor This 3.6% translates into a CHF22 million impact on the net earnings line. So in other words the 644 excluding the currency impact would have been 22 more.

Just to give you a flavor of what that means. With currency impact 37 and if I add back the currency impact it's 37 plus 22 in 2014.

What is within this 22 or 3.6%, we have picked again the four countries that I think we are all well aware of, had some currency impact, one of them being Venezuela which obviously had or still has I presume, one of the official rate, whichever you want to pick which is I think 126, something like that to the Eurozone, than you have the so called FICA 2 rates and I am looking at the bankers, because they know that much better than me, which is like 1 to 50 or 1 to 56, something like that and then over last week and I am not telling you any news obviously, the three markets went into Bolivar [ph] and all of a sudden it became 1 to 170. So prudent accounting principles would tell that’s what I need to do, I have restated the entire income statement according to these values.

So now you could say what effect is Venezuela for the group of Kuehne & Nagel, well Venezuela is actually quite a sizeable business or has been in terms of profit as long as we have some exchange rates that were actually working. Russia, Ukraine I think we will know that on a sliding scale downwards.

Argentina and again it’s a personal opinion because everybody can have one on this one how long it's going to take until we have more difficulties in this country. However within 2014 the combination of these is roughly CHF10 million impact on the bottom line.

What is 2015 going to be to us? Then came the 15 January 2015, oddly I was at an investor event here at the [indiscernible] and you could say a lot of the participants of the Investors day that we're having a coffee break and everybody was chatting with as you do and then everybody was watching that beautiful screen here like this 350 square meter screen and you could see the exchange rates to Euro plummeting and it gave kind of a shockwave to the people there within two minutes I guess everybody was on the phone and without sounding funny I think the degree of raising of their hairs would give you some hint how much or how big their uncovered positions were that these people have in their balance sheet.

We didn’t, so I was rather relaxed on what’s happened on a pure cash basis. Translation, you see behind me, translation impact and I deliberately just take some fictitious rate.

I guess there is never going to be a day where it is going to happen exactly in that combination. But if there was a year and again that would have to be then for the full year 2015 dollar and British pound as it is noted on page 19 of the presentation we would have an impact of CHF47 million on the net earnings side.

So why I am saying that because a lot of guys obviously have their models running, a lot of you probably are having to look into the Swiss bank reporting what is going to happen, we are very transparent, I think that let’s have [indiscernible] in terms of providing the information what is reported, what is the growth and what is the ForEx impact, however I think it is only fair to give a bitter fact, giving to you what does it actually mean if rates like these or similar would come to reality in 2015. Well that is the outlook for 2015 from my side.

I would hand over back to Detlef Trefzger and the…

Thank you very much. Markus thanks for the insights also into the currency outlook or projection for 2015 in a scenario technique.

We conclude the presentation on page 20 and 21. Let’s start with 20 with the outlook for the markets we are doing our business in, let’s start with seafreight and mainly in total before I get into the seafreight detail, compared to February 2014 and February 2013 today, we look a bit more optimistic into the future of the year ahead of us with all the surprises that you can imagine.

Last year at the same time when we were in that room we had a lot of red, stock exchange, share price developments on the screen that Markus has alluded to because the Russia crisis, the Ukraine crisis started exactly at that date. Nobody had foreseen that.

It was not included in our presentation. And you see today that’s the protection from today’s perspective, this is six-eight weeks behind us how markets will be - went up from our perspective.

The growth in seafreight will continue at 4% to 5% and we have not changed our targets, we want to grow 1.5 times market, we want to gain market share but again not by all means and not at all prices. Airfreight, little bit more optimistic for the airfreight market and remember two years ago we had a flattish market environment in Airfreight, that has changed.

We believe the markets will grow from 4% to 5%. Again here we plan our target, our assumptions are growth of 1.5 times market.

Overland markets, a bit better on the lower side, 2% to 3% growth expected, we want to grow with the market, having done our restructuring and work during the last 18 months. In Contract Logistics also here the market’s more optimistic also the trends continuing, a strong North America business and contracts logistics to be seeing market growth of 3% to 4%and we expect a growth of two times market.

