Ladies and gentlemen, welcome to the full year 2018 results conference call. I'm Alice, the Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Detlef Trefzger, CEO of Kuehne + Nagel. Please go ahead, sir. Ladies and gentlemen, please hold the line. The conference will continue shortly. Thank you.
Good morning, good day, good afternoon, and good evening to all of you. Welcome to the Kuehne + Nagel analyst conference on the full year 2018 results. Our CFO, Markus Blanka-Graff, and I welcome you from sunny Switzerland. In 2018, Kuehne + Nagel increased annual results again. This is the fifth year in a row where we outperformed previous year's results, and we want to thank, I want to thank, we want to thank all the team members of the Kuehne + Nagel Group and all our colleagues around the globe for an outstanding performance last year. The group earnings went up to CHF 772 million in 2018. We've seen a strong volume increase in sea freight of 7.7% or 335,000 TEUs. A strong volume increase also in air freight of 11% or 173,000 tons.
A substantial net turnover improvement in overland of 13.1%, and also a strong net turnover growth in contract logistics of 9%. As always, we go through the presentation that we uploaded this morning, and we continue on page four of the slide deck. Despite the markets weakening end of last year, 2018 has been another successful year. The consistent implementation of our overall strategy, the business strategy, the business programs of the business units, showed the respected effects. Net turnover increased by CHF 2.2 billion almost, or 11.7%. Gross profit by CHF 686 million, EBIT by CHF 50 million, and the earnings per share improved by 4.4%. The year 2018 weakened, though, in the fourth quarter. From a market perspective, we saw a changing environment.
Therefore, we want to lead you through, or let me lead you through page five of the slide deck, in order to show the very specific development quarter by quarter last year, reflecting the macroeconomic and consumer dynamics. Let's have a deeper look into the first quarter. We had a lot of tailwind from quarter four 2017, with strong volume growth continuing in quarter one 2018, strong macroeconomic momentum, and a lot of consumer dynamics in the market. The Kuehne + Nagel organization started to roll out the Roadmap 2022 strategic program, and launched already in quarter one, two digital platforms in sea freight only. The second quarter, we start to face some side wind maybe. Tailwind continued, but some first side wind came up, and the trade war and trade disputes started to become a topic in the market.
Signs of trade conflicts is what we saw, but we didn't see it in our networks at that time. Strong air freight growth continued, and especially with our Kuehne + Nagel chain solutions, the solutions that we deploy for certain industries, showed a lot of volume growth and traction. Quarter three, a very solid quarter with GP up 10% and EBIT improvement of 5% versus previous year's quarter three, reflecting the macroeconomic heated up disputes on trade settlements or trade relations, not lead to settlements or conclusions. First tariffs were imposed in quarter three. The positive momentum from our customers, the feedback we got from our markets, from our volume customers, from our shippers, were still very positive. Our focus in quarter three has clearly been on driving volume, improving growing volumes. Quarter four started with that momentum from quarter three, but changed throughout the quarter.
We saw some first headwinds in December. Macroeconomic, still stock built up in some markets, struggling to find some political solutions and conclusions, and the trade disputes continuing, even heating up with further tariffs being imposed. In December, we saw surprisingly low volumes in our networks, both sea and air freight. This started second week of December. For the first time in 2018, our customers started to become insecure about their own outlook and their own developments. It's Kuehne + Nagel because we can react fast. We are agile. We see those developments, and we have initiated immediately safeguarding measures. I would like to lead you, so what we saw in December last year and how we reacted on the following page, slide six. Especially the automotive, but also the high-tech industry and the retail industry started to struggle.
We had some profit warnings out in the market from those industries in quarter four and especially in December. The European export trade weakened throughout December, and especially Asia and North America-related trades, saw significant declines. Our measures immediately initiated in December, we adapted our transport capacity. We go more on spot markets because rates are more favorable at the moment on most of the trade lanes. We initiated cost reductions programs in markets where we see that volume forecasts are sluggish or questionable, and we accelerated our already existing efficiency improvements throughout the organization. We started to be more selective in our growth, with higher-margin customers, especially in contract logistics, in order to prepare for 2019. These measures will take time to be visible for you on the call, because they need to be implemented, and they usually start with investments into the measures as such.
The year 2018 started extremely well, quarter one, throughout quarter three. Just in December, we saw headwinds and less volumes in our networks that we had to react on. Let's continue going through the different business units. Slide four, a short overview of sea and air freight, and then we go as usual through the volume development as well as the unit GP cost and EBIT development. Sea freight. We launched the KN ESP platform in March 2018, so last year, just a year ago. We got a lot of interesting and new business with our digital supplier management platform. This was extremely well-accepted, and we even upgraded the solution throughout the year. We also saw continued gross profit pressure on gross profit margin, which particularly or partially has been offset by cost pressures and our operational leverage, but not fully.
The air freight business unit has been seeing acquisitions being implemented and integrated into our organization, and they enhance performance and the delivery of growth. Not only, also our operational organic growth has been very strong. The success of our industry solutions, and you know that we have launched KN BatteryChain and KN InteriorChain last year, was extremely positive. The take-up of those solutions by our customers and the volume put through our networks based on these integrated solutions was extremely well-perceived and positive. Let's go through the details of the sea freight and air freight volume development on slide eight. In sea freight, we saw a market that was very different by trade and throughout the year. We saw Asia, Europe, westbound trades with slight growth, 1%-2%.
We've seen the Transpacific eastbound with a strong U.S. economy driving imports being very strong, which has accelerated until early quarter 4, but not fully through quarter 4. We've seen Asia imports with negative growth in the market, flat to negative, especially reflecting the China waste ban. We had reported that earlier this year, in quarter 1 and quarter 2 calls. As well as China imports from the U.S., reflecting the restrictions on agri products being imported to China. Intra-Asia continued to be a strong market, and the performance of Kuehne + Nagel was relatively strong in each of those trades. Asia, Europe, very strong growth. Intra-Asia with a very strong growth and U.S. imports from both Europe and Asia, we were seeing strong growth but rate pressure, obviously because capacity, especially on the trans-Pac, has been tight at a certain time of last year.
In total, we were able to improve our container volume by 335,000 TEU, +7.7%, ending the year transporting almost 4.7 million TEU on our networks last year. The air freight market, different dynamics, different developments. We saw strong European exports, especially to North America or to the Americas or to South America, while exports to Asia declined. The market of intra-Asia, reflecting what I said already with regards to sea freight, very strong growth. Both markets as well as ourselves. North America exports showed growth on the trans-Atlantic as well as partly trans-Pacific, and we were able to outperform and grow over-proportionally, especially with our perishable exports from North America and South America. Air freight showed 173,000 tons more in our network or +11% last year, and a strong dynamic outperforming market. Not only on the basis of the recently conducted acquisitions, but also organic.
