Ctt Correios Portgl Sa

Good morning and welcome to CTT's 9 months 25 results conference call. This event is hosted by Mr. João Bento, CEO of CTT, by Mr. Gui Pacheco, CFO of CTT, and by Mr. João Sousa, CCO of CTT. Please note that this conference call is being recorded. For the duration of the call, your microphones will be disabled. We will have a Q&A session at the end of the presentation and analysts will have the opportunity to ask questions. To do so, simply click on the button to raise your hand and we will give you access to the microphone. If you are dialing from the phone line, press star nine to raise your hand and star six to unmute yourself. I'll now turn the call over to Mr. João Bento, CEO.

Good morning, everyone. Welcome to our third quarter results presentation. I would invite you to follow us through the presentation that has been distributed yesterday evening. So if we move to the first slide, slide number four, we have a plot of the bridge of the revenue and EBIT in the quarter. with, I would call, resilient organic growth, revenues growing 6%, recurring EBIT doubling that, 12%, with positive contributions from all the business lines in terms of revenues. This 6.1% are in fact 17.2% taking into account the contribution of CACESA. And on EBIT, the performer growth of 12.3% corresponds in fact to 38.1%, which illustrates how competitive the addition of CACESA represented to our e-commerce solutions portfolio. Moving to slide number two, and with additional detail on the growth of parcels volumes, we see a comparison between second quarter and third quarter with a slight sequential improvement in e-commerce volumes. But we have to take into account that there were a couple of events very significant in the end of September that somehow impacted volumes in the quarter. Indeed, we had this typhoon Ragaza in South Asia that kept significant amounts of volumes, e-commerce volumes. sourced in China in the ground, so they could not fly. Some of them were sent by land, but there were also impacts in the border between Poland and Belarus, and some of the volumes that came through roads were also held in there. And there was also, well, I would say meaningful delay in mail volumes that we can discuss later on. The good news is that all these volumes were merely delayed and they showed up already in October. But on the right-hand side of the slide, we can see that we have a double-digit growth in July, in August, and then in September, a flattish improvement, basically, for the reasons that we have mentioned. So because of that, we keep quite confident, also because October is looking extremely positive. And we anticipate a strong growth outlook for volumes around 15% year-on-year for the fourth quarter of this year. Moving to slide number six and moving from volumes to revenues and margin, what we see is an improvement of 36% in revenues that without CASEZA would even so represent a double digit around 11% growth, which is significantly amplified when we move to the EBIT margin, in the sense that with the pro forma of CASEZA, the growth would be very slight, 4.5%, but indeed a 50% growth on EBIT. The good news that we'd like to highlight here is that although, well, despite of these volumes delayed given the typhoon and the closing of the Polish border, we still see an improvement in margin from 8.7% to 9.5%. That, as you know, is, well, the best EBIT margin for any parcel business in the market. So, given the contribution of Casseza, that differentiates our E&P offering. With this integrated model, we continue to drive profitability in parcels, and in that sense, we think that we should signal that. Moving to mail, I will pass the floor to my colleague, João Sousa.

Thank you, João. Good morning, everyone. On mail and other services, as you can see, in the third quarter of 2025, we are already seeing a recovery in address mail, with volumes down only 4.3% compared to a decline of 8.5% over the first nine months of the year. In fact, this improvement reflects a gradual stabilization of the activity after several quarters of more pronounced declines in traditional male volumes. This recovery is mainly explained by the normalization of volumes and the clearance of backlog from major clients, which had a negative impact in the previous quarters. And we are seeing also this positive trend already or continued in October that reinforced this recovery momentum. I would like also to highlight the business solutions that is driving a good performance. Business solutions continue to play a key role in supporting both revenues and margin in the mail and others business area, with a recurring growth of 10.9% year on year. As with these mix of revenues and services, as a result of these, we have a total revenues reaching 341.9 million euros, representing a limited decrease of 1.9% comparing with the previous year. On EBIT, EBIT for the male and other segments took on 2.28 million for the first nine months, maintaining a flat margin of 8.9%. This stable performance demonstrates that our operational discipline on cost control continues to managing these ongoing structural changes in the male market. On slide eight, and now we are going to financial services and retail, we continue to see a sustained performance across public debt and insurance offering. Financial services continue to show a solid and consistent growth. supported by strongest results in public debt products and insurance. Public debt placements up to 167% in Q3 compared with the versus period in last year. Savings certificates maintain like a preference savings vehicle for the Portuguese citizens. And I would also like to highlight that the digital channels for this product continue to perform strongly and September was the record month for these channels. This also allows us to bring new citizens to this product. Also, we are with the robust growth in insurance and health plans. We are in this strategic to build the recurring revenue streams to continue to deliver health plans. The stock of health plans growth 69% versus the end of last year and almost 32, 12.8% on quarter on quarter. Insurance products also with a very good outlook, performing pretty well and I would like also to highlight that already in October we launched a new health insurance that will also allow us to have a new product in this area and the first numbers give us also a very good outlook for the coming months. Seeing this on this business area, the revenues up to 57% reaching 9.8 million and EBIT up to 44.8% to 5.2 million. This reflects the success of our diversification strategy for this business area. And now pass to Guy.

