Kuehne + Nagel International AG

Thank you very much Andrea. Good morning, good day, good afternoon and good evening to all of you and welcome to the Analyst Call of Kuehne Nagel International AG for the first half year 2015.

Greetings from Markus Blanka and myself from sunny Schindellegi, I'm sure your pencils are sharpened, the laptops are warmed up and your models are tested on robustness. I suggest we lead you through as we start on slide four.

Overview of our key figures for the first six months 2015. Net turnover in constant currency up 4.5%, gross profit 5.6% and then EBIT improvement of 11.1%.

This clearly shows the strict cost control in our group, the leverage of our business model as well as the focus on complex and value adding solutions for all of our customers. If we move on on slide five you see the details of the different business units.

Seafreight up 8.5% and a constant currency 18.1% in EBIT, airfreight up 11.5% and in constant currency 15.6% and overland decrease of 12.5% a constant development also in constant currencies and contract logistics continued with the trend of the first quarter was minus 20% and in constant currencies minus 10% EBIT growth. In total the EBIT shows a growth of CHF14 million and in constant currency the growth of CHF44 million, two-third of our EBIT growth and improvement has been eaten up by the translation of other currencies into the Swiss francs.

I continue on Slide 6 and here we come to the volume developments in seafreight and airfreight. To start with seafreight, an excellent performance in a very volatile market environment.

We have seen a margin improvement of CHF22 per TEU in the second quarter, while there is an improvement of CHF8 per TEU in the first quarter. As already addressed in our last quarter’s call, the volume versus previous year’s volume is lower with 28,000 TEUs in the second quarter less than in the second quarter 2014.

Nevertheless we have achieved the third highest volume quarter ever in the organization. The airfreight results I can only say is sensational, details we will discuss later on, but you see strong volume growth continued first quarter 2015 was plus 19,000 tons, 11,000 tons in addition to that in the second quarter 2015 and on and on we have a relatively stable margin versus the previous quarter development.

Let's move on to Slide 7 and here we go into more details of the seafreight business unit and its performance in the first six months 2015. The market rates are extremely volatile and seafreight is seeking not volume, but profitable business it's looking for complexity complex solutions to add value to the supply chains of our customers.

The margin improvements and I’ll come to that later are very much driven by trans-pac and transatlantic growth. So all U.S.

related imports and very strong development in LCL and [refa] business, plus a higher demand for more complex solutions. Let us in the first half year 2015 to a conversion rate EBITs to GP of 30.8% and the net EBIT improvement of 8.5% to CHF204 million for the first six months.

We have a conversion rate in the second quarter 2015 which we would mark as an all-time high with 32.5% conversion rate also that is based on special solutions for [refa] LCL as well as our complex solution oriented market approach. Gross profit EBIT and conversion rates up, GP per TEU very important figure for all of us, up by 4.4% to CHF356.

We have still a volume decrease of 34,000 TEU to consider in our figures, but as you know from our last quarter’s call we have given up annualized 120,000 to 140,000 TEU this last year, sorry, and the effects of that we were able to compensate by 50% almost already in the first six months 2015. The volumes Asia to North America and Europe to North America are strong and growing double-digit and that is what we are focusing on at the moment.

We move on to Slide 8 and the airfreight performance and here as I said before an outstanding performance. Conversion rate 30.6%, the highest conversion rate in half year results, first quarter 30.8%, second quarter 30.4%, so we maintained a very high conversion rate.

At the same time, EBIT is up and volumes are up. Significantly volume growth 5.2% a 30,000 ton growth, 19,000 tons in the first quarter and yes that for sure has been impacted by the west coast strike in the U.S.

But in the second quarter this strike has been over and we were able to gain additional volumes of 11,000 tons into our network. Business driven by the strong development of our European based customers, they are participating in the weaker euro and therefore exports are driven where African participate from and our new product [freightnet] is also showing double digit months over months gross rate at the moment.

In total a very strong performance in the airfreight business unit. We continue on slide 9 overland.

The overland gross profit and net revenue development is impacted by two effects we gave up the product business in 2014 as you know as we have a lower price based due to the much lower oil and diesel prices. In total we have a stable EBIT result of 40 million where the 60 million in the previous year and also in the EBIT the currency translation effect is neglectable.