Let's move on to slide nine, sea freight. In sea freight, we pursue a strong growth strategy, based on our platform business and managed business, which is impacting the overall yield per TEU due to the mix effect. The normal network volumes, the containers, the TEU shipped in our normal volume standard networks, show a rather stable margin per FCL. The yield decline in 2018 is due to the mix, and for sure was also impacted in quarter 4 through less volumes than anticipated and a certain time to react and to see the cost measures showing traction. For the whole year, we show a yield per TEU of CHF 316 and an EBIT per TEU of CHF 89.
The year-to-date variance analysis, which we usually report in those calls, we had a volume effect in our networks of CHF 108 million, a margin effect of CHF 14 million, and a cost effect of CHF 88 million, reflecting also our investments into technology and all the transformational programs that we have set up. Let's continue on page 10 with air freight. Obviously, we have more perishables in our network, and usually you would expect that the perishables in the network have and generate a much lower yield, which was the case. Here, the strong yield effect or the strong yield in our classical hard cargo business clearly offset the mix effect that we generated through increasing the perishable volumes in our network.
For the whole year, we showed a very strong gross profit per 100 kilos of CHF 69 and a very strong or stable EBIT per 100 kilo of CHF 20. Here, the year-to-date variance analysis in millions Swiss francs, a CHF 114 million volume effect, a margin effect of positive CHF 52 million, a cost effect, including for sure, the effects from acquisitions and so on of CHF 124 million, leading to a very strong result improvement in air freight last year. As we have always stated, and also being quoted in different forums and newsrooms and so on, we pursue an active M&A strategy. One example of that M&A strategy is the acquisition of Quick International Courier, a global market and time-critical shipments. I would like you to follow me on page 12 to give you some details on Quick International Courier.
A business, by the way, which we closed effective December 31st, 2018. Quick International, or Quick as we call them, is active very successfully in high-growth verticals, especially in the aerospace sector, AOG, Aircraft on Ground, with the brand Sterling. Also in the healthcare and pharma arena with the brand QuickSTAT. The time-critical shipment market, air freight market, is a premium high-growth, high-yield segment. We have always been active on single opportunities or contract basis. Here we have now a player or an organization that is set up with four control towers in the U.S., two control towers in Europe, and 11 support centers around the globe, driving and running time-critical shipments for their customer base.
We see immediate synergies with Quick from a customer, from a carrier, from a process point of view, enhancing and enlarging, widening our service and solution scope in our solutions that we have already set up. KN PharmaChain, KN InteriorChain, AOG Desk, and so on and so forth. Some financial details. The revenue annually of Quick is $230 million U.S. with approximately 500,000 shipments per year in their network. More than 500 employees. I said already, their setup is based on control towers complementary to our control tower activities, for example, that we pursue for AOG Desk. Purchased price CHF 508 million, but including a contingent consideration of CHF 202 million depending on, Swiss franc, sorry, depending on the financial performance until 2021. With that short overview on Quick, I would also like to heartily welcome our new colleagues from Quick, Dominique, the CEO, and her team. Welcome.
We look forward to jointly conquer the markets we are active in and create the synergies that we have discussed in the previous months prior to signing this agreement. Let me continue on slide 14. Overland. We have presented Overland over the last couple of years with many facets, but for the last three years or four years even, with a statement that I would like to reiterate and strengthen and stress. Overland has performed outstandingly last year and generated a huge success, not only in growing their top line, but also their bottom line. The strong performance was especially seen in U.S. intermodal business. Markets are back. We perform very closely and very successfully in those markets. Also leveraging the top-line growth with significant profitability improvements through our productivity programs and the focused market approach that has been set up in Overland.
What contributed to the strong performance of Overland? Clearly, European groupage and LCL business, intermodal, as said already, and the transport management business for major customers in the U.S., also industry-specific solutions which go across all our business units and Overland being an inherent part of those solutions, especially KN PharmaChain for patients and healthcare customers or pharma healthcare customers in Europe and North America. The next slide shows the business unit Contract Logistics, slide 16. As we have stated over the course of the last calls, we are reshaping our business in Contract Logistics. We started 2018. We will continue this year. We not only review the entire project portfolio, but also focus on the industries and solutions that generate higher margins and show growth.
One solution is for sure e-commerce fulfillment, one area where we are very active in, and we see a lot of new contracts in that sector. The same is true for KN PharmaChain and our pharma solutions that we pursue. This leads to a strong top-line growth, net turnover growth, and also GP growth. Overland also reshapes its operating model. We continue to invest into technology, picking enhancement, new warehouse software, a warehouse management software. That is especially reflecting the specific demands and needs of e-commerce fulfillment, but not only, also other solutions. This has, and I'm on slide 17, this has for sure impacted our EBIT development last year. EBIT declined by 14%.
We said before, we are at the moment very selective with new projects and further growth, moving into Q1 and Q2 2019, while we continue transforming the Contract Logistics business and the investments into technology and all the transformational and enhancement reshaping activities that I've mentioned before. With this overview, I would like to hand over to Markus, who will lead you through the details of the 2018 financials.
Thank you, Detlef, and welcome, ladies and gentlemen. I start on page 18, income statement. Obviously, everything that Detlef has explained from a business perspective at the end of today finds its way through to the income statement into the numbers. You can see, follow me quickly through the quarters. We started probably on a very high end in the year 2017 on the fourth quarter. Probably one of the best quarters ever recorded in the history. We started with a lot of enthusiasm from a macro perspective, but also from a company's perspective into the year 2018. As you can see on the page where you look at the variances quarter-over-quarter on an EBIT line, we were in the first quarters, CHF 50 million ahead of last year.
Through various macros that have obviously worked against the entire industry, but also worked against the global economy, we also felt that there was a slowdown over the quarters, first signed in the third quarter, where we were still CHF 11 million above the third quarter 2017 in terms of EBIT, but our speed of being better than the year before was slowing down. Ultimately, at the end of the third quarter, we were CHF 60 million ahead of the year 2017, and in the fourth quarter, for all the reasons that Detlef has alluded to, we were going backwards by CHF 10 million, ending the year still with CHF 50 million more EBIT than 2017. What are we doing about it? I think that, at the end, is the most important topic that we need to talk when we talk about costs.
I'm going to guide you through the page 19 and the following three pages that are main topic around eTouch. eTouch was a terminology that we have introduced at our Capital Markets Day in September 2017 as an opportunity to execute shipments in a fully automated way. Since that time, we have been working internally on the preparation of the technology and the automation opportunities to do that. We have been very covered up with information. We have not given a lot of information outside to the market just to make sure that we get also our acts together right and can present a viable situation and a viable solution going forward. Page 19. Why do we do that? Why do we actually do eTouch? The simple answer is to increase profits, but there is a bit of a more sophisticated way.