Thank you, Jerome, and good morning to all. On slide 9, we can see Banco CTD's numbers, where we witness a strong growth in business volumes, growing 11.4% year-on-year on the third quarter, with a strong performance on the loan book that grew 16.4%. And on the off-balance savings, that grew 25.7%, where we see generally partnership already at cruise speed and continuing to gain traction on the market. That translated to banking revenues growing in 3.7% in the period, although with some compression in net interest margins, as interest rates seem to reach a bottom, which gives us positive trends going forward. We see net interest income going up 0.9 million, and commissions led by insurance and card commissions growing 0.6 million in the period. In terms of profitability, a flattish performance as we continue to invest in our future growth, deploying additional commercial capabilities, be it digital or physical, and we invest in technology to support that growth. Our return on tangible equity stood at 13%, a slight increase vis-à-vis the 12.4% of last year. Moving on to the financial review. In slide 11, we have our key financial indicators where we see resilient growth throughout most of the metrics. On revenues, 17.2% growth. And if we consider Casseza last year with a 6.1% growth in the third quarter, recurring a bit, growing 38.1%. or if we account for cassettes at 12.3%. Specific items reach 7.6 million. As we concluded the restructuring project that we are ongoing on the mail division for this year, we invested 4.2 million in exits of people. M&A expenses and strategic projects account for the rest. or the value. Net profit in the quarter reaching 10.7 million, growing 35%, or reaching in the nine months 32.8 million, growing 18.4%. Our free cash flow stood at negative 6.4 million, and this is due to strong working capital investment that I will detail further on. On slide 12, we see our revenue reach, where we continue to see Express and Parcels as our main contributor to growth. Revenue is growing 6.1, accounting with Casseza, with Express and Parcels growing 15.7 million, or 10%, with softer parcel volumes due to a weak September. putting some pressure on growth. And this was caused by these extraordinary effects that Joan shared, the typhoon and the military movements on the Polish border. Kaseza continues to perform very well. In May, we witnessed a 2.4 million decline, or 2.3%. This shows two different performance, male declining 3 million euros in the quarter or 3.4% that were partially offset by the good performance of business solutions as we continue to diversify along the value chain of our customers in order to further increase the resilience of the revenues of these business units. In the bank, 1.3 million increase or 3.7%. fully driven by net interest income and commissions growth as we continue to grow our business volumes. In financial services, an increase of 3.5 million euros in the quarter and fully due to the strong performance in public debt placements that grew more than 1.1 billion euros as debt certificates continue to be a very attractive product in the market vis-à-vis other low-risk alternatives and already with some positive contribution of the recurring revenues that we continue to bet on in order to find additional diversification on this business unit. All in all, other key metric is expressing parcels in the quarter already are about 50% of our revenues, reaching 52% of our total revenues in this quarter. On slide 13, we see our costs. Our OPEX grew 5.6% in the quarter, driven by parcel. in line with activity, but softer volumes putting pressure on our unit costs. As you know, we start to scale for the peak season, where we keep prioritizing quality, as we see that as paramount to further growth in the future. Mail and others with a decline of 3.3 million euros on OPEX, or 3%, We continue to optimize our routes with a strong reduction on the number of routes and account reduction that mainly account for that OPEX savings. In financial services, we see 1.9 million increase fully in line with higher activity and in the bank, A 5.8% increase or 1.5 million euros. And this is fully due to the commercial and technology investments that I already share. Cost of risk this quarter with a good performance, reaching 0.7% of cost of risk. So good dynamics there as well. In slide 14 we see our recurring EBIT where we posted a 12.3% growth with Bank, Flat and all the other business units with a positive contribution. In Express and Parcels we see very resilient margins despite these lower than expected volumes in the quarter with 9.5% margin and increasing 0.7 million euros. Email positive contribution of business solutions and cost reductions leading to a 0.9 million increase in the quarter. Financial services with very good performance in placements also contributing positively with 1.6 million. and the bank with its flattish performance with the investments in capabilities offsetting the growth in banking product. Going forward, we expect a very strong peak season that will underpin the EBIT growth in express and parcels. Male seasonality will lead to a sequential margin improvement as fourth quarter continues to be seasonality-wise the strongest quarter of the year. Financial service will continue to grow, although with a tougher comparable in the fourth quarter. And the bank will post a flat to single digit growth due to the continuous investments in commercial activity. On slide 15, we see our consolidated cash flow. Operating cash flow reached 42.9 million euros in the nine months, with a strong growth in one year. Pre-cash flow also stood in 12, sorry, 18.8%, also with a 10 million euro growth. And our net debt now stands at 61 million euros at consolidated level. In slide 16, we see pretty much the same figures, but excluding the bank or having the bank under equity accounting, where we see in the nine months as the operating cash flow reached 20 million euros and due to this high investment in working capital. In the sub-quota, our working capital increased 13 million euros. and this is due to seasonality, of course, which is normally very strong in working capital investments, and that is due 5 million euros to the travel subsidy to the Portuguese islands, a service that we provide to the Portuguese government, and because of summer, normally, as this high growth and payment terms with the Portuguese state are always pressured, And we have 8 million euros increase in accounts receivables, both by increase in activity and some delays in payments of some key customers that we expect to fully offset in the fourth quarter as normally we do. Our net debt now stands at 2.4 million euros due to this working capital investment but we expect that to be deleveraging towards the two times in the end of the year. And with all that, I'll hand you over to João Bento for his final remarks.

