Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NTG Nordic Transport Group A/S (FRA:NRSA, Financial) reported an 8.7% increase in net revenue for Q2 2024, driven by proactive market approaches, higher freight rates, and the start-up in the U.S.
- The company completed three significant acquisitions within the last 2.5 weeks, including SCHMALZ+SCHÖN, DB Schenker's land-based furniture activities in Italy, and Freightzen Logistics in Thailand, which are expected to enhance their market presence and capabilities.
- Adjusted EBIT increased by 11.5% to DKK 165 million, positively impacted by the final settlement of earnout agreements with AGL.
- The Air & Ocean division saw a 17.9% increase in net revenue, driven by efforts to win new business, higher freight rates, and the start-up of SCS in the U.S.
- The company expects to implement price increases in the second half of 2024 to counterbalance adverse margin impacts, indicating proactive measures to maintain profitability.
Negative Points
- Gross profit decreased by 1.5% to DKK 475 million, with gross margins dropping from 22.7% in Q2 2023 to 20.6% in Q2 2024, affected by intense competition and higher pass-through effects.
- The Road & Logistics division experienced a significant change in market dynamics, leading to reduced gross profit and an organic decline in adjusted EBIT.
- The Air & Ocean division faced continued pressure on yields, driving gross margins lower despite increased freight rates and higher pass-through revenue.
- The company incurred restructuring costs in Germany and the Netherlands, with ongoing challenges in stabilizing operations in Germany.
- Net working capital increased to DKK 18 million as of June 2024, driven by higher rates and activity in the sea and temporary effects in the U.S., indicating potential cash flow constraints.
Q & A Highlights
Q: On the road side, conversion ratio now down to around at least 30% 2 quarters in a row. Where would you like to see the conversion ratio going forward? And what are the remedies? What can you do to improve and come back to previous levels of the conversion ratio? Is it on the cost side? Is it primarily sales initiatives? What can we expect going forward? And maybe also on top of that or relating to that, some comments on the restructuring going on in Holland and Germany. What will the potential impact be from that?
A: (Christian Dyander Jakobsen, CFO) The conversion ratio is under pressure due to market conditions, including haulers going into bankruptcy and demanding higher prices. We expect to see improvements in gross margins in Q4 due to seasonal factors and price increases. (Mathias Jensen-Vinstrup, CEO) In the Netherlands, restructuring is complete, while in Germany, we are still working on improvements, focusing on productivity and cost. We expect to see positive impacts on the bottom line in Q3 and Q4.
Q: What is the actual restructuring cost taken during the second quarter?
A: (Christian Dyander Jakobsen, CFO) We have taken a couple of million DKK in restructuring costs during the second quarter.
Q: Should we expect more restructuring costs in Germany in the third quarter or early second half?
A: (Mathias Jensen-Vinstrup, CEO) There is still work to be done in Germany, but it is too early to say if it will result in further restructuring costs.
Q: Can you provide more details on the new offices and initiatives in the Air & Ocean division? How much have they contributed?
A: (Mathias Jensen-Vinstrup, CEO) New offices in the U.S. and U.K. are still being built up and have not yet turned a profit. (Christian Dyander Jakobsen, CFO) We have seen positive trends in turnover, but they are not yet in black figures.
Q: Regarding the SSH acquisition, it seems more expensive and lacks synergies. What is the reasoning behind this acquisition?
A: (Mathias Jensen-Vinstrup, CEO) The acquisition is strategic, aimed at boosting our platform and capabilities in the German market. While synergies are difficult to quantify, we expect long-term benefits. (Christian Dyander Jakobsen, CFO) We believe there will be soft synergies, but they will take time to materialize.
Q: Is there any particular reason for the increase in net working capital? Can we expect a release in the second half?
A: (Christian Dyander Jakobsen, CFO) We expect a release in net working capital in the second half. The increase was due to higher rates and activity, particularly in the U.S., and temporary effects.
Q: Your guidance includes a positive impact of DKK 35 million. Does this mean your underlying earnings guidance is downgraded?
A: (Christian Dyander Jakobsen, CFO) Road division is under pressure, particularly in the Nordics. We expect some price increases and improvements in gross margins later in the year.
Q: What makes you confident that price increases in the second half will stick, given the flat or declining market?
A: (Mathias Jensen-Vinstrup, CEO) Price increases will be differentiated by market and customer. We believe the underlying assumptions for some contracts have changed sufficiently to justify price adjustments.
Q: Can you provide a split of price and volume growth in the Air & Ocean division? What should we expect for Q3 and Q4?
A: (Mathias Jensen-Vinstrup, CEO) The growth is a combination of price and volume. We expect some slowdown in the second half due to the early onset of the peak season but are optimistic about stabilization in yields and increasing file sizes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