The margin has being stable so our EBIT to GP margin as well as the EBIT to net turnover margin stays stable at 1.2% EBIT to a net turnover and 3.5% EBIT to GP. And if you look on to the graph on the left bottom side of this slide we have the third largest or highest result shown in Q2 2015 in the history of overland business at Kuehne Nagel.

We have one business in new markets like LatAm, Brazil and also in Asia but all those new wins are not yet being computed for in our figures that you are having in front of us or that we are having in front of us. To continue with overland I would like to deep dive a bit into the recent acquisition that we announced.

The ReTrans acquisition in Memphis, Tennessee in the U.S which is still subject to antitrust approval and we expect the closing of that in the third quarter 2015. But if you continue on slide 10 you see some key figures and also the product of ReTrans.

ReTrans is a 500 million U.S dollar revenue business which focuses on smaller medium sized enterprises with 500,000 shipments per year and a very strong sales organization complimentary to our Kuehne & Nagel sales organization in the U.S and Canada. The company has been launched in 2002 and it's one of the leading intermodal providers in the U.S.

ReTrans offers three categories of products, ReTrans multimodal that is the intermodal business that is the hearty and the strength if I may say so of the ReTrans organization; ReTrans logistics that is the brokerage business, it's complimentary in size and solution to all our North American or U.S brokerage business and then ReTrans freight, that is the innovative internet e-commerce part of the ReTrans organization which offers a very interesting platform for its specific solutions and has a focus on LCL airfreight shipments. We continue on slide 11 and here we see the rational of the ReTrans acquisition.

The U.S intermodal market is extremely attractive. It has been in the past and it continues to be a very attractive market.

It shows two to three times GDP growth rate, a CAGR of the last six, seven years of 7% annually and a strong and significant cost advantage of intermodal services [where the striking] of around 20% for long distances. And a lot of the transports from the course into main land U.S are long distance transportations.

The railroad continues to focus on infrastructure improvements and as we still have a lot of significant shortage of truck drivers in U.S, the intermodal market is supposed to continue growing and outperforming GDP growth in the U.S. The rational for Kuehne & Nagel to buy ReTrans or to acquire ReTrans is, we want to offer ReTrans customers the product of the Kuehne & Nagel organization and we want to offer Kuehne & Nagel customers the product, the complimentary services of the ReTrans organization.

So it's a growth acquisition and acquisition to drive further growth in one of our most important markets U.S and North America or [naphtha]. With ReTrans we gained direct excess to the intermodal industry in the U.S and we also have the innovative LCL platform that we can leverage into other [naphtha] or other markets beyond [naphtha] as well.

And yes we have seen a very entrepreneurial and competent team in the ReTrans organization. This [geared] with other U.S.

organizations will for sure drive market impacts of our sales and operations in North America. We continue on slide 12 with contract logistics.

Contract logistics, and we informed you about that situation already in our quarter one call 2015 two, three months ago. We are suffering from two effects mainly.

The first effect is we have a legacy business in the UK, in Great Britain which we will restructure and that will take until the end of the year to fully show traction and it's based or will be based on a solid and a forward looking sustainable platform. And we suffer over proportionally to the other business units from the translation effect into Swiss francs because a lot of the business is still euro based business.

And therefore, we have these two effects. Without the UK case and without the currency effect, the business unit, contract logistics will show a net EBIT growth of 4% to 5% for the first six months 2015.

If you look on the left bottom side part of slide 12, you will see that the negative EBIT or the de-EBIT deviation Q1 versus Q1 2014 showed 9 million Swiss francs, Q2 2015 versus Q2 2014 showed only minus 5 million Swiss francs. So we got already traction in all the measures and negotiations and activities initiated.

And we believe that by the end of the year we will have solved those topics and have built a solid platform to grow and outperform our growth again in contract logistics. We sell solutions all over the world and we are very successful, especially in North America and Asia with our solution scaling that we have addressed 18 months ago, that we had started a few months ago.

And now I am pleased to hand over to Markus to give you more details on our financial performance.

Yes. Thank you Detlef.

Also from my side a warm welcome to all participants of the call. And let me tell you I think the second quarter was a very good quarter for the Kuehne + Nagel Group.

Page number 14, why do I believe it was a very good quarter. Three messages that I want you to take away from it.