On page 21, I want to summarize the outlook for 2015. It was a reflection of our strategy, remember that we presented to focus on excellent strategy, the business unit strategy, we explained the initiatives globally across all the business units and we have implemented that strategy and we will continue deploying it.

There will be no radical change or surprise in our market approach. We also will continue with organic growth.

This group is prepared and ready for more organic growth and market share gains. That is what we call momentum.

The momentum we have gained during the last six to 12 months we want to keep and accelerate this year. Leverage is our business model.

Leverage is what we can do best, leverage where we - leverage is where our conversion rates, stable and higher conversion rates come from. We continue the strict cost management and we will continue with standardization and optimization of our operational administrational processes.

And we are looking for client change instructions, we are looking for the surprises, we are waiting for complexity, we are not in a commodity game. We are a solution provider across RDUs and that’s what we call innovation.

We will have innovation. The very moment a customer is stuck with his cargo and needs a solution and we will be an innovator with new products and tools in the market.

KN FreightNet, the air freight e-commerce platform that we’ve launched autumn last year is one major example for that, and we will come with more. That is our aim, our assumption, our view into 2015 and I will conclude with those statements, our presentation.

And we are then ready for Q&A and we will start for those that are listening remotely, we will start with ladies and gentlemen here in the room.

Good afternoon. Mark Manduca from Barclays.

I have two questions. First of all with the pressure on GP, which seems to be ongoing where is the worst of that coming from.

Is there a particular type of order or customer that’s exerting the most pressure? And do you see that improving anytime soon and if not what, beyond the usual efficiency can you do or are you doing to mitigate that?

There is no specific reason or customer or market dynamics that you could pinpoint being the reason for the pressure on the gross profit. There has always been pressure on gross profit even if you look back 10-12 years.

I think one of our responses we hedge capacity with big volumes, directly with carriers. So when we buy and sell for longer term contracts we are locked in from both sides.

That is our approach and for lower small volumes we do play the market. I mean there is buying and selling of capacity and that is trade lane oriented and it’s market oriented what approach we play in those markets.

But the pressure on GP will continue. Therefore it’s on us to optimize the processes in the administration operation later on to get on our unit cost here.

Thank you. And my second was really for Markus.

In the current interest rate environment and from what you say is your debt and credit positions how much cash you really need to run this business?

One of the favorite questions we get all the time and we always say okay we are not disclosing that. I think let me answer you from our current stages.

Dividend policy is not changing, so we have 75% of net profit after tax being the regular dividend policy. You have also seen over the last years that we are aware of the excess cash on the balance sheet and we are prepared already to make the proposals to the Annual General Meeting to give some special dividend to that.

I think from a business perspective and you have seen it on the slide there is a certain working capital need in it and there is also net profit after tax and that is one of the few businesses I think where net profit after tax equals really also to the include cash inflow and that could be one of the reference points that you could actually use for say how much cash we would like to keep.

But given the strength of the cash generation are you not tempted to just increase the payout policy and say roughly all other things being equal we can payout 100% of our net profit?

I think the reason why we would not favor that solution is that we would lock ourselves into a new policy. I think it is also the strength of Kuehne & Nagel to have that liberty for M&A possibility or opportunities and/or internal business also organic growth opportunities, which also require investments, to have that availability and not having to explain afterwards why the policy is now different than it has been before.

In simple terms, I’d rather keep my liberty or our liberty to make decisions which is best for the business and to develop and grow business and keep admittedly may be low policy on the dividend part.

Thank you.

Next question here in the room.

Thanks. I would like to continue with the gross profit question but specifically on the airfreight business.

I mean that slide you nicely showed the strong growth in Q4 volume wise for airfreight, strong markets share gain. However the GP per ton did fall below 700 and it is the only quarter this year you had below 700 GP per ton.

With the risk of getting a similar answer than before I would still like to ask if there is any specific reason why this happens and then could you give us an indication perhaps in 2015 in such a situation. That’s the first question.

The second question is on your statement of the freight competition in seafreight in Asia Pacific. I am not sure this is - well of course, it is not new but to phrase it in the press release might be a hint that things get tougher and the question is does this affect your strategy in Asia Pacific going forward.

And the last question is on Overland and the success of your Route to Profit program is quite obvious. So the question is where do we go from here?