Thank you. So moving to slide number 18. We have a plot of the evolution of EBIT and the corresponding contribution of ENP that we see after the drop between 19 and 20 associated with the COVID crisis. It's been very, very steady. And looking at the trailing last 12 months up to the third quarter of this year, We see that we are already at 105 million euros of EBIT, which means that we would require fourth quarter. That would be roughly 10 million or more above that number. The right-hand side chart illustrates the gap between where we are and what we need actually to do. So we see the fourth quarter EBIT of last year at 30.5 million euros. If we would consider the contribution of Casillas, that would take us to 37.2. meaning that because we need 41 to achieve the guidance, we are at a 10.3% increase, or 34.4 versus the actual number of last year. This 10.3% of growth fourth quarter on fourth quarter is, I would say, significantly less than what we have exhibited throughout the year. So at the top hand side of the slide, you can see that on the first quarter we grew 19.5%, 28% on the second, 12% on this quarter with all the delays associated with the typhoons. And so I'm not saying it's easy, but it's quite feasible. And that's why we are strongly committed to keep our ambition of a recurring EBIT equal or higher than 115 million euros. And by completing a quarter along those lines, this will in fact represent the conclusion of a, I would say, notable transformation cycle. that we have been taking this company. I would still ask you to follow me on the last slide, just to remind you that we have our Capital Markets Day taking place next Monday and Tuesday. We have quite promising news for you. We're going to do a similar exercise that we did three years ago. discussing and illustrating the strategy for our business areas and committing with financial targets for 2028. So we are looking forward to meet you all there and I believe that you'll be very pleased with the news that we have to bring. With that, we remain available for your questions.

We are now available to take your questions. As a reminder, analysts that wish to place a question should click on the button, raise your hands, and we'll give you access to the microphone. When you are allowed to talk, don't forget to unmute yourself. If you are dialing from a phone line, you should press star nine to raise your hand and star six to unmute yourself. Our first question will come from João de Safara. João, you have been allowed to talk. Please unmute yourself and ask your question.

Yes, hi, good morning and thank you for taking my question. I'll start just with two questions and the first on to try to understand a little bit what is in place in the four-quarter margin for for expressing parcels. Obviously, and you've mentioned, you've been focusing a lot on quality ahead of the season.

João, sorry, we are having significant difficulties in listening to you. If you can speak louder, please. Yes, is it better now? It's better now.