For us, it is a response to something that we expect in the future, which is an ongoing structural margin pressure for shipments that are on the less complex, lower service side of the business. We all recognize, you all know that not every shipment that we are handling in our organization is a super high-value service shipment. There is a couple of shipments that only cover a short part of the supply chain, but also shipments where we do very little additional value added to. Shipments that we will identify as being addressable with a fully automated execution, we will call eTouch shipment, and we expect a conversion rate that will be around 60%-80%, mainly through technology and automation at a shipment level. What is addressable for volume for us? I think we have been in various conversations.
We try to convey the message, what is the addressable volume? I think what we come today is around 20% of the sea freight business as it stands today, and around 45% of our entire air freight shipments would be addressable through the eTouch automated solution. Out of that addressable volume, our aim is, depending on the business unit, sea freight a bit less, air freight a bit more, to convert around 20%-40% of this addressable volume into executed eTouch shipments. That will clearly drive conversion rate up. To anticipate a question not being asked yet, is that going to be our driver for a conversion rate of 16% for a group? Yes, it will drive us towards the conversion rate target of 16%, but that will not be the only thing that we need to do to arrive at that conversion rate.
Let's leave that aside for a moment. Let's get a bit more into the details of eTouch. Page number 20, what is it? When you look at the page, we have tried to use a couple of symbols, commonly used symbols around supply chain to demonstrate in which areas of supply chain we are active. For each of the business units that we have seen, in the sea and in the air freight area, we have put a couple of numbers together which are, for illustrative purposes, based on two days' volume. When we say the addressable volume in sea freight is around 20%, we will then be able to convert, let's say, 10%-20% of the addressable volume into fully automated.
Out of the total volume, we talk today, let's say around 250,000 TUs that will be executed with a 60%-80% conversion rate. The same calculation on the air freight side, we will talk around 400,000 tons today that would be operated under full eTouch 60%-80% conversion rate. In relation to our today's volume for air freight, while 400,000 tons out of 1.7 million, that is like 25%, right? It's like 20%. This is the magnitude of what we aim for by the year 2022. Is that going to be a linear way to get to that point? Most likely not. Automation and technology will be put in place side by side on a process journey. That means only when processes are linked up together, then we will be able to cover various steps within a shipment execution in an automated way.
Most likely what we will see is that our impact on the numbers will be very much loaded into the years 2021 and 2022. This is the volume conversation we have. We also need to look at what are the values and what are the financial framework, which of the shipments we are addressing. Page number 21 basically gives the answer on what is today's commercials around the addressable volume. Unsurprisingly, I'm giving you the explanation for the left side of the slide where we look at the gross profit per unit. Today, in our entire business mix, sea freight, we generate around CHF 300, CHF 310, CHF 320 gross profit per TEU. That is a whole range, as you can imagine, from very little to CHF 4 or CHF 500. The average is at CHF 300-CHF 320.
The addressable volume, the shipments that where we do less value added, where we do on a shorter piece of the supply chain, of course we are not making CHF 300-CHF 400 GP. We do less. Currently, we have identified the addressable shipment with a gross profit per TEU that is somewhere between CHF 60 and CHF 70. Today, and I'm being very simplistic on this, today, when we operate these shipments with that kind of gross profit in our existing operational model, we will generate 30% conversion rate. 30% of CHF 60, we will make CHF 20 EBIT. Yes, we know that. All of us do that. The industry does not only live out of high value-added services. These are the shipments where we're going to target, instead of making CHF 20 per shipment, we want to do CHF 50.
That is where our whole work is going to go to, that we have an incremental EBIT per TEU of CHF 30 in my model or doubling the conversion rate versus the average today. Same conversation of air freight. I know that there's already some questions out there. Why is it in air freight, the gross profit per 100 kilo in the average the same as in the addressable volume? Very simple, because the addressable volume in air freight is far more around the mix of not specific meaning perishables, pharma, KN Chain solutions, as Detlef has alluded to. It's far more in the general mix cargo included where we see the addressable volume. Hence there, our leverage will be, again, from 30%-ish conversion rate today into 60%-80%.
Now it should be relatively straightforward when we look into the volume section and the financials around it to figure out what is the ambition and what is the impact on the financial model on the sea and air freight. I'm pretty sure there's going to be a couple of questions around that, but that is kind of the information that I would like to share at the moment and move from the P&L impact and the business model impact towards balance sheet. Balance sheet. I'm back on the 31st of December 2018, page 22. Not much movement. Still today, we have a very good equity ratio. Our balance sheets total around CHF 7.5 billion, with an equity of CHF 2.3 billion. That translates into an equity ratio of around 29%.
Anticipating next page 23, the impact of IFRS 16, all the operating leases being put onto the balance sheet, which leads to an extension of the balance sheet. We will still have an equity ratio under the new balance sheet reporting standards of around 24%. What is the impact specifically of IFRS 16, page 23, on the balance sheet items? We will add, as I just said, around CHF 1.7 billion-CHF 1.8 billion towards the extension of the balance sheet. On the income statement, you can see that here, obviously, this is a shift from SG&A expenses into depreciation and interest expenses. We would see EBITDA increasing approximately between CHF 420 million and CHF 460 million. Depreciation increase of CHF 400 million to CHF 450 million. An EBIT impact of around CHF 10 million to CHF 20 million.
A profit before tax impact close to zero, I would estimate it today of negative CHF 5 million-CHF 6 million due to the front-loading of the IFRS 16 calculation. Thirdly, not to be forgotten, on a cash flow statement, we see from a pure cash flow, that should be cash neutral, there is obviously a reclassification in the reporting from the operating to financing activity. Talking about money, page 24, cash and cash equivalents. You see at the current stage on the 31st of December 2018, we have roughly CHF 500 million cash position available. What are the main variances between 2017 and 2018? We have listed them briefly. We started a bit lower. Working capital, we have put CHF 130 million into the working capital, which is putting the growth, or growth needs to be financed through that.
We will just talk on page 25, what is the movement on the DSOs and DPOs. We have obviously had higher CapEx. Also there is growth in the contract logistics area that was driving that, and acquisitions, plus a little bit higher dividends than 2017 have led overall to the position that we are in by the end of 2018. Talking about working capital, page 25. I think we are still within the corridor that we have given ourselves for working capital intensity between 3.5%-4.5%. We are at 4.1%. You can see there is an increase compared to a year before. Where does the increase come from? DSOs, I think we have been able to defend, if you like, to work very well with the customers to have different solutions in place, not to have much longer extended payment terms.
On the DPO side, very clearly, two components that were driving a shorter DPOs by around 7.5 days. One is the overproportional growth compared to sea and air freight of contract logistics, which leads to receivables but no payable, other than if you consider payroll as a payable. Payroll doesn't have payment terms, unfortunately. It needs to be paid on a monthly basis. That is one driver of this. The other driver, we have to be clear on that as well, with sea freight carriers getting far more into an aligned situation on the market. Also here, we have come under pressure. Page 26, return on capital employed.