First message, look at the foreign currency translation impact on the very right side of this schedule. So throughout the first and the second quarter we are suffering from a translation impact between 7.5%, 8.5% throughout the P&L.

Nothing to do about, it's just to make sure that we understand the implications of that. Second message, look at the quarter and the quarterly results.

In the first quarter we were on an earnings for the period basis 3 million ahead of last year in Swiss franc reported, in the second quarter we are 10 million ahead of last quarter. So that clearly shows the acceleration and the momentum that the Group, has a total Group has gained during the second quarter.

Third message, when I look at the column called growth and I look into gross profit development, so excluding foreign currency exchange impact we enjoyed a growth of 5.6% gross profit growth. Out of these 5.6% growth, the bottom-line has grown nearly 12%.

From our perspective, this is the leverage effect that a company like ours being run on a very solid cost base can enjoy even in times of limited growth that the market is giving us. Going to page number 15, financial overview and the financial targets 2015.

Let me highlight you two or three items on that slide. EBIT margin to net turnover increased from 4.7% in the first half year in 2014 to 5% in the first half year 2015.

That also matches our Group EBIT margin to net turnover target of 5%. So we are confident that over the second half 2015 we will maintain and we will further develop for that financial target.

Equity ratio, last year we were on an equity ratio of 35.7% this year of close to 31%, let me remind you that obviously we have paid our dividend with extra dividend in May 2015 to the amount of roughly $840 million. Cash and cash equivalents, you see here is in lower position 437 million of [edible] as of the end of June 2015 also representing the cash outflow which we will see in the next page on the cash flow statement for the dividends.

Operational cash flow this is where I'm going to give you more details on the next page, very enjoyable 505 million Swiss franc for the first half of the year. Working capital targets we maintained a corridor between 3.5 to 4% understanding that until the first half 2015 we have been rather at the lower end of this bracket.

Effective tax rate, we maintain an effective tax rate of around 3 to 2%. Balance sheet page number 16, this is one of the boring news in this calls, that balance sheet itself structure does not changed but boring in that context for me is very good because our balance sheet I think is a very healthy balance sheet with as I mentioned beforehand a 31% equity ratio, 2.5 billion trade receivables which as you all know and recall to develop maturity is covered for insurance so risk profile has not changed.

Going on to page number 17, cash flow and let me point out again two or three numbers on that one. Cash flow from operating activities is compared to 2014 a 109 million better, which the major part stems from changes in working capital 65 million being better and that is something that I think the group can be proud of that we manage working capital in a very strict way so that we maintain a very challenging target of as I said around 3.5 to 4% working capital intensity.

Cash flow for financing activity is obviously under 46 million more cash outflow because of the increased dividend payment which ends up altogether with roughly 440 million cash position at the end of the reporting period. Page 18 and to go about cash and this comparison we're showing on this slide is actually from December 2014 to June 2015.

But please accept that there is some seasonality in the annual development of working capital and I would prefer comparing the working capital intensity development towards June 2014. And observing the numbers on the GSO you will see that our GSOs how quickly we collect cash from our customers has cast a stable level of 45 days.

Our DPO so at the time we actually pay our suppliers into looks like we have increased roughly three days of DPOs which then improves the working capital. So what is the drivers without the main drivers to do that and I'm very proud to say we have supplier finance programs deployed that really take on shape now and we see some of these effect on a year over year comparison being very contributional to the operating cash flow numbers.

Last but not least upon request of many of you on the call we have put back the return on capital employed [indiscernible] that like every half year or so and you see the 69% return on capital employed is an exceptionally good number. What it means to us it confirms that our asset light business model is from a return perspective the model to choose and combined with the strong cash generation as we mentioned it on the previous two or three slides I think that is a very healthy and good message out of the second quarter 2015.

With that slide I would like to end my quick turn on the highlight of the cash flow and the balance sheet and hand back to Detlef for the further continuation.

Thanks Markus and indeed at this point ladies and gentlemen you would have expected the 2015 volume outlook and we would have loved to provide this to you as with previous quarter of years. At the moment given the volatility of the Markus, the strong volatilities, the uncertainty in some of the political decisions to be taken and executed and a very sluggish macroeconomic outlook, we are not able to give a solid and reliable outlook on volume growth.

