NTG Nordic Transport Group AS
CSE:NTG
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NTG Nordic Transport Group AS
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Good day and thank you for standing by. Welcome to the Nordic Transport Group Q2 2022 Conference Call. [Operator Instructions]
Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Christian Jakobsen, Group CFO. Please go ahead, sir.
Thank you and welcome to our Q2 2022 conference call, and thank you for dialing in. And if we go to Page 2, we ask you -- kindly ask you to read the important notice provided in this slide.
And then we move to Page 3. You see the presenting team of today. My name is Christian Jakobsen. I'm the Group CFO of NTG Nordic Transport Group. Mike is, due to illness, unfortunately, not able to be here today, so you'll have to settle with me.
And then if we go to Page 4, you see the agenda for this conference call, which includes highlights for the second quarter of 2022, a review of the financial performance of the group and the 2 divisions, a presentation of the key figures and the outlook for 2022. At the end of the presentation, the line will be open to questions from the audience.
If we move to Page 5, these are the main highlights for the second quarter of 2022. The positive momentum from previous quarters continued into the second quarter of the year as freight rates remained in favorable top territories and the hard-working employees of NTG continues to do an outstanding job supporting our customers in moving their freight no matter the challenge.
In the Road & Logistics division, shortage of trucks and drivers and elevated fuel prices continued to challenge our customers and employees in Q2 and while volumes gradually decreased during the quarter as demand softened. Freight rates remained in the second quarter of the year -- remained high in the second quarter of the year, which resulted in high operating cost compared to the same period last year.
In the Air & Ocean division, freight rates entered a decreased -- decreasing territory compared to previous periods, although remained in favorable territories. And in combination with higher volumes, the division showed double-digit organic growth in the same quarter on both top and bottom line.
As a result, we experienced a double-digit growth in net revenue and operating profit for the group in Q2 2022.
On 6th of May, we raised our expectations for 2022, and we maintained this guidance. So for 2022, we continue to expect a net revenue of DKK 9.7 billion to DKK 10.2 billion and an adjusted EBIT in the range of DKK 700 million to DKK 750 million.
On the next slide, I will take you through the Q2 financial results. As I mentioned, we're very pleased to see the positive trend from previous quarters continuing into the second quarter.
On this -- Page 6, you see the main financial highlights for the group. We had revenue for the second quarter totaled DKK 2.7 billion, which is an increase of 59% versus the same period last year. Organic growth contributed with 25%. And acquisitions in both divisions, most notably the acquisition of Aries Global Logistics, contributed with an additional 35% for the quarter, while currency translation effects had a negative impact of 1.2%.
Gross profit increased by 54% to DKK 533 million, corresponding to a gross margin of 19.5% versus 20.2% in Q2 '21.
Adjusted EBIT increased 58% to DKK 217 million in the quarter, corresponding to an operating margin of 7.9% versus 8.0% in Q2 '21, reflecting a constant margin in the Road & Logistics division and a margin increase in the Air & Ocean division.
And then if we move to Page 7, you see a summary of the key financial performance indicators. As illustrated to the left, the gross margin development for the group was mainly impacted by a decrease in the Air & Ocean division when compared to the last quarter as well as the same period last year primarily due to the acquisition of AGL and an increasing share of pass-through revenue.
In the middle of the slide, you see the conversion ratio, which increased compared to the last quarter of the same -- and the same period last year. The development was driven by a combination of increased efficiency, higher gross profit per shipment in the Road and persistent cost control. Please note that when looking at the Road & Logistics conversion ratio, Q2 last year was impacted by a one-off effect related to a lease agreement. And if we adjust for this, the conversion ratio increased 6.2% year-on-year for the division.
On the right-hand side, you see the development in the operating margin, which remained, well, flat compared to the same period last year. However, adjusted for the one-off effect in Q2 last year, the margin increased 1.1 percentage points year-on-year.