I would like you to look at the top line of these two on the graphs, which is 58% in the fourth quarter or at the end of the fourth quarter, 2018. As you have heard, by 31st of December 2018, we have consolidated the balance sheet of the Quick acquisition, which obviously the balance sheet came over immediately, there was no EBIT at that point in time, you see a little bit the impact of the acquisition on the lower line. Going forward or looking forward, IFRS 16, we would expect and estimate roughly an impact of around 1% on the return on capital. Coming to page 27, financial targets. Unsurprisingly, I guess, nothing new on the left side.
We stick to our target in 2022 to have a 16% conversion rate from GP into EBIT for the group. Please never forget, this is assuming the same mix between the business unit as it has been 2017. Obviously, when there is overproportional growth in some of the business units, that might distort that number either favorably or unfavorably. We want to measure ourselves against the mix remaining equal. Return on capital employed, excluding acquisitions, we want to stay at 70%. Simple answer to that, we just have to make more EBIT, we're going to get there. I think that is a simple target to do that, eTouch is going to be part of that journey. Tax rate, working capital, no change today. Expectation from a volume perspective for 2019.
I'm not going to read the slide to you, I think it tells we want to grow at least double the market growth. About the market growth, I think we can all have an opinion. We see currently, or our expectation at the current stage is what is written here. sea freight 2%-3%, air freight flat-ish to +1, overland contract logistics pretty much in line with GDP for the market. Our ambition, double the market in the businesses. Page 28. Last but not least, also relevant. At the current stage, we have a proposition towards the supervisory board. Sorry, excuse me. Towards the annual general meeting for a dividend of CHF 6, which would translate into a dividend yield of, again, roughly 4.5%-4.6% with a payout ratio of 93.3%. Also that, very stable.
That would conclude the financial overview, I would hand it over back to Detlef for the outlook 2019.
Outlook 2019. We have looked into our crystal balls and have spoken to our customers. We expect 2019 in total to be another good year, very challenging. Especially in quarter one and two, the insecurity in the markets will have their impact. We need resolutions for trade disputes. We need clear conditions for future trade, eventually, we need less noise in the news on what's going on or is going to be postponed. We concentrate on ourselves and on our customers. Cost control stays in our focus, as mentioned before. Technology is a game changer, is a prerequisite also for eTouch, as Markus has shown. We will continue with our technology-driven or enabled transformational path, we confirm our organic growth targets with growing double as fast as the relative markets of the business units. With that, we clearly aim for improving our results in 2019 further.
As said, quarter 1 and quarter 2 very much depend on resolutions in the trade environment and trade regimes that are currently discussed. With this message, I think we can hand over back to Alice in order to open the Q&A for all of you.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star 1 on their touch-tone telephone. You will hear return to confirm that you entered the queue. If you wish to remove yourself from the question queue, you may press star 2. Participants are requested to use only handsets when asking a question. Anyone who has a question may press star 1 at this time. The first question comes from the line of Daniel Roeska, Bernstein Research. Please go ahead, sir.
Good morning, gentlemen. Not surprisingly, three on eTouch, if I may. The guidance you've given on eTouch today seems to be just a little bit less ambitious than your previous plans from the CMD in 2017. Lower boundary of conversion rates down 10 from 70, penetration aspiration a little bit lower. Why is that the case? What are the key drivers for this a little bit more cautious view? Secondly, if we take your guidance, it seems as though you're expecting eTouch OpEx per unit could be more than 50% lower almost than a traditional shipment. Could you elaborate with a tangible example, what it is your employees don't do anymore in that moment? Whether the biggest benefit is in booking, execution, or fulfillment invoicing. Which processes are you looking at and targeting the most?
Lastly, you shared your ambition in terms of addressable and penetrated volumes for eTouch. Could you comment on today's starting point, where are you right now in sea and air, in terms of those volumes and penetration? Explain a little bit how the sea freight is different from the air freight since you're seeing a lower penetration. Markus, to comment a little bit, maybe with a little bit more color, which processes in ocean, what makes it more difficult to have more addressable volume in ocean? Thanks.
Hi, Daniel. It's Markus. I think I just take a random sequence because I'm going to explain the story. I'm not going to do one, two, three, four. I start with the difference between sea and air freight, because that helps me also to explain what people are going to do and not going to do. I think the biggest difference between sea and air freight shipments is just the duration of how long in time actually a supply chain is. As a matter of fact, you may agree with me that more things can happen, meaning unplanned happen within 7 weeks than within 72 hours. Point number one. Point number 2, I try to be as careful as possible.
The quality of the air freight product in terms of accuracy, punctuality, and how much room for error is there, is much lower than what we see in the sea freight arena. That obviously helps and supports a larger number of shipments being potentially, coming back now to one of the previous questions, potentially fully automated execution of the shipment. What does that mean? That means that customers' orders will be received in an automated way. That could be as benign as somebody actually putting information into an internet interface, or it could be as sophisticated as customers' applications or IT applications interfacing into our applications. Either way, no matter how that front end looks like, but it's an automated order received. From that point on, order planning, that is something that we can do already today. What is the design of the shipment?
What is the available space on which of the routing and do we have space booking on the planes or not? We can all do that today. Comes the tricky part. It's the communication part with the suppliers. It's as crazy, if you like, as when we get an order to pick up a shipment at a certain place, you need to employ then, obviously somebody, a trucker or somebody like that, who actually goes there and picks up the cargo. That service must be capable to give us a confirmation of that service has been done in a way that our systems can further progress with that. It's just not enough to pick up the phone or to come then back into a depot and actually clocking in. That is today when people manage that. Human intelligence can deal with that.
Machines cannot deal with that. You have to get a standard response to these things. You see there is a lot of interaction with the execution part of a shipment that needs to be automated or readable. Readable and workable with from a machine. That answers what an operator is not going to do anymore. An operator may actually not, as a standard routine, if everything goes fine, may actually not manage anymore if the trucker is stuck on the entrance door of the manufacturing side and saying, "I need to pick up something from door number 8," and he doesn't know where the door is, and he's going to call and say, "Can somebody show me where the door is?" These things, operators will not do. Or doing the standard documentation process.
Doing the data transformation from one system into the next, meaning on the left screen, he has that information. On the right screen, he's entering the other information. All these things, operators will not do anymore. Ideally, and the cautiousness is more on the conversion rate of 60%-80%. Ideally, no operator will do anything different than monitoring exceptions. Arguably, you could put me in a hot seat here and say, "Well, then actually the conversion rate should be 100%." Yes, arguably, intellectually, I agree with you, but I think reality will be a bit more where we think it's going to be between 60%-80%. Last but not least, more cautious, I think we have been pretty consistent in our messaging around eTouch, also back in September 2017.
