Kuehne & Nagel International's (KHNGF) CEO Detlef Trefzger on Q2 2016 Results - Earnings Call Transcript

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Kuehne & Nagel International AG. (OTCPK:KHNGF)

Q2 2016 Results Earnings Conference Call

July 19, 2016, 08:00 AM ET

Executives

Detlef Trefzger - Chief Executive Officer

Markus Blanka-Graff - Chief Financial Officer

Analysts

David Ross - Stifel.

Damian Brewer - the Royal Bank of Canada

Neil Glynn - Credit Suisse.

Christopher Combe - JPMorgan

Mark McVicar - Barclays

Stuart Todd - Lloyd's Loading List

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the Kuehne & Nagel’s Three Months 2016 Results Analyst call, hosted by Detlef Trefzger, and Markus Blanka-Graff. My name is Simone, and I will be your coordinator for today’s conference. For the duration of the call, you will be on listen-only. However at the end of the call, you will have the opportunity to ask questions. [Operator Instructions]

I am now handing you over to Detlef Trefzger to begin today’s conference. Please go ahead.

Detlef Trefzger

Thanks, Simone. Good morning, good day, good afternoon, and good evening to all of you and welcome from sunny and hot Schindelleg to the analyst conference call half year 2016 results of Kuehne & Nagel International AG. Markus Blanka-Graff my colleague, CFO colleague and I will lead you through the slide deck that we have distributed earlier today and lets’ get started with slide four of the slide deck.

With global trade making a clear growth momentum, we look back to a strong first half year with a improved EBIT of 11%, all TEUs have contributed to this EBIT growth and you’ll see an EBIT improvement of CHF45 million year-over-year six months 2016 versus 2015.

Gross profit also improved significantly by 7.9% or CHF239 million also here our business units contributed to that improvement. Giving a very sluggish rate development in the C&F rate markets, we saw a net turnover decrease slightly of 0.9%, this is mainly an almost only reflecting, the rate, current rate level in C&F rate in the market.

Let’s continue on slide five, the overview of our Seafreight business. The EBIT improvement of 8.3% led to CHF17 million additional EBITs in Seafreight’s business unit, the volume increase of 5.8% versus the market growth of 2% led to 108,000 TEU more and the gross profit per TEU at the same time was expanded by CHF3 per TEU. In total for the Seafreight business, the conversion rate improved further to 31.3%.

Slide six shows the key figures of the Seafreight business unit, in an overview you will see that we have shipped a growth profit of CHF44 million more leading to an EBIT of CHF17 [ph] a growth of 8.3% in EBIT as mentioned before and the EBIT in percent of gross profit improvement from 38% to 31.3% or for the incremental business above 38%.

The quarter two figures showed a remarkable volume in expansion by more than 1 million TEU shipped, 1,023 per TEU shipped versus 65,000 TEUs more than quarter two, 2015. The Asia exports especially to Europe and also to North America, but also the Intra Asia business clearly double-digit growth has been seen here and the improved conversion rate was due to our solutions earning as well as the strong OTM business, order management business on the transpac.

We will continue on slide seven, airfreight key figures. EBIT improvement of 8.1% or 11 million additional EBIT generated in the airfreight business unit. The volume increase for the first six months of 1.3% or 8000 tons, gross profit per 100 kilo improvement of 5.5% or 4CHF per 100 kilo and a stable conversion rate at 30.8%.

The market in airfreights showed a negative growth of approximately 1% and our volume expansion of 8000 tons together with the extra volumes we saw quarter one, 2015 through the West Coast strike in the U.S. led to a normalized improvement of volumes of 12% or 2% and this is exactly the figure we have seen in the last quarter.

On slide eight some details on the airfreight business unit, additional gross profit of CHF33 million led to an additional EBIT of CHF11 million or conversion rate of 33%, so growth in all areas here and especially the expansion of the gross profit through a 100 kilos short the profitability and the leverage effect of that business unit. I would like to thank especially the pharma and perishable teams for their great contribution in the first six months 2016.