Okay, sorry. Okay, yeah. So what I... Yes, so going back to my question. What I was wondering and trying to to look implicitly to the fourth quarter to meet your guidance, you would obviously have to have some kind of improvement in expressing parcel margins. So I think basically just wanted to have a confirmation there since we've been having in the last quarters. In first quarter, margins were flat. Obviously, trying to exclude the impact of Casseza, which I know it's difficult. And then the second quarter, you've recovered. And now in the third quarter, it seems that margins, again, they've more or less been flat versus year on year. And for the fourth quarter, according to my numbers, it would still imply an improvement in margins. So if you could, well, just give me some color there on what are you seeing for the fourth quarter in terms of margins. And then the other question is just on the extraordinary costs you add this quarter for the employment contract suspension. The question here is, I mean, basically, if this is something related to the plan you're going to present, on Tuesday or is this something that was already contemplated and part of your ongoing cost savings?

Thank you. digamos, porque no hay ningún tema.

Thank you, João. So on your first question, so we are expecting a strong peak season in express and parcels that will once again be the main driver of our growth in the fourth quarter. Obviously, as you know, scale here plays a role and because we have this unforeseen growth lack of volumes on the third quarter, especially in September, that put some pressure on unit costs and as such our margin was stable and I would like to underline that nevertheless we were able to post a 9.5% EBIT margin that shows a lot of resilience of that business unit. But nevertheless, as you said, we expect both a volume increase and a slight margin increase during the fourth quarter. That could once again express a passage as a main driver. We also expect growth coming from mail, sorry, positive impacts from mail and the growth coming from financial services as we continue to see resilience on the placements, although the comparable will be tougher as last quarter was already very strong in placements last year. On the specific items, So, two main things. First, it's the restructuring project that we ended, and that we continue to explore opportunities to optimize mail and others, as we continue to see that paramount to sustain margins going forward. and that project come to an end in the third quarter. And now we also add some strategic projects that are, as you mentioned, linked with the next strategic cycle that we'll announce next week and some M&A expenses as we continue to have projects ongoing and and and what's ongoing be it with the transactions already announced another internal project thank you just a follow-up would there be on the fourth quarter additional non-recurrent costs On people, no. We should expect some costs around M&A, but nothing as meaningful as this quote.

Thank you. Thank you, João. Our next question comes from Filipe Leite. Filipe, you have been allowed to talk. Unmute yourself and ask your question, please.

Yes, hello. I have three questions, if I may. The first one is on CACESA and the integration of CACESA. And basically from the five million synergy that you announced at the time of the acquisition, if you have an idea of how much do you have already achieved in terms of synergies and when should you expect or should we expect the full achievement of these five million synergies with the incorporation of CACESA? Second question on mail. And CPI use it as reference for the upcoming year. Mail price increase, I believe, is up to June or July. And the question is if you have already an idea of the potential magnitude of the price increase for mail on next year. And last one is a clarification on specific, because looking at the breakdown, you mentioned in nine months, 1.4 million positive impact from regulatory compensations. But in second quarter alone, this positive impact was 3.5 million. If you can clarify what are those regulatory compensations and why the reversal in third quarter? Thank you.

Thank you, Filip. I'm afraid we didn't get exactly what you mean in the third question, but I will start with the previous two ones. So on CACESA, things are going pretty well. What we can say is that we are... more or less around mid-term achieving the full synergies that have been announced and they will be fully embedded across next year. Because there are several, the nature of the synergies is diversified. So we are probably halfway to be there. On CPI, actually, the formula is public. We know the volume decline. We know the inflation. The issue here is that the proposal has been put, but it's not been approved. In any case, you should expect something around 6.5%. plus or more or more or less around that just not to give you the exact figure because it's not it's not been approved but it's very easy to to compute the numbers and it should be something around well between six and a half seven percent something like that on the third question uh i'll because we didn't fully get it i i suggest that nunuviero will follow up with you in the end of the call okay thank you

As a reminder, analysts that wish to place a question should click on the button to raise your hand and we'll give you access to the microphone. Analysts dialing from a phone line should press star nine to raise your hand and star six to unmute yourself. As there are no further questions at this point, I would like to end the callback over to Mr. João Bento, CEO, for any additional or closing remarks.

Thank you, Nuno. Well, as we've seen, it's been a mild quarter. Fortunately, the positioning is strongly in line to achieve the guidance this year. And I believe that the most promising news are to be shared with you on the forthcoming Capital Markets Day next week. So thank you again for coming. We remain available to your questions through the IRO team and hope to meet you all next week. Thank you. Thank you very much for your participation. This earnings call is now concluded.