And then if we go to Slide 8, you see the financial review of the Road & Logistics division. The division generated net revenue of DKK 1.8 billion in Q2, which was 32% above the same period last year. The increase was related to both the acquisitive growth that contributed with 15% and organic growth that contributed 20%, predominantly driven by capacity and Mobility Package surcharge introduced in '21 and '22. And this was to safeguard capacities and existing customer relationship as well as our successful efforts to leverage favorable spot market prices.
Gross profit increased 36% to DKK 365 million, corresponding to a gross margin of 20.8% versus 20.3% in Q2 '21. And the increase was mainly driven by structural market imbalances that's supported favorable spot rates and high utilization of our trucks in the second quarter of the year. As said before, please note the conversion ratio decline of 1.3% was due to the one-off effect in Q2 '21. Reverse, the conversion ratio increased 6.2 percentage points, reflecting increased gross profit per shipment and strong cost discipline.
Adjusted EBIT increased 32% to DKK 148 million in the quarter, while the operating margin remained constant at 8.5%. While -- if the margin in Q2 last year was adjusted for the one-off effect, the operating margin increased 1.5 percentage points year-on-year.
And then if we flip to Page 9, you see the financial review of the Air & Ocean division. The division generated net revenue of DKK 976 million in the quarter, which was 140% (sic) [ 147% ] above the same period last year composed of an organic growth of 43% mainly driven by elevated freight rates as well as positive trends in volumes handled. Currency translation effects added 3% to the growth, while the acquisition of AGL contributed with 102%.
Gross profit increased 113% to DKK 167 million, corresponding to a gross margin of 17.1% versus 19.9% in Q2 '21. This development was, as I mentioned earlier, mainly a consequence of the acquisition of AGL and, secondly, cost inflation resulting in higher pass-through revenue.
Adjusted EBIT increased 176% to DKK 68 million, corresponding to an operating margin of 6.9% versus 6.2% in Q2 '21. The margin increase was driven by a positive conversion ratio development of 9.1 percentage points due to our scalable operating model and positive market conditions and a combination of increased efficiency and persistent cost control, though partly offset by the effect of the acquisition of AGL.
And then if we go to Page 10, you see an overview of other key figures. On the left, you see that the net working capital increased to DKK 39 million as at 30th of June '22 mainly driven by the acquisition of AGL, which added DKK 177 million to -- in net working capital, partially offset by non-recourse factoring programs, releasing DKK 12 million by the end of the quarter.
The adjusted free cash flow totaled DKK 152 million in the second quarter of the year compared to DKK 98 million in the same period last year. And that was mainly driven by the improved operating performance but partially offset by the development in the net working capital.
Finally to the right, you see that net interest-bearing debt, excluding IFRS 16, that totaled DKK 545 million by the end of the quarter, which was a result of the acquisition of the AGL.
And then if we move to Page 11, you see an overview of the share buyback program that we initiated today. The purpose of the program is to meet obligations to acquisition of shares in subsidiaries under the Ring-the-Bell concept, cover potential obligation on the share-based incentive programs and for all other potential purposes such as payments in relation to potential M&A transactions. The program commenced today and will last until the 31st of March next year at the latest. We will buy shares for a maximum amount of DKK 100 million and up to 310,000 shares in total, corresponding to a maximum of 1.37% of the current share capital of NTG.
And then if we move to Page 12, the last slide, a recap of our full year outlook for 2022 that we provided on the 6th of May. We maintain our full year expectation of a revenue of DKK 9.7 billion to DKK 10.2 billion and adjusted EBIT of DKK 700 million to DKK 750 million. The updated full year outlook is based on an expectation of a gradual normalization in the second quarter -- in second half of the year and a stable macroeconomic environment with no additional material adverse events affecting regional and global cargo volumes and trade patterns.
And that was all what we had planned for today, so operator, please open the line for Q&A.
[Operator Instructions] There are currently no questions, sir. I will hand the call back to you.
Okay. There might be some technical challenges. But -- then thank you very much for listening in. And we look forward to our roadshow and -- so see you when we are publishing the Q3. Thank you very much.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.