Good morning, this is the conference operator. Welcome, and thank you for joining the Nordic Transport Group's Q1 2024 results call and webcast. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions by pressing star and one on your telephone. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero. At this time, I would like to turn the conference over to Mr. Mathias Jensen-Vinstrup, Chief Executive Officer. Please go ahead, sir.
Perfect. Thank you, and welcome to our Q1 2024 conference call, and thank you for dialing in. If we go to page 2 of the presentation, we kindly ask you to take a look at the important notice provided in the slide. If we move on to page number 3, you see the presenting team of today. My name is Mathias Jensen-Vinstrup, and I'm the new Group CEO of NTG Nordic Transport Group. And with me today, I have Christian Jakobsen, our Group CFO.
If we move on to page 4, you see the agenda for this conference call, which includes the highlights for the first quarter of the year, a review of the financial performance on a group level, and for each of our two divisions, a presentation of other key figures, and then a reiteration of the outlook for 2024 that we maintain. By the end of the presentation, the line will be open to questions from the audience. If we move on to page 5, you see the highlights for 2024. The market conditions from the fourth quarter of 2023 continued into the first quarter of 2024, with macroeconomic headwinds and, in general, challenging market conditions.
Our performance in the first quarter of this year was also affected by the strikes in Finland, which lasted for almost four weeks in the first quarter and about one week in the second quarter so far, as well as fewer working days compared to last year, mainly due to the timing of the Easter holiday. So all transport markets continued to be characterized by fierce competition and aggressive pricing behavior in Q1, and we continued to invest in securing volumes across both divisions. If we take a look at the road transport side of the business, we have been quite successful in securing existing volumes and also winning new accounts over.
This has been with a very aggressive pricing strategy, which did take a toll on the gross margin for the main road entities during the first quarter. The Baltic and the Finnish traffics are, in general, still under a significant pressure, driven by macroeconomic headwinds, following, in particular, also the termination of the trade relationships with Russia, high inflation, but also the fact that a significant share of the European hauliers are based out of the Baltics. And with the adverse market environments, this has led to an increased competition in general in the markets in which we operate, and which added to the price pressure in the market in general. From a spot market perspective, availability of capacity continued to keep spot rates at low levels during the first quarter of 2024.
In logistics, we are seeing a rather stable and satisfactory performance across our main markets, being Denmark, Sweden, the Netherlands, and the UK, even though utilization levels are not at full capacity at the moment. In general, while customers are still hesitant to rebuild storages, this behavior is less pronounced as compared to before COVID, where the just-in-time concept prevails. Nowadays, we are seeing customers being reminded again and again about how fragile supply chains are, which emphasizes the importance of building and maintaining buffer stocks, and this also supports demand in this part of our business. In the Air and Ocean business, or in the Air and Ocean division, we still suffered from very fierce competition, low activity levels, and yields under pressure in the first quarter of 2024.
As the SME segment, where we mainly do business, have seen a fierce competition from a multitude of players. In Q1, the file counts held up pretty well compared to the low activity levels in the market, and volumes as measured by kilos and TEUs, showed a similar pattern, whereas lower yields, yields are a significant driver of the results in the Air and Ocean division in the first quarter of the year. While the rerouting of ships as a result of the Red Sea crisis led to increased rates in general in Q1, as longer lead times absorbed some of the capacity flowing into the market on the ocean side, the higher rate environment has not had any positive influence on our financial results.
In Q1, the overcapacity in the market increased the certainty of uplift, which resulted in an even higher focus on price and consequently, well, generally lower yields. While the volumes trended lower in the first quarter, yields were the main driver of the general declines, as I described before. But in addition to the market conditions in general, the results for the first quarter of 2024 in the Air and Ocean division were also impacted by certain geographies not living up to expectations. In Germany, we are facing an ailing economy and low volumes across the board. And while restructuring initiatives have been introduced, which also affected our performance in the quarter, we are now onboarding new customers again, thanks to investment in particular in sales.
We are still actively working with the local teams to improve performance going forward. In the U.S., we came off to a very slow start of the year, as we've been focusing on also building a new startup, Supply Chain Solutions, and these investments also weigh on the results for the first quarter. But also in the U.S., we have seen a positive tendency towards the end of Q1. And finally, in the U.K., we've also been investing in the footprint going forward. We have opened two new branches, and this also weighs on the results for the division in the quarter, although to a lesser extent than the previous two geographies.