Nevertheless to give you a bit of guidance or some guidance, the financial performance that you have seen in the first six months 2015, we are certain to keep that momentum for the remaining six months and also in the second semester 2015. In total, we believe that through Kuehne & Nagel through its agility and its adaptiveness to market and customer development will be able to address volume growth and profit in margin improvement globally and its cost and margin consciousness helps for sure to keep the momentum already gained for the remaining six months.

And with that statement, I would like to hand back to Andrea to open up the Q&A session.

I had two questions really, first one was in volatile and sluggish markets you just delivered some of the best margins and returns the Group has ever seen, how do you sustain that against competition that can now see what you done and whether they come off to or not the pressure in the markets continues, how does that stay as a sustainable weighted margin conversion ratio or return?

We are focusing on the solution part of the market and if you look into our market-share in seafreight, we have a 2% market-share. We will always find areas and niches where we can sell solutions and that is our approach.

We move away and we have moved away from the commoditized volume low margin business and a business that offers 5% or 10% -- CHF5 of CHF10 margin on TEU is not sustainable for us. And therefore, we feel confidence that this approach and this market strategy is right moving forward as well.

So it's just continuing to be more and more the complex stuff and less and less of the [commoditize] stuff in keeping ahead of the market basically, yeah?

Exactly.

And second one, on returns because obviously we’re going to try and model in for my guess Q4 onwards. Are there any other financial details that you can give us other than the revenue and the EBITDA which I think you gave out at the time of the acquisition?

I mean does it have any depreciation, does it have any better [indiscernible] what sort of a tax rate does it have, anything else you can help us with?

Mark for the time being we are waiting for closing in the next couple of months the latest and with the year-end closing related we will include all the figures and all [indiscernible] and you can include them into your models. It's a successful business and it's a healthy business, it's not a turnaround or restructuring case.

It's a very successful intermodal player in the U.S.

My final small question was within contract logistics what sort of restructuring charges did you take in Q2. You talked about continuing to restructure the UK contract?

We don’t disclose those details as you know, but they are all fully provided for in the figures and it's significant, but lower amount in the first quarter.

The comment you made on the strength in the trans-pac and transatlantic lanes that was very interesting. You mentioned they were strong and growing double-digits.

Just for clarification was that in the first half of the year or was that in the second quarter only.

In the first half of the year and sustaining so far on both trade lines.

So sustaining with double digit growth even after the port congestion.

Yes there is shift back to seafreight. But the growth is still in the market.

Okay still very good news.

That is for our volumes. The market is more difficult to judge.

Correct. And then can you talk a little bit about the airfreight rates in Asia, Europe right now.

We've heard some carriers are getting price aggressive and added capacity to those lanes. Are you concerned about pressure on airfreight rates moving in the third quarter?

I could answer with maybe surprising statement here. Airfreight rates are much easier to handle because they are going down through the increasing capacity, the overcapacity that is getting into the market than the seafreight rates.

Seafreight rates are extremely volatile, we had a seafreight rates spike with effect of 38 times the rate of the June 30 on July 1 and 60% of that is already out of the market again. That is [indiscernible] effort, airfreight, the margin pressure, the rate decrease will continue and our experts are especially in the combination with their solutions that they develop and sell well prepared to forecast and prepare for this development.

And last question is just about China and your exposure over there. How much would you say if your airfreight and seafreight business would be tied to I guess China consumption or Chinese imports.

I don’t think it's significant, it's both we have China export and China imports, consumer confidence in China is up and down at the moment. We are not so worried about the China development than what we read at the moment in some of the newspapers.

I had a follow up on airfreight. I was just wondering given your very clear market share gains, especially in the second quarter.

How much of that would you attribute to some of the problems of a larger competitor at the moment?

I don’t think it's a game which is resting on the problems of competitors. And I don’t know what problems they might have.

We have a key perishable network we are benefiting from a strong perishable import and export growth out of Europe into Europe and also LatAm and North America. And we have a solution approach especially [pharma] as you know or KN engine chain all those solutions got a lot of attraction in the market in airfreight and both together drive the volume growth.

Okay and with respect to the financial guidance. Could you elaborate a little bit on your confidence in delivering the 5% is that if you have downside in volume you expect more volatility in rates and opportunity to capitalize on those?

If I may take that question. I think the 5% we could add deliberately as a mix of the group is going to perform.