Slide nine shows that or reveals the details of our press announcement earlier today leveraging volume for profit. Volume rose 108,000 TEUs for the first six months 2016 in seafreight and the gross profit per TEU expansion of 3CHF and an airfreight a volume expansion of 8000 tons as I said normalized 12,000 tons given the West Coast strike or taking the West Coast strike in the U.S. into account in Q1, 2015 or a gross of 1.3% normalized 2% and an expansion of the gross profit per 100 kilo of 4CHF.

Leveraging volume for profit also is true for the other two business units which contributed to our EBIT improvement. Overland, net turnover increased 22.6% organically 4.8% and the ReTrans acquisition contributed 16.3% of that improvement, EBITDA gross of 19.4%, the margin EBITDA to a net turnover strong at 2.6% and the EBIT improvement of 21.4% or 3% also showed a higher EBIT to gross profit margin.

This can be seen on slide 11 of the slide deck. On the top left bottom so to say you see the EBIT to gross profit margin which improved from 3.5% last year’s first six months to 3.7% this year’s first six months.

Net turnover improvement 267CHF million, gross profit 51CHF million and an EBIT of 3% that shows an improvement to EBIT margin to -- EBIT to gross profit margin of more than 5% or almost 6%.

We continue on slide 12 with contract logistics. EBITDA improvement of 19.2% or 20CHF million, the margin improved by 0.6% to 5.6% EBITDA to net turnover margin. EBIT improved by 40CHF million or 25%. Idle space reduced further to 3.2%. We have added in the last 12 months so comparable periods first six months 2015 to first six months 2016 more than 1 million square meters additional space and have reduced the Idle space by another 67,000 square meters to 3.2%. In total, we operate at the moment 9.7% -- 9.7 million square meters warehouse space around the globe of which only 3.2% are Idle.

Details on contract logistics can be found on slide 13. Net turnover increased 6.9%, 7.4% in gross profit and 25% as already mentioned in additional EBIT. Given an incremental net turnover of 141CHF [ph] million and 14 million additional EBIT one could assume that we have an additional incremental EBIT margin of 10% we would state that this is partly through 50% maybe true for the restructuring efforts that we did and mentioned last year with regards to the U.K. business but more important the new business that we implemented is complex and high value business contributing over proportionally to our EBIT in the portfolio of activities that we are running in contract logistics.

In the last six months we have implemented more than 100 projects around the globe and especially the expansion in pharma and e-commerce shows clearly double-digit growth in both segments. And with this statement on contract logistics, I’m happy to hand over to Markus to lead you through the financial details.

Markus Blanka-Graff

Thank you, Detlef, also from my side a warm welcome to all participants of the call. Thank you for dialing in. I’m going straight into page 15 and everybody who have participated more than once in these calls knows that this is one of my most favourite slide. Again when we look at the momentum that we picked up at the beginning of the year for the first quarter in generating additional gross profit that momentum has sustained and even accelerated in the second quarter.

You can see we have gained a 143CHF million additional GP as that to the first quarter of 96CHF million that we have added in total for the first six months of the year 239 million gross profit. This of course is across all business units, one of the largest contributors mainly in the second quarter was contract logistics with 73 million additional gross profit.

But as you know this is only one part of the story, the other part of the story is how much EBIT we can actually generate out of the additional gross profit. And here again you can see that we have had a very profitable [ph] momentum in the first quarter and we also have a very strong momentum in the second quarter.

You may now say, well in the second quarter we only made 18 million EBIT out of 143 million gross profit, but there is one additional one-off element in the second quarter which is worth mentioning. It is a 7 million impairment for a real estate evaluation in Greece [ph] that needs to be added from a performance perspective into the EBIT number. So the Company or the business has performed with 25 million additional EBIT out of the additional gross profit in the second quarter. That all means that we continue to add business that is improving the overall EBIT and equity margins of the entire business.