So all in all, the performance of the division is driven by fierce competition, driving low activity or also low activity levels, and this drives lower yields, and then the more idiosyncratic challenges that I described before. So from an Air and Ocean perspective, going forward in the coming weeks and in the coming months, our focus will center around a range of areas. So first, we will focus on the challenges from a country perspective that I described before. And we are working closely and proactively to addressing these challenges and improving the trajectory going forward. And second, we will focus on maintaining controlled volumes in what is a very competitive market, which will position us for a potential rebound if that occurs.
But more tangibly, controlled volumes are, from our perspective, a prerequisite to drive increased GP per shipment from a totality perspective, meaning that by developing our intercompany trade lanes and by leveraging our network in both ends, we will be able to keep more GP within the firm, and we have already registered the first signs of progress in that respect. Third, in a market like this, productivity is perhaps more important than ever, as we are making less GP per file that we manage, and we thus need to see more files per FTE to counterbalance the current environment.
With CargoWise now fully rolled out across the Air & Ocean division, we are in a good position to improve our operating procedures with a view to increasing productivity as measured by exactly files per FTE. And finally, we will continue to keep a very close eye on the cost side, and we continue to evaluate the appropriateness of the cost base in a market environment like this. We do see early signs of a stabilization in selected geographies, and while it remains a rather blurry picture out there, we continue to see significant price pressures from customers. We do also see signs of demand as well as supply; the side dynamics are changing gradually.
On the road side, for instance, the procurement prices on hauliers seem to have reached a very bottom, meaning that further reductions are not possible without capacity leaving the market. And from a spot market perspective, we see signs of prices bottoming out on the continent, as well as what could be signs of a very early rebound in the Nordic region on the road side again. And so we could be approaching a vacuum-like situation where we have priced aggressively to secure volumes and to secure new volumes, but where capacity is becoming less abundant, meaning that some customers are also starting in certain places to focus on locking in rates for longer, as opposed to exclusively focusing on getting the lowest price possible.
So we're definitely paying attention to this like we always do, and we will continue to monitor the market closely to make sure that we protect our margins in case the dynamics continue to change and in case a potential market rebound occurs later in the year. As I mentioned, regarding Air and Ocean, we have seen a slight stabilization towards the end of the quarter, supported by restructuring initiatives in Germany, more momentum in the startup in the U.S., and progress on our trade lane development efforts, which could indicate that the worst may be behind us.
But I would say all in all, we still see a very low level of activity, and talking about a recovery is definitely too soon to make any firm conclusions on, and the jury is still out in terms of concluding if any changing dynamics are sustainable. We continue to invest in the sales organizations in both divisions to support future growth and to support the ongoing uptick in volumes that we control. And we also keep a very close eye out on the market dynamics to make sure that we protect our margins, both on the buy side and on the sell side.
Finally, the 2024 guidance is maintained, and for 2024, we still expect an adjusted operating profit between DKK 500 million and DKK 580 million. And with those words, I will hand it over to Christian Jakobsen, who will give you a more granular walkthrough of the financial results in the first quarter.
... Yes, thank you, Mathias. On page six, you see the main financial highlights for the group. Net revenue for Q1 2024 total DKK 2.2 billion, representing a decrease of 4% compared to Q1 2023, where organic growth contributed -6%, driven by the macroeconomic headwind in North Europe, lower freight rates, and then the low number of working days due to the, to the timing of, of Easter, as Mathias mentioned. The acquisition of RTC contributed with 1.3%, and currency effect had a positive impact of 1.1% in 2024. Gross profit decreased 2.9% to DKK 463 million, corresponding to a gross margin of 21.5% versus 21.2% in Q1 2023.
Please also notice that the number of working days in Q1 2024 also affected the gross profit for the quarter. Adjusted EBIT decreased 24% to DKK 114 million in 2024. The drop in operating margin come from the pressure on volumes and yields, but also the investment in start-up of SCS and the reorganization in Germany of around DKK 6 million, has declined the EBIT. Then if we flip 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, when compared to the same period last year, pretty stable, primarily due to the lower rates was mainly and, and the main pressure on the freight rates and also, and the yields, and then offset with a change in product mix and the acquisition of RTC, which had a higher gross margin than NTG in general. In the middle of the slide, you see the conversion ratio was decreased compared to last quarter and the same period last year. The development was mainly driven by the effects of the pressure on, on GP and the number of working days, but also the DKK 6 million, as I mentioned before, had a negative effect.