Are you able to give us new guidance or an indication as what the future development of overland will be?

Thanks, Scott, and sure I will answer those questions. I will start was the GP and airfreight Q4 currency - the answer is currency and the high volume of perishables.

Also think about the Chinese New Year being two weeks later, and this compared to previous year it is different dynamic that we saw especially the last six weeks of 2014, not changed in the overall picture but that is mainly impacting or has impacted that figure. Asia Pac highest for - in Asia has always been a low margin market and we grow there but also here we are selective.

I think I said something like we step away if we can’t find customers and markets with sustainable rates. So we have different margins and different profitability per trade lane, which is normal but within the trade lane we optimize also, so there is a minimum return, there is minimum margin per trade lane, which we want to achieve and only in rare cases we would step away, or we would agree to a non-sustainable rate.

Route to Profit, it’s not over. I mean we have launched it a year ago.

It is a program that has been designed for two to three years and we have built now a platform of what positive in this environment a cash flow generation in the business and now we are looking for those markets where we see the demand, complementary to the other business units, to grow and extend our footprints in overland. The footprint is very much driven by solutions.

Also Overland has the solution of course, and we have one product that we have announced and commented last year which is Pharma, the Pharma solution that we can offer to our customers is a solution across all the views. And therefore we need to develop roads in those areas where we feel we see market chances and a complementary effect with our other network as well as contract logistics.

Thanks, just on the GP per tonne question, I mean I know the airfreight business is not the US dollar business but still doing the calculation in US$ the GP per tonne also went down so it is part of FX, it is perishable, that’s it, no other reason.

Yeah.

Okay thanks. And maybe this one is for Mark on common resources.

And the first is on the [indiscernible] $60 million, what part was booked in Overland? And the second am I right to assume that the cash has not yet arrived in the - I mean I'm not finding it in the cash flow statement.

And third one is on external EBIT, the $22 million what kind of EBIT was generated in Overland in 2014 after this - event.

Okay, first all thanks for reading our statements very diligently and in detail, and secondly, yes the [indiscernible] business was - the vast majority of it was the Overland business. Understand that I'm not going to give you the exact number to it but we finished the vast majority of it.

Also EBIT not just the volumes, so talk about volume.

And yes you're right, the cash has not been fully collected yet because you have seen it on the other receivables notes, of the financial statement but that how much strength currently we give. It's quite amazing even for myself, and but we don't see a risk on that level.

We have collected part of it already as we said there is a contractual commitment which obviously I cannot disclose but the collection is in fact over the next future. The last question on that subject was, I cannot read my hand writing.

The $22 million EBIT with external revenue of - what extent was what in the overland EBITDA as well?

The same, the last majority of it was - I mean the vast majority itself in all contracts was Overland.

And to what extent it can be the [indiscernible] we have $60 million disposal gains let’s say vast we say $10 million is Overland plus $22 million EBIT overriding contributions, let's say $50 million is Evacom [ph] So $25 million out of $30 million is Evacom and that's not there anymore.

No, from a profitability point of view I will not confirm the numbers obviously but yes there is going to be a lack of that profitability in the 2015 outlook yes. And we will have to make up for it.

Okay, thank you.

Just a question with regard to the conversion margin development. You seem to have an EBITDA high strongly in the first half of the year in the airfreight business from the improvement of the conversion margin.

However that trends reversed in Q4 or you have the lower conversion margin in airfreight and I was looking at the conversion margin in seafreight similar picture, what is there - in that case what can we expect there going forward in terms of the conversion margin development kicks in and that continues to absorb the pressure on that business unit.

Now that is something we wouldn't disclose because we will - for sure we won’t I can tell you. But we have a target and we have an assumption.

And that assumption is that the key to airfreight conversion rate for 2015, I'm not talking about quarters but overall conversion rate for 2015 and with our core activity programs we should be able to get closer or keep that momentum and the same is true as we have stated for seafreight. We are aiming more for conversion rate and margin than for volume growth.

Yeah so we would always compromise the volume growth target for a conversion rate target. And we aim for 30% plus conversion rate for seafreight that has not changed.

And what’s the reason that the positive trends reversed in the airfreight business in the second half of Q4?

I think the same reason as I stated before. We have a different dynamic at year-end in December in Asia.