I think that slide that has been copied I don't know how many times in how many presentations with that little sliding lever where we were showing higher value and lower value. That has always been neglected, the fact that not every shipment that we had on this lever is represented as an eTouch addressable volume. I think that was something that we might have been not precise enough, but there was never a notion that 100% of the volume is eTouch addressable. Hence, that is a specification that, and I take that on our shoulders, that we might have given a bit late in the process, but I think the reality is what we have presented.
Is there something you can do or think of in terms of technological developments in the next five, six years that would enable you to either increase the addressable or the convertible, so to speak? If those are the two levers you think about, what are the discussions you're having internally to accelerate or to put in place new initiatives to improve or enhance that?
I think it comes back to my first point in the answer. I think we need also other players in the industry on the execution side to actually get that accuracy to, or the quality of the service to the point that it is workable for a machine. That is one of the things. What we, I think from a general perspective, what we will, I don't want to say never, but it's got to be a huge challenge to make a larger addressable volume when we talk about cargo that needs manual handling or that needs special care handling. A lot of our cargo needs some additional special handling to it. I think that's going to be still difficult to automate entirely.
You're talking about a time frame, maybe 5 or 10 years. I don't want to open here the miracles, but maybe at a point in time, there is also for care centers, which today are obviously, mainly operated by people. That these care centers might actually work in 10 years from now with a bit or with the support of, call it artificial intelligence, and they're really intelligent, and they would only be working, eventually, on the real exceptions with humans. That is, I think, less relevant for our current strategy, which expands into 2022.
Thanks.
Thank you, Daniel.
The next question comes from the line of Mark McVicar with Barclays. Please go ahead.
Hi, Detlef. Hi, Markus.
Hi, Mark.
Hi. A sort of two-part question on Quick. First of all, could you just I get the principle of mission-critical transport, but could you give us just maybe a couple of examples of things that it can do for customers that you can't currently do, or you couldn't have developed yourself over the course of a couple of years? What makes it so different in terms of its service offering is the first part of the question, the second part is, what guidance can you give us around synergy benefits and margins? When are you going to start contributing to the bottom line of Kuehne + Nagel?
Sure. Quick has two areas which they have focused on and where they were very successful. I've mentioned that before. Let's start with Sterling, the part that addresses the aerospace aviation industry with spare parts. Their setup is similar to our AOG desk, but with a different customer base, and they have a higher focus on purely time-critical shipments, where we solve solutions, or have solutions for all spare parts requirements of the aerospace and aviation customer base. For that, it's a complementary service and partly overlapping in the area or arena of AOG desk, but with different customers. We have a complementary customer base for that business. Well, similar interesting, Mark. Interesting for different reasons. I should have said area is the pharma healthcare area or industry.
You know that we have set up the KN PharmaChain solution, and especially with regards to clinical trials, HyperCare, and organs, they have a very robust and sound solution. This is what we didn't offer. Whenever we talk to our strong pharma and healthcare customer base, this was a service we either subcontracted or would have taken years to develop for us. Therefore, in this area, we can create immediate synergies and benefits for existing customers, for both of us, with a more enhanced value proposition or service scope than what we operated today in the KN PharmaChain. Quick has a proven track record and a strong brand established over almost 40 years, four decades. They are a market leader in this time-critical arena, focusing just on time-critical. We had time-critical solutions, subcontracted, operated in different ways in our organization.
Now we have a very robust, high-quality, high-reputated solution within the Kuehne + Nagel network offering, for KN PharmaChain and KN ZeroChain or AOG desk to start with, but for other time-critical segments of the industry as well.
As you say, it would have taken a very long time to develop that stuff in-house.
Yeah, a very long time. Very often, I mean, as the pharma customers do not just give it a try and test someone. It's for us the opportunity with our strong reputation in the pharma and healthcare industry to upsell, to widen our service scope for existing customers and win new customers in our classical PharmaChain business, which is clearly higher-margin business and a very strong growth segment in the entire pharma or transport logistics segment of the pharma industry.
Okay.
Yeah.
Synergies and contributions, that type of thing?
Yeah. Immediate synergies, top-line growth. Immediate synergies, cross-selling between the different networks, so to say. Our customer base, we will offer now the full scope of services that Quick has been offering over decades and vice versa. We have synergies, for example, in sourcing carrier capacity, procurement, so to say, in the different markets. Also from a footprint point of view, I mentioned that 4 Quick control towers in the U.S., 2 in Europe, and 11 supporting stations around the globe. With our global networks, we can enlarge the Quick solution to other high-growth markets very quickly.
Okay. Sorry, the last of my question was, when do you expect it to start contributing to the bottom line?
Yesterday. It was closed, as Markus said, 31st of December last year. It is part of the balance sheet, but it is part of the group as of 1st of January this year on, and it contributes immediately.
Okay. It will be earnings enhancing this year?
Sure. Earnings, gross profit and so on.
Okay.
EBIT.
Good. Okay. My second question was, within contract logistics, you've been restructuring, repositioning, reshaping for quite some time now. Do you see a point where that process is complete and then the new growth starts to show itself through more strongly, or we still got another couple of years to go? What sort of timeline do you have?
Years to go. First of all, restructuring for quite some time, Mark, is a very interesting statement. We started to reshaping the business second quarter last year. We announced the technology investments, but we were fully ready in starting this exercise second quarter last year. Contract logistics is based on contracts. Longer lasting contracts. Contract logistics is based on three to five years contracts. We will address also the reshaping of our portfolio in this timeframe. You can expect to see effects much earlier, obviously. I'm not expecting you to wait another couple of years as you just have alluded to. I would expect second semester this year, so Q3, maybe Q4 more, to see the first effects fully in contract logistics.
With all the measures, productivity measures, technology, picking enhancement, new warehouse management system, and the focus on the portfolio will show traction this year. End of this year.
Okay. That's great. Thank you both very much.
Sure.
Thank you.
Thanks, Mark.
The next question comes from the line of Aymeric Poulain with Kepler Cheuvreux. Please go ahead.
Good afternoon. Two main questions if I may. The first one is on the capital gains that you reported in 2018. Could you help us locate this capital gain by divisions? I understand there is around CHF 20 million in the contract logistics in Q4, but for the rest, if you could remind us where this affects the profit of each division, that would be helpful. Also in terms of the pro forma clean EBIT that we need to use. I calculated the capital gain at CHF 47 million in 2018, that would mean CHF 940 million, but it could be that these are not exactly the numbers. It would be helpful to have a clean EBIT number if possible. That is the first question. The second is on the acquisition of Quick.
Given the price you paid on an EBIT sales ratio, I understand the synergies in terms of growth and so forth. Could you give us an idea of the underlying EBIT margin of this business, or why you pay such a high price? I think in terms of ton value, it seems like a high price and more generally on the acquisition rationale. You obviously made some comment in the press back in December on the possible interest in Panalpina, one of the key shareholders is saying that that would not be the case. Just to understand how you are prioritizing your acquisition and the rationale behind the choice you make on that front, that would be very helpful. Thank you.