On the right-hand side, you see the development of the in the operating margin, which decreased both compared to the same period last year and compared to last quarter. Again, this was mainly an effect as of the beforementioned reasons. Then, if we flip to page eight, you see the financial review for the Road and Logistics division. The division generated a net revenue of DKK 1.6 billion in the quarter, 2.7% below the same period last year. The decrease was mainly related to organic growth, contributing with negative 1.8% to the total growth, mainly driven by the lower number of working days, and then acquisitions contributed with 1.8%, and currency effects had a positive effect of 0.3% during the quarter.
Gross profit decreased 0.3% to DKK 347 million in the quarter, corresponding to the gross margin of 21.6%. As mentioned before, the acquisition of RTC had a positive effect on the gross margin, but also the close down of a smaller operation in Germany had an effect. And then you saw a change in our product mix. Adjusted EBIT decreased 12% to DKK 103 million, corresponding to an operating margin of 6.4%. We are seeing that our main markets in the Northern Europe having macroeconomic headwind, and that has, of course, affected the quarter. And then if we flip to page 9, you see the financial review for the Air and Ocean division.
The division generated a net revenue of DKK 553 million in the quarter, a decrease of 9% compared to 2023. The decrease was mainly driven by negative organic growth, driven by mainly the freight rates, which have been lower quarter-on-quarter, and then the challenges, as Mathias mentioned, in Germany, and therefore the shutdown of the two offices in Germany. FX effect had a negative effect on growth of minus 0.3% during the quarter. Gross profit decreased 10% to DKK 116 million, corresponding to a gross margin of 21% in the quarter, compared to 21.3% in Q1 2023.
Adjusted EBIT decreased 63% to DKK 12 million, corresponding to an operating margin of 2.2% versus 5.3% in Q1 2023. The margin development was impacted by the challenges in the division, and then also the one-off due to the start-up of SCS and the close down of the two offices in Germany. If we flip to page 10, you see an overview of all the key figures. On the left, you see that the net working capital increased to -DKK 18 million, as per end of March 2024, an increase of DKK 191 million compared to the end of Q4. Compared to the same quarter of 2023, the last collection date in March was due to Easter moved forward, and therefore we have a temporary negative impact of that.
And then on top of that, we had done a merger on the first of April, and therefore we prepaid around DKK 18 million to creditors, and that, it's expected to come back throughout Q2. And as a result of the development in the net working capital, the adjusted free cash flow totaled -DKK 110 million in the first quarter, compared to +DKK 45 million in the same period last year. Finally, on the right-hand side, you see the net interest bank debt, excluding IFRS 16, which totals DKK 246 million as per end of March 2024.
And then if we flip to page 11, you see the full year outlook, where we, as Mathias mentioned, keep maintain our expectation, and we expect adjusted EBIT in the range of DKK 500 million-DKK 580 million. The outlook for 2024 assumes an overall flat market environment with soft macroeconomics and continued muted consumer confidence. The Road and Logistics division is assumed to persist in the current market environment for 2024, with lower freight rates, soft volumes, and challenging spot markets. And the Air and Ocean division is assumed to remain in the current market environment, with low rates and oversupply of freight capacity, which have an adverse impacts on both freight rates and yields. We continue to closely monitor the activity and adjust capacity and cost base accordingly.
The outlook for 2024 includes the effects of the acquisition of RTC as from February 2024. The transaction was closed on the 14th of February, but the outlook does not include potential impact from all acquisitions during the year, if any, and currency exchange rate are assumed at current levels. Because the financial and geopolitical uncertainty remain high, the assumptions underlying the outlook may change. That was all what we have planned for today. Operator, please open the line for Q&A.
Thank you, sir. Excuse me, this is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Once again, if anyone has a question, please press star and one on your touchtone telephone. We are about to close the question and answer session. If you have a question, please press star and one on your telephone. Gentlemen, at this time, there are no questions registered from the conference call.
I think there's a couple of other companies in our business that have a conference call at the moment, so therefore, I don't think there are any questions. So thank you very much for listening in, and we look forward to present Q2 in August. Thank you very much.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.