In reference to currencies you can see on that page, the effect of foreign exchange has been nearly to zero for the first six months of the year obviously with the recent developments in the account, we are remaining cautious to the revenue outlook for the rest of the year but we see how much the impact of that is.

Last but not the least, when you look now into the EBIT margin that have been achieved in the first and the second quarter 2016 with 5.4% and 5.8% respectively for the EBT, 5.5 and 5.8 equally they are essentially above last year’s levels.

Now moving onto page number 16, the financial overview, there are only two items that I want to pick out of that slide it’s what I referred to in the EBIT margin to net turnover 5% in the first six months last year versus 5.6% in the first half this year. We remain with our profitability target at a Group EBIT margin to net turnover above 5%. You will appreciate that that number obviously is influenced by the net turnover and especially over the first six months this year we have seen a relatively low rate level and we are going to remain at above 5% as a target.

Cash and cash equivalents and operational cash flow you will see and I’m presenting some of the questions that I have received over the last six to nine months during various calls with some of you asking me what is the minimum threshold on cash that the company wants to maintain and I think my answer was consistently when you look at the balance sheet of the half year results we will probably see the area of our threshold, so 450 million that is the current value on that balance sheet effect.

Operational cash flow, 548CHF million, which is 43CHF million above last year so we maintained a highly cash generating operation. On the right side, you can still see the financial target for 2016 entirely unchanged our CapEx targets still remains at roughly 215CHF million for reference and for memorial [ph] for everybody who compares through 2015, the number of 2015 included an investment into the Singapore logistics hub which is currently already operating and in production. Working Capital target we maintained at 3.5% to 4% and the tax rate at approximately 23%.

Moving onto page 17, balance sheet and trade receivables again the biggest asset of the balance sheet at 2.5CHF billion no movements here you will see also in the DSO a very stable development. Equity ratio between December 2015 and 30th of June 2016 were at a stable 30.6%.

Page number 18 cash flow as I mentioned before, operational cash flow plus 43%, a few changes in working capital of about 40CHF million, income tax was paid slightly more than last year 35CHF million more but all of you have we are not managing the point of paying taxes, so hence that is something that is cash outflow but [indiscernible].

The biggest deviation between last year and this year cash flow from financing activities, this is obviously the changes in dividend payment that has been [ph] 800CHF million last year and 600CHF million in 2016 pertaining to the financial year 2016.

Moving onto page number 19, working capital development and I’m proud of my team that is managing together with all the finance team around the world that excellent development, working capital intensity have increased in June 2016 compared to last year at the same time below our corridor 3.3% and it is mainly on management of suppliers, so DPLs [ph] have increased to 58.4%. That has mainly been achieved through supplier finance solutions, so we are not having pushed the supplier payment churns in unreasonable ways that you have offered various opportunities for supplier finance and making finance returns more attractive. As such our networking capital from June 2015 compared to June 2016 has improved by 57CHF million.

Return on capital employed page number 20 and my final slide you will see over the last four quarters we are at a level of around 70% and given the logic and the algorithm around the calculation of the return on capital employed with the current structure of our balance sheet and the average development, I would expect going forward to have that business running at around 70% return on capital.

It would be my last slide on return capital employed and I hand it back to Detlef for the slides 2016.

Detlef Trefzger

Thank you very much Markus. We are on slide 21, 2016 our guidance for the remaining six months. We have gained a lot of momentum over the last four to six quarters, which confirms our strategy of organic growth and focus on excellence. We are continuing our progress in leveraging, applying a strict cost management and leveraging additional volumes through the organization at marginal cost.

Innovation will continue to focus on value added contributions that matter for our customers rather than principal R&D that is especially true for the pharma e-commerce fulfilment as well as other verticals like aerospace or automotive and our target of volume gross improving, increasing our market share and improving our EBIT at the same time remain.

Having said so, we are confident that we can continue the momentum and volume and profit into the second half of this year from today’s perspective and we hope that there will be no other influencing factors that hinder us from continuing with the momentum we have gained.