Sure. Aymeric, let me answer this question that left here with regards to M&A. Our M&A strategy has not changed throughout the last 12-18 months. We have always said that we look for transformational acquisitions, especially with regards to technology, for enlargement, widening of our solution competence, Quick is a very good example for that. We always said we look on domestic markets in Asia in order to increase our footprint because with our global networks, we are active there, but in some of the markets we will be able to do more with different solutions specific for the market. My interviews in the press were rightly represented by the news and by the press from my point of view, I never said I would buy any target.
I never mentioned the name of any company, I even gave an interview on the 3rd of January in the German business newspaper called Handelsblatt stating that we would never buy a target unfriendly, we would never buy a target that is clearly having a price tag that is based on speculations or rumors in whatever direction. We, I stated, we clearly stated, we look at targets, we evaluate the business case, we evaluate synergies, on that basis, we then decide whether to pursue or not to pursue certain targets. We then pitch, as you saw in the case of Quick. Which brings me to the purchase price. We pay a very normal, I would say, multiple on the EBITDA or EBIT for the Quick acquisition.
You saw or you've seen that we have a certain consideration put into the purchase price that we announced in our analyst presentation and our annual results. That's based on an earn-out basis. Quick is one out of only three global players in the time-critical market segment, and it's extremely unlikely that you can build a very robust and network-covering time-critical solution yourself. From that point of view, Quick is a clear part of our strategy and Roadmap 2022 in airfreight that we posted and announced at the Capital Markets Day and reiterated throughout the last couple of analyst calls. I hope that answers your questions.
On acquisition. Obviously you mentioned technology. We saw private value of e-booking platform like Flexport going through the roof. The trade-off between buy and build and obviously the appetite for top-line growth versus cost synergies, that you did not necessarily answer. Especially given the price to sales ratio of Quick, which is like 3 times and seems to be geared to top-line growth mostly.
That's a pure financial look at it. Also, those examples that you mentioned are based on speculations. Markus gave some details on eTouch and our process here. It takes a certain understanding of the global forwarding market, a network infrastructure as well as a technology competence to establish these solutions. I don't think that we can expect this from other players at that pace at the moment. I'll give you an example for sea freight. We have launched two platforms early March last year, seaexplorer and KN ESP, a digital platform for supplier management. I will not go into details of those platforms anymore because we have mentioned that a couple of times. We have a lot of transactions and business won on that basis. We even enhanced those platforms, you can be sure we will not stop there.
You will hear news on our technology in all business units driving top line, but also bottom line growth. That's our transformational journey that we have started one and a half or two years ago. This is paired up with solutions. We mentioned that before. Airfreight, for example, KN EngineChain in aerospace, KN InteriorChain in aerospace, also then the KN BatteryChain is not only a solution that facilitates the customer requirements with an air freight answering, but it's an end-to-end solution operated by all our business units in an integrated way and has a very high margin per shipment. The beauty of Kuehne + Nagel is that we can pursue two strategies at the same time out of one organization.
One is high volume shipments transferred into an eTouch environment as much as we can, but we will always stay a people's business because we need forwarding know and expertise to address customer needs and to interface with customers. From a process point of view, we can ease up the process as Markus has described much more. The solutions business, we understand industries, we understand our customers' needs because we understand their customer needs and have answers to help and support them transforming their business. That's our strategy.
Good.
Thanks, Aymeric.
Thank you.
The next question comes from the line of Neil Glynn with Credit Suisse. Please go ahead.
Good afternoon, everybody. If I could ask three quick ones, please. The first one with respect to the dividend. It's the first time in living memory and maybe ever, I'm not sure, that the dividend amount proposed is actually bigger than the cash on the balance sheet. Before thinking about IFRS 16, it looks like you'll go into a net debt position in the first half of next year. Just interested in your thinking on that. Not that a small net debt position is in any way an issue, but just thinking about how you manage that going forward. Second question. Markus, you mentioned pressure from the consolidation on the sea freight side having ramifications for working capital. I'm just interested to what extent liners are starting to request payment upfront, and how you manage that. I think Maersk is doing that.
I'm not sure, are you experiencing others following? Is it an issue for you, or is that more for the smaller freight forwarders to worry about? Then a final technical question just on ROCE. Within IFRS 16, you've obviously highlighted CHF 1.7 billion-CHF 1.8 billion of an uptick to your asset base. Just interested in terms of why that doesn't have a bigger impact on your ROCE calculation, given that it doesn't seem to have much of an impact on the EBIT per the accounting change. I would have expected ROCE to have a considerably greater impact on the one percentage point you reference in the slide. Thank you.
Maybe let me take quickly the third question on the return capital employed. There's obviously an extension on both sides of the balance sheet. The 1% impact only comes with that small interest differential between these two.
Your calculation of capital employed then is based on net debt?
Well, it includes both. Yeah. It includes both the assets side and the business side of it. That's, I think, the more easier one. On the liners
Yeah, I can answer the liners. It's not only the liners. You have this in all industry. We do not pay carriers upfront. We pay on the agreed payment terms, which are different per carrier, per industry, and per trade, and we honor those payment terms, and that, from our point of view, has not significantly changed.
There was the, I think on the dividend side, well, it's an interesting question because we finance the acquisition, not necessarily the dividend on it. We were obviously having for the Quick acquisition, we were picking up some debt, as you can see, obviously in the balance sheet, and hence that is the situation we're in. Legitimately, I think, and we have always been quite transparent on this one, that on an acquisition side, we would accept a temporary net debt position.
Understood. I guess part of the substance of the question is I'm just trying to understand if you're thinking developing in terms of finding more justification to use that balance sheet for accretive reasons, or would your mission be to build up a net cash position again as soon as you can?
Well, I think it has never been driven by a balance sheet policy. It's about what is the right target, what fits to us, what is also, as you say, accretive. It's getting more and more difficult to actually find accretive targets in that context. We are more thinking about that part of the decision making rather than anything else.
Understood. Thanks for that.
Welcome.
The next question comes from David Kerstens, Jefferies. Please go ahead.
Good afternoon, gentlemen. Two questions, please. First of all, on the yield development in sea freight, could you please explain what the mix effects are that lead to the ongoing pressure on yields in your sea freight business? With regards to the outlook for 2019, how have your recent rate discussions on Asia, Europe, developed with your carriers as well as your customers, and particularly ahead of IMO 2020 likely coming into the freight rates in the fourth quarter of the year? The second question is regarding the 16% conversion ratio. You mentioned, Markus, in the presentation, you also need other factors besides the expansion of eTouch. How much do you expect will be driven by the eTouch expansion to get to the 16%, and how much should come from other factors?
What are the other factors that you are having in mind to improve the conversion from here? Thank you very much.