That is a different environment, the end of the year the two weeks plus the Chinese New Year have an effect. If you look into the airfreight volumes, a lot of the airfreight volumes was generated in China and in Asia versus the U.S.

So we have a trade land development very strong for both units, that was more in airfreight focusing on U.S. and North America trades and that is - that has this effect.

Okay.

Can I just quickly interrupt for governance for - can I ask you to state your name before you ask the question because otherwise the transcript is going to have difficulties.

[indiscernible]. Just a question on the - you gave us a long statement and presented at the investor day in September and that was longer in the result and whether you have also readily closed out the [indiscernible].

Sure so we have presented at the Capital Markets Day we’ve launched it after test implementations which optimized the final product or solutions end of August early September and we have a lot of onboarding of customers and booking. So we track that for each and every local market, national market weekly and we see once a customer is onboard, credit approval done, checked and approved, so that we are not getting into collection problem later on, we see that product has a lot of traction.

So of those customers that have on boarded more than 80% have a constant booking results, which is higher than we assume. Okay and if there is no more questions out of the auditorium here, I would like to ask then please switch off your microphones in the room so that we can invite the participants from the phone that are now on the telephone and I would hand it over quickly to the operator if you could start taking the questions from the participants on the phone.

Yes, good day gentlemen.

Hello David.

First question is just surrounding the U.S. West Coast port congestion.

You mentioned that briefly in your comments that if you could expand on the impact that had on your air and sea volumes, not only in the fourth quarter but as we started 2015 and how do you expect that to play out or your volumes to normalize in terms of volumes back to the West Coast or if some volumes have shifted permanently to the East Coast?

Sure first of all, the problem seems to be solved or the topic seems to be solved. But we are waiting expecting the vote of the labor union members to acknowledge and approve the decision taking between the port authorities and the labor unions.

An ongoing dispute, eight months in a row which worked according to SOPs and obviously that led to the high congestion. What happened to us first of all we benefited from that as we were looking for solutions for our customers.

First solution obviously is to grow into the Delta 4 in Vancouver and to grow into Mexico and then in Texas, Chicago up and down or down the West Coast. Then the Delta port was congested in Vancouver and we couldn’t find any way anymore because they were struck somewhere in the hinterland of the U.S.

West Coast and East Coast. Then we started to bypass and go via the Panama Canal into the East Coast and we’re trucking there.

And all of a sudden and I'm not exaggerating now, we had an all-in cost per TEU per forty footer of more than US$10,000 because going through the Panama Canal, discharging the cargo then putting it on a truck and trucking it back through the West Coast was a very costly experience. And our customers were grateful because they had the problem of not having to shell full or the production been and feel able to be sourced.

That would not have been a model to sustain and to go forward for longer. So the East Coast port started to slightly jam as well and we are happy that we found a solution.

The question was also how long that will take. We would assume minimum four weeks up to eight weeks to clear the ground.

Please remember the ships are waiting 10 to 12 days in front of the port to be getting invited to enter the port and then it took up to two weeks to get the cargo, the container off the port. So the delay, best case was minimum three weeks, up to five, six weeks per single container.

Sometimes we couldn’t even get the container out because it was difficult to find, the ports were deadlocked. So we believe four to eight weeks will be a reasonable timeframe for the port congestion objection to clear up once the decision is confirmed and is accepted and respected by both parties.

That’s very helpful commentary and then one last question on the airfreight market. You may have addressed this already, but it’s not clear to me why you’re seeing an acceleration in market growth in 2015.

What are you either hearing from your customers or seeing in the economy to put out guidance of market accelerating its growth rate in airfreight?

Yeah, we are seen still strong U.S. economy and we see Asian economies catching up as well.

So from a volume perspective, please do not focus on the U.S. airfreight market only, but also on the intra-Asia market.

And we saw growth in the intra-Asia in airfreight market and that growth we believe will continue, maybe even accelerated way in 2015. But it’s an assumption we can be wrong.

That’s all. Thank you very much.

You’re welcome. Thank you.

Hi, congratulations on the results. Two quick ones, firstly on e-commerce.