So the dependency yes on seafreight that’s a big issue that is still there. But I think we have demonstrated that the airfreight the country's logistics, the road these are a whole mix which we drive to 5%.

We're as hit currently and I think as I mentioned previously the 5% is a rich full target.

And very last one regarding return on capital employed chart. What would contract logistics in overland look like alone and what sort of your internal long term targets for those businesses.

I mean logically without disclosing the individual numbers. But logically the sea and airfreight will be above 100% in country logistics will obviously be below 69.

Is a double digit return consistent long term? Is that a reasonable expectation for both businesses?

Double digit according for country logistics, yes.

Just a couple of maybe financial questions, Markus maybe for you. Just go back to the margin target and certainly you got -- I know that you put that out as the investor day.

I thought it was kind of it is more of the medium term target, it seems like you're getting there earlier and you talked about further development there, might be just talk about that. Is it a bit of the next turnover, a bit lower, obviously the [indiscernible] performance is fantastic, but just to flex that out a bit.

The second thing, I was just wondering with the return on -- when you look at projects, I mean what you considered kind of the I guess more an [indiscernible]. And finally I was just, I think this has been debated before but I mean obviously I think the cash flow you mentioned has been very strong and the working capital in particular I know it can move back up a bit within the range of 3.5 to 4, as the cash generating continues to be strong, is that something that is continuously reviewed in terms of the dividend payments in that obviously be generous but like two years of a special dividend.

So sometimes when it keeps coming, it seizes to be special, you know what I mean?

Hello Simon. So let me take it from the top.

The 5% EBIT to net turnover, indeed that is why also after the previous question EBIT if you wish sluggish I mean that is a relation between net turnover and EBIT performance. We are happy with the EBIT performance, that's why I said a 5% are also slightly depending on absolute REO rate and -- turnover rate.

I totally agree these are the mathematics behind it that are obviously influencing potentially that number. However I think what we have seen and if you wish the expectation going forward with a certain volatility in rate, I think we are relatively on the safe side with our EBIT performance in the first half and continuing that momentum into the second net turnover to EBIT will be somewhere around 5%.

Okay, thanks.

On the regional capital and to project [indiscernible] number I mean our weighted average cost of capital are somewhere between 8% and 9%, we know that we have made an analysis also external people like analysts, all investors have done that. So on a project basis, it should be on a [construction] method business is not a big chunk of business for us.

Hence the impact of that is going to be marginal to our bottom line. The last one working capital and the context of dividend payment and cash generation I think the good news and I think what is to be proud about is that it's a highly cash generating business.

The question of dividend is something that the Board of Directors is deciding and what I can tell you from historic and you know that as well there is a view on having a certain safety cushion as a high cash position because independency, safety and being able to react quickly is necessary to restructuring our stuff like that. That is something that I think historically the Group is proud of and is continued to be proud of.

And the question is if there is excess cash available to pay another extra dividend as you say and they become a bit more regular than extra I think that is a matter of decision of the board of directors.

Yes. Good afternoon gentlemen.

A couple of questions from my side please. First on the outlook.

I appreciate that, yes, we have quite a lot of volatility in the markets and in the rates and everything. But arguably this isn’t new, we've had it for the last couple of years.

So what's changed to make you guys a little bit more uncertain about how the future will develop?

That is a very clear and straight forward answer. We got so many different inputs from carriers on potential volume developments that then that we would have issued and [indiscernible] would have been so unreliable that we decided not to give any guidance on volume growth.

So is it the carriers and the customers in or just the carriers?

No it's the carriers.

Okay, okay.

Customers don’t care for volumes they only see their order lines and their market impact.

Yes, okay. So the customers still have decent visibility on their own order lines?

Exactly.

Okay. Fine.

And then on the M&A side of things you guys have done the ReTrans, is there anything, any other areas you are looking at when it comes to future areas of M&A?

That is we never disclose our M&A slots, we are always open to look at interesting targets. But there is nothing that we are going inform you about in the next couple of days

You're happy with your size for example and seafreight or something like that.

We are happy with our business units and there're always ideas on strengthening our solution, or industry specific portfolio.

Okay, okay great, thanks. And then finally just on the cash flows, looks like in the Q2 cash taxes were down year-over-year, can you give us just some quick insight as to how you expect that to develop over the rest of the year?