And having said so we are now open and hand back to Simone for Q&A

Question-and-Answer Session

Operator

Thank you.[Operator Instructions] The first question comes from the line of David Ross from Stifel. Please go ahead.

David Ross

Yes, good afternoon gentlemen.

Detlef Trefzger

Hi, David.

David Ross

If you could talk I guess initially about the competitive landscape both in the airfreight and seafreight side, you seem to be doing a nice job of not only growing above market but also doing it profitably, is this coming here from any of your competitors, you know in terms of their own internal improvements and being more rational allowing you to gain more market share or is it something different that you all are doing. And are you seeing, I guess better luck winning business in I guess certain lanes versus others?

Detlef Trefzger

David, I can only comment on ourselves. We have a clear go-to-market strategy for our business units, target customers, target regions, target solutions and if we can find business in the market that fits to those criteria, we capture it obviously very successful high conversion rate of TEUs but we don’t pursue other business and maybe that is the secret of our gross and profitability improvement.

David Ross

That’s helpful. And then also can you comment a little bit on e-commerce, you mentioned that contract logistics has been a big area of growth. One, I guess any comments you had specifically within contract logistics and how its growing, but also how that ties across your airfreight, oceanfreight and overland segments in terms of offering a broader e-commerce solution for customers?

Detlef Trefzger

Yes. We are in the B2B e-commerce fulfilment sector across BUs maybe to a lesser extend in seafreight, but all other BUs and mainly driven out of the fulfilment centers in contract logistics that we operate for many customers.

David Ross

And they're most of the single client or multi-client?

Detlef Trefzger

Multi-client, David.

David Ross

Thanks a lot. Thank you very much.

Operator

Thank you. So, the next question comes from the line of Damian Brewer from the Royal Bank of Canada. Please go ahead.

Damian Brewer

Good afternoon. Thank you. Two questions please. First of all, just looking back at the sequential GP for TEU in the ocean business, could you talk a little bit more in detail about what cause the sequential rate to come a little bit under pressure particularly given, I think on the historical comment that the vast majority of the GP is value-added service related, so any light you can shed on that would be fantastic?

And then, secondly, more generally in the second quarter even adjusting to the Greek one-off you mentioned, I mean, it looks the incremental EBIT GP was about 17%, 18%. Could you talk more generally about what cause that, if you been allowing cost to rise in anticipation of future volume you expect to handle, but we can't see in the numbers at the moment? Or is there something else going on there? Thank you.

Markus Blanka-Graff

Damian, I'm more happy to answer those questions. I'll start with the latter one. The answer is clearly to find in the contract logistics business we have implemented in the last 12 months more than 100 projects around the globe. There are additional costs associated to these projects, especially as we operate 1 million and more than 1 million square meters additional warehousing space. That is the explanation for the GP development or EBIT to GP development.

The first question; the Q2 seafreight's development, please have a look at Q2, 2015. One year goal, the West Coast strike was over or you know drew this out and we had a lot of additional GP and margins because we were shipping not only seafreight for airfreight or other way round airfreight for seafreight, sorry, but also seafreight to the East Coast of the U.S. in order to have uninterrupted supply chains operating.

And this led through additional and exceptional high margins in Q2 in seafreight on the TEU. So a normalized figure would be a bit lower than the figures we have shown last year. So we are happy in the current market environment and the current sluggish growth of 1% to 2% in seafreight to have such a strong GP development in seafreight.

Damian Brewer

Okay. Got it. So the Q2 on Q1 development, you consider just a normal sequential quarter-on-quarter development?

Detlef Trefzger

Yes.

Damian Brewer

All right. Thank you.

Operator

Thank you. So, the next question comes from the line of Mr. Neil Glynn from Credit Suisse. Please go ahead.

Neil Glynn

Good afternoon everybody. Three quick ones if I may. The first one maybe a word on your new Head of Airfreight obviously with the company since 1990, so I guess you'd bring a lot of experience, but when just Mr. Ruud will take that helm. And what should we expect if anything really change within airfreight on the new leadership?