Hi, David. Let me take the mixed question first. We have clearly over-proportionately grown our managed business, the platform business, based on, for example, KN ESP that we mentioned before. With this platform, with this digital supplier management tool, we got a lot of traction in the market, and that is reflected also in our volume development. That had an impact on the yield mix. Also here, as you saw, we were able to counterbalance this with leverage effects on the cost side. The carrier question that you mentioned, we have agreed rates for trades and volume agreements with all carriers, and IMO 2020 is part of that agreement. That is embedded already in the rate discussions. It's not an issue. It's something the whole market is experiencing and will become effective then in 2020 and not today or yesterday.
Therefore, that's not a major concern for us. You might see the first effects of IMO 2020 maybe in Q4 or end of Q4, given the lead time of sea freight shipments, as you know, in the supply chain. That would be my answer.
I think on the conversion rate.
Yeah
Yes, you're right, eTouch is, as I mentioned, is not the only thing that we need to do. No. eTouch is one component from conversion improvement, if you like. It goes back to the even traditional thing as cost control. It goes into automation. Not every automation falls into eTouch. It goes into improvement of productivity and efficiency. Let's say, I don't want to say the normal, but the efforts to become a more efficient way of working is not only driven through the eTouch shipments. When you think about how many files are being handled on a daily basis, we will not have as an only initiative that now we are doing everything on eTouch. No. There is also the automation and technology driving productivity. The famous three files a day, you may have heard over many years in sea freight.
If that becomes, say, three and a half or four, then that is contributing to that conversion.
If I may add, David, we have always mentioned that we implement our new generation of operating systems in sea freight and air freight. AirLOG is completely rolled out around the globe. Now we have to work with the new system and need to use those leverages it offers, not only to drive eTouch forward because these systems are a prerequisite for becoming eTouchable in some parts of our supply chain activity, but also to drive productivity and new operating models forward in order to enhance EBIT. I would like to add solutions business, as you mentioned before. Our KN Chain solutions, as we call them, have a much higher margin per shipment because they reflect specific needs of our customers in certain industries. They are auditable, they are licensed, and they are generating a value proposition that cannot be fast-copied by some other marketplace.
Would it be possible to put a number on the conversion rates for improvement? How much would come from eTouch, roughly speaking?
Well, I think when you have a model on hand and you would put these numbers in terms of volume and the profitability, the GP and the conversion rate into it, I think it should be very clearly visible to you. I will not give a specific number from our side.
All right. Fair enough. Thank you very much, gentlemen.
You're welcome.
You're welcome.
The next question comes from the line of Bruce Chan with Stifel. Please go ahead.
Yes. Thank you, Allison. Good afternoon, gentlemen. Just one question from me on the contract logistics side here. A competitor of yours talked about significant increase in the use of factoring in their business, especially, again, on that contract logistics side. They mentioned that this is something that was very common in managing working capital. I want to know, is receivables factoring something that you do, and if not, is there an opportunity there?
Very simple answer, Bruce. I think currently we're not doing it. Is it an opportunity? Yes, it is an opportunity. Are we looking into it? Yes. There is nothing specific right now in terms of that I can give you a timeline or a volume to that. Yes, I agree. It is an industry commonly used way of doing.
Okay. Very good. Well, thank you.
The next question comes from Damian Brewer, RBC. Please go ahead.
Good afternoon, everybody. I've got two questions, please. First of all, just on the outlook for 2019. Clearly, the volume and the GP per unit is open for debate, but one thing you do have control over is the cost. Just looking at Q4, you did about CHF 1.7 billion of SG&A cost, and you've already alluded in the presentation to accelerated operating efficiency measures. Could you tell us a little bit more about how you think that will trend over 2019? In particular, if it takes a while to get those measures in, would Q1 be similar to Q4 and then we could see progress, or would the phasing look slightly different? My second question, and sorry for laboring cost and cash flow. If I look at your operating profit to EBIT conversion through 2000 to 2010, you're at 110%.
Through 2011 through to 2015, that dropped to sort of 90%, 95%. Then we slowly come down to 80% in 2017 and 67% in 2018. Is what we've seen in the last two years an aberration, or is there a sort of new normal of lower operating profit to EBIT conversion? Thank you.
The outlook 2019. We for sure can influence both sides. Our cost side as well as the new business that is one and implemented in our networks or in contract logistics. The phasing, I would expect the majority of the effects to phase in Q2 and then from there, second semester 2019. If we reduce G&A costs and we do this in some areas, very conceptually-driven, that will take time to show the effect in the P&L as we may have to pay redundancy payments or have a cost of change here to take into account. That's our expectation. The macroeconomic environment, we can only assess and see how volumes will kick in. Here we are extremely cautious for Q1 and also Q2. As I said before, we need clarity in the trade agreements and not postponement of negotiations or discussions or Brexits. We need clarity.
It's not us that need clarity, it's the end consumer, because all the noise in the press create a certain insecurity. We have low unemployment rates around the globe, driver scarcity, and so on and so forth. We have higher purchasing power through tax reliefs, and so on and so forth. If the news states certain insecurity, people will hold back and will not continue to consume and invest. That drives our business. Therefore, yes, cost effects will be seen. The majority with full swing as of Q2 this year. More interesting for us is whether consumption continues to grow and improve again after Chinese New Year, but not only, and what the future scenarios in some of the trades look like given this insecurity that I mentioned before. Operating profit to EBIT conversion.
Damian, I think we talk also cash conversion in that context. I think it is a very correct observation that the capital intensity has increased over the years, especially in the last couple of years. Is that a new normal? Well, there was very good growth pattern over the last couple of years. Growth is connected with some investments, if you like. If these investments are then expensed as cost into the P&L or real investments in terms of into fixed assets, that doesn't matter that much. Every significant growth is requesting some capital to it. At the end of the day, I think what we are all collectively working on is getting more out of the capital allocated. If that comes eventually with some trade-offs on growth, meaning, do we need to take over proportional growth in capital-intensive businesses?
I think that it's going to be a management task for us to manage it right. I think I would not be happy in seeing that as the new norm.
Okay. Thank you. Can I just ask a follow-up from that then really just coming back to the outlook, what you've just said, Markus, is that the explanation of why the aspirational or the goal, or whatever you want to call it, for 2019 in the contract logistics business is only around about that 2% as you seek to optimize the balance between profitability, return, and growth?
I think there is truly a hint to it as well, that we have been very vocal around it and pulled even the headline for the contract logistics slide we called reshaping. I think there is some of that in it.
Okay. Very clear. Thank you very much.
The next question comes from the line of Frans Høyer, Handelsbanken. Please go ahead.