Well I think that is, if you look at in tax charge and the P&L that's the relevant number, when and how we happen to pay the tax to get the cash outflow towards the government obviously varies from year to year.

Okay, so you would expect it to normalize. Great thank you very much gentlemen.

Good afternoon everybody and a couple of questions please. The first one with respect to the dramatic ocean rate weakness we’ve seen over the last few months.

Has that impacted positively the GP per TEU at all aside from your set activity in the second quarter, can you give us a sense as to how concerned you might be about the third quarter or are you pretty relaxed about the ramifications, the GP per TEU in the third quarter, and the second question with respect to the 5% margin targets. To think about that in different ways, if you're going to achieve the 5% margin target in 2015 I'm interested how you think about motivating and incentivizing whether it be senior management or indeed the broader labor force.

Does the company need a bigger more ambitious target to continue to achieve efficiencies going forward beyond 2015 or why wouldn't that be the case, thank you.

Right. Neil, let me answer.

Ocean rate weakness I don't think we have an ocean rate weakness that is influencing our gross profit. Our gross profit per TEU is very much influenced by the solutions, the additional services, the seafreight community and experts provide to our customers.

From the pure trading on rates we will now show such a margin and that is what we are focusing on, we are looking for complexity and complex requirements in the market to be solved with our ocean team, ocean freight team accordingly. 5% EBIT margin target, can we celebrate the achievement of the 5% EBIT margin target by end of this year because we have six more months to go, it's a hard work to sustain that margin and then for sure if we have to keep that margin target we will set a new target.

I mean this is a company that is proud of growing and outperform the market and competition and that target will be set accordingly then by end of the year or early next year when we see the financial results.

Good afternoon thank you for taking the question. A few questions please, could I [ask one on] costs, I just want to understand, after the unit revenue if one thinks of GP per TEU or even in the air business was very impressive particularly if one pulls out the impact of currency.

But also when I look at the cost base, the SG&A cost base sitting between GP and EBIT, fell both in the air and the ocean business and at least then my numbers look like it contributed to the in excess of a 100% incremental EBIT GP margins. Where are you on the sort of the cost efficiency measures, how much more is there to go particularly if you like intensive IT structure change within the ocean business and how much better could that get or will at some point it plateau and then the second question just we're seeing what looks like extreme volatility in the ocean market.

At what point other than sitting on the cash balance for the certain outlook do you begin to worry about some of your suppliers in that market and how do you diversify your risk within that space.

Okay Damian, let me start with the latter question, volatility and supplier security. We are a top three customer for all of our suppliers in sea freight and we have access to all the carriers and we are not worried about any supplier risk if you may say so at all.

They all try hard to improve their own business model and we are in a good relationship with all of them so I don’t see any risk there. To come back to your cost based improvement and the question about how can we drive cost efficiency further, we have cost efficiency programs in the organization and we never -- we question daily whether we can improve processes where we can reduce costs and how we can drive costs from new IT system, cost improvements through new IT systems.

The big leverage and we have told you that I think a couple of times will be with the [roll] fully implemented and rolled out new IT system for [CMF] rate and also overland which will not take place before 2019. So don't expect wonders in the next couple of years, but the incremental improvement in our cost per unit will continue.

Can you give us any thoughts about regional development of airfreight, where are the strong market for you in the second quarter, also weak markets where, just general idea of what might be some of the contributions geographically?

Yes I am more than happy to do so. We were very positively surprised by the imports to the U.S.

and [NASCA], North America both from Europe as well as from Asia trans-pac business in airfreight. We are also very confident about the Middle East Africa import.

So that is continuing -- on Middle East import, so that is continuing. And intra-Asia also there we see a strong rolls or development.

The rest I think is normal and we don’t see any fallout at the moment other than the imports to Europe airfreight based as we do see a weaker import from Asia to Europe also in seafreight.

That weakness in Europe I guess is related to the foreign currencies weakness in the euro or just consumers in Europe mostly?

No I think we have a lot of consumer -- higher consumer confidence in Europe year or two years ago. I think we said so already in our annual -- the call for 2014 results.

At the moment the euro weakness which is a weakness that has being desired by the European Central Bank in order to help exports to grow. This weakness has its impact on imports or less imports.