And the second question, is it possible to give us some insights when we look at seafreight as well as airfreight as to how much pharma and perishables has contributed to volume growth in each, so that we can understand how the underlying maybe lower focus growth areas have been developing side-by-side with pharma and perishables?

And then the third question it's obviously early, but is there anything to say on the container-weigh certification experienced so far and would you expect that to be potentially a source of additional margin given additional complexity for customers?

Detlef Trefzger

Okay, Neil, happy to answer your questions. Let's start with the new Head of airfreight to take on his helmet to fly to the airfreight in this unit. Ruud will start October 1st. He has a regional CEO job at the moment for Western Europe and he will take over in the couple of months, 1st of October. There his success has been announced and you shouldn't any major change from in the start in airfreight, because our strategy has proven to be successful. The figures clearly show that and there's no reason to expect any major change of our cost.

Perishable, pharma, perishable growth contributes maybe 20%, 25% of our volume growth in the overall – from the overall business, 5% to 7% would be pharma and the rest is what we called hard cargo gross in the airfreight community. The seafreight, so last question, we have made a positive experience. I have to say, we only had less than two hands full of containers that we were not able to ship, because customers didn't obey the rules and didn't do the weighing and all this.

We were well prepared. You will find instructions even on YouTube from our company helping customers to prepare for that process. And all together I would say the preparation also the internal processes went well. So that in total with the volume shift in Q2, 2016 more than 1 million TEUs, there was irritation or problem to be seen.

Neil Glynn

Understood. Many thanks.

Detlef Trefzger

You're welcome.

Operator

Thank you. So, the question comes from the line of Christopher Combe from JPMorgan. Please go ahead.

Christopher Combe

Hi. Good afternoon, just a couple of questions. First of all, can you comment a bit on what you've seen in terms of seafreight demand by major trade, its look like since March or April we saw some small clients improve demand in Asia and Europe. But wondering if that's some often anyway since that you referred in both here in the U.K.

Second, Lufthansa, Chris when you mentioned that they maybe targeting more direct business with Alibaba and Amazon, however, they don't believe that will necessarily get in a way their relationship with [Indiscernible]. Just wondering if you have any views on how that may evolve? And then lastly, with respect to the capital gains just in housekeeping, is it correct that we had $10 million gains in contract logistics since you've won $5 million in the second quarter and the impairments also all in contract logistics? Thank you.

Detlef Trefzger

Okay. Christopher, the latter question, the impairment is entirely in contract logistics. Its a $7 million impairment for the infrastructure of the contract logistics, infrastructure in Greece which we did last month. The volume development, we see since the beginning of this year, but continuously strong growth from Asia to Europe, but also vice-versa.

So, we are happy that Asia and Euro trades are back to normal. Whether this will continue or not we will see. We haven't seen strong growth for the last two weeks of June, but that can also be a seasonally effect. In total, I would say, there's no reason to believe that, that should change at the moment.

With regards to Lufthansa e-commerce question, you have to ask Lufthansa. We are lot afraid of them doing direct business. I wonder how they do the supply chain solutioning and plus mile pickup and delivery, but to be seen the market is big and with regards to our customers we are not at all irritated from their approach.

Christopher Combe

Thank you.

Detlef Trefzger

You're welcome.

Operator

Thank you. So, the next question comes from the line of Mr. Mark McVicar from Barclays. Please go ahead.

Mark McVicar

Good afternoon. Hi, Detlef, hi, Markus.

Detlef Trefzger

Hi, Mark.

Mark McVicar

Just three questions from me. First of all, obviously its kind of arithmetic, mathematical, but your GP into net revenue continues to push up and up and up. Are you managing to avoid any customer resistance on GP or you just happen to ever more selective with the customers that you go for?

Detlef Trefzger

Is that your question? We are extremely selective Mark and we can afford to be selective with the market share of less than 3% in total of all business units across the globe. It's on us beheading those niches and customers where we can improve GP, where our solution selling is appreciated by customers and where we can add additional value to a normal port-port supply chain delivery or transportation.