Thanks very much. Question about sea freight negotiations, how they have developed on Asia, Europe. Are you looking to cover more or less than you usually do with these contracts, please?
sea freight rates and volume, I think it is two different things. We see Asia, Europe, that we agree on long-term rates, and we have no significant change in our rate negotiations with security. I think I mentioned that before, which usually happen early in the year, this year. No change. The question is, the rates are stable, Asia, Europe, the rates will stay stable, and we are usually covered. That is different in other business units or in air freight. We are covered long-term with regards to our sea freight rates. We are expecting a normal volume development, nothing specific on Asia-Europe. We had a different market dynamics vice versa. Europe to Asia, as I mentioned before, we saw a declining environment. This was also driven by less scrapping and waste material in the market. A different market dynamic.
Okay. Thanks very much.
You are welcome.
The next question comes from Todd Stewart from Lloyds. Please go ahead.
Yes. Good afternoon, gentlemen. I just want to get some reaction from you to this CHF 1 billion investment
capital investment in Flexport. This is a company that in the space of five years had a turnover of CHF 500,000 million now. Obviously, they're taking business from somebody. Are you starting to feel the heat from the disruptor? You've said in the past that you played down the impact in the past. Is that something that's going to change, do you think?
First of all, you need to go into another analyst call, the one of the company you mentioned. We mentioned that the market, before we mentioned many times, the market is consolidating from the bottom, and we are a consolidator ourselves. We don't see any heat at the moment. We see market opportunities, and we are even selective with our growth already today over last year. From that perspective, market consolidation is something that is ongoing in our industry for decades.
Through acquisitions in the early 2000, but also through organic growth over proportionally of some of the players like us. The market share of the top 10 or top 15 players in the market is below 20% significantly. Therefore, nothing has changed from our part of it. My question now, with the fact that they're going to change scale with this capital investment of CHF 1 billion. Is that obviously going to change geographies, scope, and range of services, too? You don't see any difference in the landscape now as far as a disruptor like Flexport is concerned? Disruption is a word we never use because disruption means you are not prepared. We are a transformational player in the market ourselves. We are not concerned, and we don't see any changes in the market dynamics right now.
We have more than a quarter of a million forwarders around the globe, named forwarders that are identifiable. You might have even more agents or people being active in that market. As said the market share of the top players is not changing significantly over the last year because the market is growing itself as well as you know. Frans, can't help you. Todd, sorry. Is it Todd? Okay. Can't help you. Nothing changed. Okay, thank you. You're welcome.
The next question comes from Sebastian Vogel with UBS. Please go ahead.
Hi, good afternoon. I have a couple of questions. The first one would be on DPO. During the presentation, you quickly alluded to a couple of points that was driving DPO in 2018. From my point of view, these reasons were somewhat, or should be somewhat ongoing. How should we think of DPO going forward? That would be my first question. The other one would be on air and sea with regard to top line growth. Can you provide me or remind me there on the split between organic growth and M&A? The last one would be on the short-term bank loan that you alluded to earlier also a bit. When was that actually drawn? By when it need to be paid back again? That would be my last question. Many thanks.
Sebastian, hi. DPO. Well, yes, there is ongoing pressure on that, and especially because I talked about carriers, I think that will be an ongoing situation. How do we mitigate that? I think it's going to be on us to do two things. The first thing is, I'm not referring to the carriers at that point in time, I'm more referring on to many other suppliers, that supplier selection is going to play a bigger role to it. Also, focusing and the consolidation on the supplier side. With the same context, I think the offering of supply chain finance solutions that we are having out there is a good opportunity. Having said that, do we expect these numbers go back up to the, I don't know, 70s or 80s or whatever it was, some time ago? I would doubt that.
We would have to see probably, certainly for the next 12 to 18 months, we would see a certain. Or we would see a level like that. On the short-term loan, well, as you can imagine, it was drawn when the deal has closed. At that point in time, that was the short-term loan for the acquisition of Quick. As you see, it is within short-term without giving too much away. It is payable within a 12-month time frame. Organic versus M&A growth. First of all, we focus on organic growth, as you know, in sea and air freight. Sea freight is organic growth, only driven by deploying our technology, our platforms that I mentioned before. Air freight has an M&A effect embedded in the overall development.
One third of the business is organic, of the growth is organic, two thirds roughly are through acquisitions that we concluded previous year, so 2017. The full effects in 2018 or phase effects in 2018, mainly in the perishables.
FX?
No Quick effect.
Sorry.
FX is different per business unit. The highest FX effect has been in the Euro environment. I would say, Air and Sea was a very small FX effect, especially on EBIT level, because that's most likely what is of interest. There's no major effects in EBIT. We just checked figures here.
What-
We have a negative
What level are you talking about?
Sebastian.
You want to have the revenue, or you want to have the impact on revenue or GP? Where you want to have?
Focusing on revenue. Sorry, yeah.
Okay. As you can imagine on air freight, its FX impact is nearly zero. On the revenue side, I would think it is around 4% on acquisition impact. The rest is organic growth. On the sea freight, very much the same. There is very little Forex impact.
No acquisition.
No acquisitions.
Perfect. Many thanks.
All right. Thank you.
The last question for today comes from the line of Mr. Dan Togo-Jensen with Carnegie. Please go ahead.
Yes, good afternoon to you. Questions if I may. How should we think of yields in 2019 as you point to quite muted growth here? Is it too optimistic to expect a slightly positive impact from, so say, the muted growth into yields, especially Air I'm thinking of here? Then a question on eTouch. What does this require from the clients? Any investments in education, et cetera, and the interface? Is it just a plug-and-play here? That's the two questions. Thanks.
Ideally, it's plug-and-play based on data standards to start with that answer right away. It's not only clients, it's not only customers. We are integrated in many of the production or order management processes, supplier management processes of our customers already today. It's across all touch points of the supply chain. It includes different carriers, not only sea freight, but also port handling agents. It includes the pre- and on-carriage, trucking activities, and so on and so forth. I don't want to go into that detail again, I think Markus mentioned it before. We need data standards for this. It will be a plug-and-play. We will have service offerings, platforms that you can connect with, but you have to be able to connect. That is, by the way, a prerequisite for many activities already today in the market.
The market is softer at the moment, to come back to air yield development market is softer today. The volume that we have in the market generates a positive effect, obviously, and is desired by the carriers, also the perishable volume.
Okay. Thank you.
All right. Dan, thank you very much. I would like to take the opportunity to thank all of you for joining the analyst call on the year-end result 2018. We are proud of what we have achieved last year, first year in our transformational journey that we have explained to you in detail during the Capital Markets Day and bilateral meetings following one and a half years. We are looking forward to a challenging year 2019, as said, with a certain insecurity in markets, given the political instability or unclear situation with regards to trade theories, trade wars or trade agreements, especially in quarter one and quarter two. For 2019, we expect this year to close again as another successful year with higher volumes, growth double as fast, double as strong as market growth, and an significant improvement again in our bottom line.
Thank you very much. We will talk to you soon again on quarter one. I think in 2 months, pretty much on the spot, we will talk again. Thanks and bye-bye from Switzerland.
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