The consumers in Europe tend to continue to consume and maybe the sourcing pattern is changing and they saw a small out of the euro zone rather than from an RMB environment which has significantly appreciated in value.

Two questions please, regarding the calculation of the return on capital employed on Slide 19, could you please tell as what definition you used for the capital employed or respectively what you include in your definition? And then the second in sea and airfreight, what gross profit per unit development should we expect in H2?

Is it right to assume further improvement of TP per TEU in H2 also based on the U.S. dollar which is some tailwind and somewhat probably stable GP per [indiscernible] in airfreight?

Thank you.

I would like to start with the latter question and I would be as always very cautious and I would continue to use the same figures that we have achieved already in the first semester. I don’t see any risk, but I also don’t see any upside in further GP improvements per TEU or per tons for the second semester.

Rolf to your first question capital employed deficiency, first of all on the Page 19 on the lower projects financial which appear we are thinking, so we take four months rolling. The definition for the capital employed is already short-term received for short payable, so in overall terms that’s an 8 plus [feedback].

Just a few add-ons and little technical questions. Perhaps you can give us a feeling for the volume development and the margin development in seafreight in the course of Q2 basically.

And mostly how did June go? I would be interested if you can share your thoughts on that.

The other thing is on overland if I get the numbers right, the FX impact and in Q2 was zero for EBITDA which seems a bit wired but it might be long numbers I have here. And then thirdly do you provide or give us the indication or your estimate how strong the market for seafreight and airfreight grew in Q2.

And thirdly and perhaps if you could share some thoughts on the verticals both for sea and airfreight which verticals were specifically strong and perhaps some were weak. Just a four questions I have thanks.

Okay Torsten let me start and then FX question I will hand over to Markus. Torsten to start with the verticals we had pharma very strong, automotive partly strong and high tech aspect and that is very important.

As you know we were suffering from lower high tech volumes for a year or two, the last two years. But the high tech volumes are really back and that is bringing a lot of confidence in our outlook.

The other verticals what we call consumer especially luxury goods driven by the growth in the middle class or upper middle class in Asia, in North America is still growing solidly and that is also a niche or an area we focus on. But market growth second quarter and the different ones, I would say June was a strong month, a much stronger month than April or May.

But be careful working days in June were four days more than in previous year June. So you have to look into the development per working day and not per month, that is more headful and it's more helping towards the volumes.

But June was a stronger month and we were very happy about that development. The guidance on the market volume and seafreight we really can't give because the feedback we get from carriers is also very heterogeneous.

We have carriers with strong volume growth and we have carriers with low volume growth in the second quarter. And you will see this when the reporting of the carriers start and therefore we have moved away from giving any guidance historic or future oriented guidance on the volume growth in sea and airfreight at the moment hopefully that will stabilize and becomes more reliable to predict and then we are back to the party and give you those information as well.

FX for overland Torsten technically is actually correct. I have checked that number myself because zero is always a bit of a coincidence [the out term].

But when you look at it and its sad to say but if the EBIT is relatively small in comparison to obviously the GP and the cost then when the profitability is spread out equally over the currency then at the end of the day the currency impact is really zero.

And so just an add on if I may on the IT program roll out. I didn’t slip back my note but I am quite sure that in early days at the years back so to speak, the indication was earlier than 2019 and so perhaps you can confirm the question is really did you already start to profit and speaking about the superb conversion rate at the seafreight business did you already start to profit somehow from some implementations on the IT roll out.

Torsten we did not profit from any IT roll out and seafreight yet. And for the last three years our guidance for the fully rolled out IT system for sea and airfreight has always been 2019.

So I am not aware of any other guidance or maybe you have to look back very far back.

Sure we have a chance to chat on that. But I am pretty sure we are on-time in our project deployment that the import modules have been up and running now.

We are focusing on the export modules for both sea and airfreight and that takes time to have 1,000 locations in 100 countries fully included in our new system setup. And that is then driving the benefit because then all of a sudden both sides, import and export sides work on the same files and that will bring additional efficiencies in our operations.

Thank you very much everybody for joining in and your questions. The next call on the Q3 performance and year-to-date 9 month 2015 results will be on October 13.

In the meantime from sunny Schindellegi at 30 plus degrees we can only wish you a nice summer. Stay confident that the year be a successful year for all of us.

Thanks and bye-bye.