And that is exactly the approach. We move away from business and we have a focus on SME customers a lot as you know and all that had in this mix to improve GP. Unfortunately, it's not a mathematical model because then we would need less effort and our staff would be more relax in achieving our figures and our gross.

Mark McVicar

Sure. And do you find – you have to sort of churn the customers more as the freight rates are lower?

Markus Blanka-Graff

No.

Mark McVicar

Would the customers just say, fine, it is what it is, we pay the shipping line to do that or we're paying you to do something very different?

Detlef Trefzger

In the last couple of years as you remember we have moved away from certain customers. They have made their experience with other providers and we have a strategy called focus and excellence. And the excellence part is what retains customers in our portfolio. So customers are interested in a Kuehne and Nagel service because it is exceptional, it is a better service. And when you do poor performance is then the convincing arguments. We don't have a higher churn of customers, not at all, the opposite is the case by the way.

Mark McVicar

Sure. Okay. Thank you. Next question was obviously because of the dynamics in the market you're going to beat the 5% EBITDA of the net revenue target. Are you not tempted to reverse the target like a chance of what's going on out there?

Detlef Trefzger

We are not tempted to reverse the target because we can't predict the rates for year-end 2016. And as Markus has said, the net turnover is heavily impact at the moment by the low rate level in the market. With the seafreight carriers consolidating at the moment that might change, we don't know, but therefore this target remain.

Mark McVicar

Okay. And then just two more quick questions. First of all, on the balance sheet, Markus, it looks like you've actually got some debt or some an interest bearing liability on the balance sheets for the first time, I just remember, can you just explain what that is?

Markus Blanka-Graff

I will explain that.

Mark McVicar

The 171 isn't that here?

Markus Blanka-Graff

The 171, that is a – that the very local requirement if you wish, because Swiss banks are laving negative interest rate for deposits and for a cash rich company like ours, it actually pays off to keep money in accounts where we still have zero interest. I'm not drawing on it and putting it back with the negative interest. Hence when we need cash in for liquidity we are better off in actually drawing money and maintaining our zero interest basis on deposits.

Mark McVicar

Okay. [Indiscernible]

Markus Blanka-Graff

It’s a pure technical mechanic which is obviously improving our interest situation with the banks. Unfortunately, that's something that is very rigid in Switzerland.

Mark McVicar

Yes, sure. And is that just in Switzerland or is that elsewhere?

Markus Blanka-Graff

No. Our finance policy has never changed because our biggest cash outflow is dividend payments that is in Swiss Franc, so everything is off streams as quickly as possible into Swiss bank account.

Mark McVicar

Right. Got it. And my very last question, obviously you've been making good progress with the – there's problem in contract -- in contract logistics in the U.K. Are they actually still loss banking or you've got them back into profit now?

Markus Blanka-Graff

Mark, we have stabilized the drinks topic in the U.K. We'd see further improvements throughout the year, but the big improvement, the big driver is the additional business that we want. By the way that was not loss making, it was not at the margin level that we have plan for and expected to make that clear as well.

Mark McVicar

Okay, okay. So it just -- the Brits just need to drink more basically to get those contracts back?

Detlef Trefzger

Maybe the Brits decision helps in that case.

Mark McVicar

You never know.

Markus Blanka-Graff

Mark, it would have been helpful if in the Euro football you would have progress a bit further.

Mark McVicar

Yes. But you would never put that in your budget, would you?

Markus Blanka-Graff

It's true. That's true.

Mark McVicar

History tells you not to do that. Good. Okay. That's very kind. Thank you very so much. Thank you.

Markus Blanka-Graff

Thank you.

Operator

Thank you. So the next question comes from the line of Stuart Todd from Lloyd's Loading List. Please go ahead.

Stuart Todd

Yes. Good afternoon, gentlemen. Just a question on the so called disruptive technologies and generating quite a bit of debate, and by that I mean, basically 3D printing robotics and autonomous vehicle. Some of you competitors are getting involved in this quite significantly. Can you say anything about your particular vision of this in the future?