Just like to talk about that a bit more beyond even FreightNet. Can you just talk about the other divisions and how that could be applied in say ocean or road and maybe some degree contact logistics were viewed, I know you have a current business and maybe how IT really provides you the ability to do this, maybe both older people [ph]?

And the second thing, I know markets - embedded operating leverage. I mean it seems that your - the market growth rates are accelerating a bit and you are keeping your own targets of growing above market.

So I think you must be comfortable with the balance between the correct growth and efficiency. So you just might give views on operating leverage going forward, I guess your - it would seem to me from your outlook you are pretty optimistic?

Thank you.

Yeah, I wouldn’t say pretty optimistic, but we are not negative. We are seeing market charges moving forward.

But let’s start with the first question on e-commerce. E-commerce had two maybe three dimensions.

One is the dimension that I’ve mentioned that is the interfaces with our customers and the optimization and wet platforming of our own processes. The second topic is getting more out of the data information that we have.

So making more use of the intelligence within our systems for our customers. And the third I mentioned and that is maybe what your question is alluding to is the e-commerce providers and players as our customers.

And especially in airfreight as well as in contract logistics we have solutions for e-commerce customers. The contract logistics division has an e-commerce solution that has been sold to many customers last year.

I will and cannot disclose any customer name here, but these are the e-commerce customers that you know. Further with our normal retail and FMGC customers, a lot of them have started or are going to start a e-commerce sales channel.

So there is an additional momentum with our existing customers that will not invest themselves into e-commerce solutions, but will leverage on the strength and capability of the logistics provider, and obviously there is some of those we are feeling, we are in a good position to do business with them. So that would be the answer of - to that.

Operating leverage, yes we have operating leverage and we outperformed the market not by a percentage, we outperform the market by a factor, and I think that is a very, very clear statement. So if the percentage changes, we still have a market ambition, a growth ambition and outperformance ambition that is stated with the sector as you have seen that on slide 21 also.

If I may just add Steven, at the end of the day what does operating leverage mean it is about productivity, it is about cost control and it is about how quickly and how well we can actually move and shift sub processes into shared service center to make or say benefit out of wage leverage. These three elements I think they are in the DNA of Kuehne & Nagel, especially the cost control and these are elements that are going to be there forever, so productivity cost control and the operational if you wish part of the sub processes, that is something that we stand for.

So yes you can assume that these elements of our DNA will be there because our DNA is going to be there.

Very helpful, thanks guys.

Good afternoon, a couple from me, please. Firstly with respect to your conversations with your customers, the FX impact on European imports I presume will be negative, is that something that you are experiencing or talking to your customers about or significantly worried about at this point, and if you could balance that with how other factors such as maybe a lower fuel price might stimulate price wars to shape the year that would be helpful?

And then secondly, with respect to working capital intensity it’s been a very impressive gradual ramp down since the peak at the start of 2014. Could you talk a little bit about believers as you told there on the - from walking away some potentially owner risk contracts, at that level that you have mentioned.

Have you restructure terms with existing customers and what else has been going on to produce such a performance?

Okay, let me try to answer this I am not sure I understood the first question. I’ll give you an answer and then you have to state whether I got the question.

We don’t discuss the FX impact with our customer because we trade fixed rate in U.S. dollars and we have U.S.

dollar price and the operating costs in local currency are our own risk and our own - our own influence. So we have in our limit price that we discuss with the customer and that is not FX discussion that I’m aware of.

Yes there will be an FX in discussion maybe in markets where we have an extreme devaluation of the currency and we have the price basis in U.S. dollar or other currencies but why that is I don’t know one market where there is the case, but that is something we honor our contracts and expect our customer to do the same.

And once we contract or agree to certain terms we do our utmost to optimize also its influence. And so lower fuel prices are part of the rates the carriers the airfreight carriers have two approaches, the new, they may have some in the market I don’t see which one but they have an all-in price so that make the argumentation easy because we show those prices and sell them then to our customer and the other carriers have fuel surcharges, and yes we have discussions on that.

But we have a mechanism ourselves so doesn’t - I was going to say that doesn’t affect our prices immediately. We have an index and we have a basket and that is what is the basis for our price with our customer.

Usually there is more - but the risk because fuel price was moving into the upper direction the last 12 months and nobody asked that question from you. So at the momentum there might be a little chance from there.