Detlef Trefzger

Yes Stuart, happy to do so. Disruption and disruptive for me is the word of the year. I think the markets are evoluting, a new technologies has been implemented everywhere for the decades. I don't believe that this leads to disruption. It leads to a change in production. We are engaged, involves in those activities. We have two research centers that are operating with those technologies and once we have standardized technology we transfer them into normal business. That's has been our approach for many years and has not changed. Maybe for others speak about their plans and ideas and views.

Stuart Todd

Yes. Just a follow-up question if you allow me. The fact that you said little bit changes in where goods and manufactured, surely that's going to have implications for air and ocean freight, and less intercontinental traffic flows?

Detlef Trefzger

Yes. But we have seen Stuart trend to new [ph] shoring over the last maybe eight, 10 years. If you see the growth in Mexico that is benefiting a lot from new shoring similar to other markets especially in the Middle East and also partly in Asia. So, I don't see a big change or major change. When I come back to our overall market share of 2.5%, 3% we will find business and we'll find our niches to grow our volume further.

Stuart Todd

Okay. Many thanks.

Detlef Trefzger

You're welcome.

Operator

Thank you. The next question comes from the line of Pradipta [ph] Kumar from Merrill Lynch. Please go ahead.

Unidentified Analyst

Good afternoon gentlemen. The question is regarding the seafreight, couple of things and you pointed out your impressive volume on double-digit growth? Would it be – so if you could just clarify on what are the business segments that grow those double-digit growth, and then, what your guidance for the rest of the year as you go into the Q3 big season?

Detlef Trefzger

I'm not sure. I have understood the last question right. If you were talking seafreight, we didn't have double-digit growth. Our volume growth in seafreight has been 5.8% or 108,000 TEU.

Unidentified Analyst

Sorry, if you go to a slide six you mentioned about Asia exports and Intra-Asia strong volume growth. And you did mentioned during the call that indeed see a double-digit growth?

Detlef Trefzger

You mean, that's the intra-Asia, clearly double-digit growth in intra-Asia and we don't expect any changes because we have seen that for many quarters.

Unidentified Analyst

And is there any particular business divisions or commodities that driving those double-digit?

Markus Blanka-Graff

Across the board.

Unidentified Analyst

Okay. Sure. Thank you.

Markus Blanka-Graff

You're welcome.

Operator

Thank you. So there was another question from the line of David Ross again. Please go ahead.

David Ross

Yes. Just a follow-up on inventory levels, at least in the U.S. we've seen that they've have been relatively high for the last year, and wanted to get your comment as you look across the supply chain, do you think inventories or do you customers think inventories are too high, are they coming up to a more normal level? And is there any difference in inventory levels from your standpoint across the continents, Asia, Europe and U.S.?

Detlef Trefzger

David, let's with the U.S. and North America, I think we haven't seen an increase in inventory level over the last 12 months, we have seen that over the last three months that is at least our perception in the U.S. especially the U.S. market. I wouldn’t say they are too high. Maybe they come back to a more segmented consumption pattern that is currently to be seen in the U.S.

Europe, no change, no major change, and in Asia I would say, they are relatively low, so that would leads to the assumption that in Asia as I said before, intra-Asian business for sure should not see any negative or major changes in the next couple of months.

David Ross

Thank you.

Detlef Trefzger

You're welcome.

Operator

Thank you. So, we currently have no further questions in the queue. [Operator Instructions]. Okay. There are no further questions. So I will hand you back to Detlef Trefzger to close today's conference.

Detlef Trefzger

Thank you very much. Ladies and gentlemen thanks for joining in and thanks for the interaction on our first six months results in 2016. As said before, we are confident that the momentum that we have gained shall continue in the second half of 2016 from today's perspective and we look forward to our next call with you. Thank you very much and enjoy a sunny and warm summer. Bye-bye from Schindellegi.

Operator

Thank you for joining today's conference call. You may now replace your handsets.