I would believe that the fuel price, the oil price was 65 on average plus or minus 5, that is my personal guess, is a natural hedge we will have hopefully for a bit longer. We are not talking about 45 anymore we are talking about 65 plus or minus.

I hope that answer your question.

Well, just to come back on that, it was actually more of a volume trade flow related question. I guess in simple terms the weaker euro, I would expect that might have a negative impact on the imports from your European customer, is that a significant risk in your view?

Yeah, but it will cost European exports and the imports from Asia to Europe and we stated that in Q3 call already, run low - stable on a lower level for the last six to 12 months. Europe imports, especially from Asia were low.

Europe imports by the way from the U.S. restaurants that front Atlantic was a strong trade for both CNF rate in those directions.

I hope that answers your question.

It does, thank you.

Thank you.

Thanks for taking my question and good afternoon everyone. I wanted to ask you if you had any comments on the two acquisitions made by Japan Post and Contesu [ph] in the announcement in the last week about APL and the Toll Brothers Holdings, and what is that - does have any particular impact on your business and why do you think they were interested in doing those acquisitions?

David, good morning to you and I hope for your understanding that I will not comment on our competition.

Yeah, you can’t say anything about the competition but it is competition, it may intensify as a result of these two announcements.

Nothing to add, we are always happy and looking forward to professional competition and my statement would be good luck.

Okay all right, thank you very much.

All right, thanks David.

Hello good afternoon. Couple of questions from me please.

First of all just coming back to the question of the Overland business, I remember the Investor Day historically you have mentioned that sort of 1.5ish, 1.6% would be a long term target and yet that’s the kind of margin you generated in Q4. So just curious about where there is anything special about Q4 or that 1.6% over a full year basis could now be quite conservative estimate?

And then secondly just on to - ocean business, I know you said about sort of the 30% or so conversion margin from GP to EBIT but again looking at full year ‘14 you are delivering something like a 40% incremental conversion margin. So new business was significantly more profitable than the base if one can put it that way.

Is 30% again conservatism on your side or are there potential for that business to generate much better than 30% conversion margin given the 2014 performance?

Damian, thanks for your questions let me answer. I will start with Overland and EBIT.

We have we don’t disclose EBIT target for business unit, we have the overall target for the group of 5% EBIT margin Markus has mentioned that and elaborated on that and for sure Overland is a positive contributor to that development and more I can and will not say to a single business unit EBIT target. Conversion rate is our core KPI for optimizing our business in the two main networks; seafreight and airfreight and for sure I didn’t say that will be the conversion rate.

I said that’s the aim, so our aim is the conversion rate of 30% plus in seafreight and we would like to keep and be sustainable to 27% achieved in airfreight whatever that mean for single quarter be careful the quarter very much reflect closing of business, closing of files, a congestion in harbor has a delay in closing shipment files. There is a lot of influencing factors in detail of our daily business and the millions of shipments that we organize.

The overall target is set for the year 2015 and not for a quarter. We don’t have conversion rate targets per quarter.

If I may just add Damian, your observation that additional or incremental business only from the numbers perspective has been taken on with relatively high margin is correct but we always said that we are valuing margin over the volume. So if we walk to talk you should actually see exactly what you have observed that the profitability is actually stable.

Okay thank you very much.

Thank you.

Hi everybody it’s actually Chris Combe here. Just few questions, first of all on seafreight yields how do you see the development of the mix between the heavily commoditized contribution which I think you said most recently is about 50% of the GP versus the value add and is 350 a good average going forward?

And then second on Overland given your rate of progress is it possible that within the course of 2015 you could see a shift towards a greater focus on growth and growth ahead of market and possibly outside of Germany, France and UK? Thanks.

Yeah, so to answer that latter question yes, we are not talking about Europe only. We’re talking about our footprint and that’s our footprint in Middle East, Africa or footprint partly in Asia and European business and we will see extensions and course opportunities there for sure.

But not by all means and not isolated for the business unit Overland. There is a base interaction and link between in the business units and the growth of seafreight, airfreight and contract logistics shall be complementary supported by our Overland business.

We are integrated player we will continue to offer all solutions in homogenous way with high quality all over. The sea freight years yes there is a high proportion of the yields being influenced by additional services, but these services are what we’re going to sell.

When we walk away as I said before from fee trade business that we feel is not offering the right gross profit margin that reason is mainly driven up by the port toll rate but by lack of additional services but lack of doing more with the cargo on those 16 touch points that the customer usually requires to get the container transported and customs cleared and trucked and everything. So therefore we are and I said that before, we are looking for complexity in the requirement in all business units to bring our solution competence, our solution expertise and experience to the market to our customers.

And just a quick follow up in the past you noted that you need - there’s a 5% sort of headwind at the GP level. You need to make that up just for standing still is that still a good sort of rule of thumb?

I'm not aware of that statement but --

I know that, Markus here maybe he has an idea.

He has always an idea.

Great, the headwind of that 5% is coming from where?

I believe you noted in the past there was a combination of competitive pressures, the decline - the pressure was on the commoditized segment and you had also value add?

You’re talking GP margin, well okay, yes and they did a combination, I think the 5% would be a number that I would not be feeling comfortable with in confirming but and there is competitive pressure on the pricing. I think we have consistently over the past, also explained what it is, although the GP number stands in the constant currency relatively stable.

The composition of that has changed quite significantly from a margin that is being made on the wholly brokerage to the buying and selling of the seafreight where it’s a value add. So the value add portion of that GP per GU is increasing consistently, also through our solution and service offering where our new place and in reality we have a better pricing power to that, because we’re not making or we’re not in that direct competition with that commoditized buying and selling of the sea freight.

So yes there is headwinds, there is always headwind, there is rate volatility that plays in to it, the competitive environment is on the major trade lanes as we all know increasing but I think the service offering and our ability to generate additional gross profit through the solution and the value add services is an unbroken and very sustainable trend going forward, otherwise we would not be where we are right now.

Great, thank you.

All right Chris.

Yeah, I'm going to give it another try, since my first question wasn't a very good one. I just…

Thanks for your quality improvement then.

I'm not going to give up that easily.

No, we know you David, we know.

You're very - you are I would say optimistic about airfreight as one other questioner commented, how can you be so optimistic, given the distortions in the west coast, and the Asia Pacific market, little I guess is some freight moving sea to air during the last six day week particularly recently. And so how do you know what is going to look like after this disruptions in the west coast stuff is gone.

We don't know, that is clear. We have an assumption and the assumption is not based on the west coast only, but you're right.

We participated with our solutions and bypasses in airfreight from the congestion in the port at the west coast of the U.S. But there are other markets, they have a strong seafreight market going into North America also from Europe.

And with the euro diluting with the exports hopefully from Europe increasing, than we should see volumes growing also in airfreight, TransAtlantic westbound as well. So that is basis of our assumption.

I think I mentioned before that also IntraAsia air freight is growing as well. So there is a strong growth IntraAsia because tie definite and tie metals in those markets obviously again.

And to finish that the high tech industry is back to the party. That was a lack of high-tech volumes, airfreight and ocean freight for the last two years, but they're coming back, obviously consumers and I read that, I think yesterday or today I don't remember.

Now five devices per person is the next index. So if you have five electronic devices and you - if the target is five electronic devices in the U.S., three at the moment per person or per consumer obviously that offers a growth in volume here as well.

So there are markets and we should end to finish that. We have a solution of frozen airfreight, we see a strong growth in pharma.

The pharma business, the pharma solution is strong and engine trade and the airfreight [indiscernible] made for turbines, for engines, for airplane engines, strong growth. So we have a lot of offerings to a market environment that is I wouldn't call it optimistic but I wouldn't call it passiveness to either.

So we see opportunities in that market.

Now that's great. And certainly you certainly are ready for it and thank you very much for your answers.

Thank you very much David.

Okay I think if there is no more questions out there, I think that time is also advanced and I think we should thank everybody for their participation on the telephone and here in the [indiscernible] in Zurich. Again thank you very much for your question, for your question in Kuehne & Nagel and I'm just highlighting the next company event that you can time on the event on the - 23 in April ‘14 we will present our first quarter results in 2015.

There will be as usual an analyst at 2 o'clock in the afternoon Swiss time. Thank you very much for your participation.

Thank you.