Ctt Correios Portgl Sa

Hello and welcome to CTT's first quarter 2026 results conference call. This event is hosted by Mr. Gui Pacheco, CEO of CTT, and by Mr. João Sousa, CCO of CTT. Please note that this conference 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 hands and we will give you access to the microphone. If you are dialing from a phone line, press star 9 to raise your hands and star 6 to unmute yourself. I'll now turn the call over to Mr. Guipacheco, CEO.

Good morning to you all and thank you for attending our first Q conference call. I would invite you to start our presentation on slide number four, where we show a quota of resilient growth with 4.3% growth with our growth areas performing well. Passos and Banco CTT showing growth acceleration. Although, as anticipated, our profitability was impacted by a number of congenital impacts, namely the Middle East crisis and new regulation introduction in parcels, concentrated peak volumes that spilled over to the first quarter, and the storms that affected the centre of Portugal due to the hurricane Christine. And with that, our EBIT declines 35.3% year-on-year on a comparable basis. These events were contained in April, and April is showing strong signs of improvements, with SEP volumes accelerating, e-commerce solutions, recurring EBIT also improving sequentially, and the public debt placements showing signs of strong recovery and should improve further with revision of the limits that government announced last week. On page five, we can see the e-commerce solutions volumes, where we continue to see strong volume evolution with another quarter of acceleration on growth. We posted a very strong 14.3% in the first quarter and April shows strong signs of improvement with almost 30% growth on April. This growth is supported mainly on non-Asian customers with strong volume acceleration. And with this, we continue to see a very strong Iberian structural opportunity that remains unchanged. since the last quarters. On page six, we can see e-commerce solutions revenues growth that remained very solid. SEP revenues increased 14.4% on the back of strong volume growth that we saw. E-commerce solution revenues consolidated, growing on a performer basis 10.2%. The non-SEP revenues, namely on Casseza, were impacted by this continuing of low gross margin business, like handling, and the impact of the introduction of the new G4 regulation in March. Our margin at the impact of these specific events, and as such, we had a challenging margin in the first quarter, regulation peak volumes and middle east crisis introduced volatility in in the volumes throughout the quarter as shown in the instrument detail that we shared on the previous slide and that poses a number of capacity management issues that affected the the margin in the first quarter All those issues were resolved, and as such, profitability in April is showing strong signs of sequential improvement and normalizing. Abidat, I would pass you over to João to take us through the public terms numbers.

Thank you very much, Gui. Good morning, everybody. As we did in the last results call, we start with another section with our growth and diversification areas. As you can see in this slide on the left side, we show the performance of public debt placements. This first quarter, performance was impacted by two main factors. So, the lower footfall in our stores due to several storms that affected Portugal during the quarter. That led to several stores being closed for a long number of days. And also, a demanding of this quarter versus the quarter of last year when... we compared because the last quarter of last year was still benefiting from the cap increase that you see in that quarter, the last quarter of 24, and also the improvement remuneration conditions. The good news is that we already saw a sequential improvement in April, and in addition, the upgrade limits at the end of April already translate into a strong growth in the first days of May. We can highlight that these first days of May, we see two times of public place, sorry, public place death placements in the daily basis. And even in our app, we see a best day ever, like a record in our app in public place death placements. On the left-hand side, we see our diversified services we are doing, so the health plans and insurance. Here, we highlight health plans that even with these lower health falls in stores, we see the customer base continue to increase. Both health plans and insurance products are evolving very positively and helping us to build a customer portfolio. with recurring revenue and great productivity for CDP. On page eight, we see the revenues decline from 128.7 million in this quarter versus 132.2 in the last quarter. This performance reflects two main factors, so the declining mile That is a well-known trend that we are managing with improving in pricing and managing sharing with the big customers. But more important, the reduction in revenues from the savings certificate that I explained before, but it is not a trend. It is a specific impact that we already solved or is already solved, and we are seeing already a positive trend. In the other end, positive in this chart, you can see business solutions and payments, another important pillar in our diversification strategy, continue to grow. This area continues to support the overall performance of this business unit. In terms of profitability, recurring EBIT email services was impacted by lower revenues from these saving placements. Recurring EBIT stood at 4.2 million in this first quarter, versus 7.9 million in the last quarter, representing a decline of 46.6%. And the EBIT margin was 3.3% on the first quarter, versus 6.0% on the first quarter of 2025. Nevertheless, we maintain a positive outlook on this model and others, because continued growth of business solutions And we see, and we already see, this recovering on savings placements in April and these first days of May. And with this, I press to leave.

Thank you, João. On page 9, we can see Banco CCT operationals. The Banco continues to accelerate sequentially its volumes growth, showing early signs of success over the new strategy that we have been implementing, with volumes growing almost 14%, especially on the loan book, with growth of almost 16%. and off-balance sheet savings that continue to overperform with 23.2% growth. Banco was one of the banks that grew most within the retail banks in Portugal for the ones that post-resort, so very, very strong performance here. Current accounts continue to grow 3.5%, reaching almost 712,000 customers. On banking revenues, we continue to see net interest margin improvement that now stands at 2.2%, and the banking revenues driven by net interest income and commissions reaching almost 9%. in terms of recurring events, a fetish performance or a marginal improvement as we continue to invest in reinforcing our commercial and digital capabilities to refuel or to reignite the bankrolls going forward. On page 11, we can see the beginning of our financial review with our key financial indicators. Please bear in mind that these are not performance, so it includes the impact of the acquisition of Castelva. And we see 14.1% close on revenues or operating costs. as mentioned with the additional costs due to capacity management and impacts of weather growing 17.7%, recurring average reaching 15.3% with a decline of 24% and our net profit was 4.5 million euros with 17.6% decline. Our free cash flow was heavily impacted by seasonality, and that is due to the repayments of the capacity installed to face peak and the capex that normally is back-end loaded. And as such, we saw this reversal that we expect, as previously commented, to reverse during the year. On page 12, we see revenue growth continues to be pulled by solid performance of e-commerce solutions, where we see SEP with very strong performance and overall growing 10% or 15.1 million. On mail, we saw the decline of financial service placements that account for 3 million of this decline. The remainder is the net effect of good performance on business solutions and still decline on volumes of mail. Banco CTT growth of 3 million driven by volumes that drove net interest income and commissions and overall growing 4.3% on our performer raises on the first quarter. Our e-commerce will continue to be the catalyst or the core catalyst of our revenues and accounting more or almost half of our revenues in the first quarter. On page 13, we can see the evolution of our costs that, as mentioned, were mainly driven by temporary e-commerce capacity challenges. The e-commerce solutions grew 19.8%. with high volatility due to supply chain disruptions and peak season 2025 spillover to January due to an abnormally concentrated peak around Christmas required significant additional effort to maintain quality and as such we continue to prioritize quality for our customers because we think that is what protects value in the long term. and these have contained the impact on the first quarter. Mail and services declining 0.8 million, showing lower activity in mail and financial services with some cost impact resulting from the storms in Portugal and the bank, a 2.9 million increase due to the investment on growth and commercial expansion. Our core cost of risk now stands at 1%, with a slight increase from 0.9% last year. Overall, our revenues grew 7.5%. In slide 14, we can see our recurring EBIT bridge, where we see a first quarter showing compression in our margins due to these relative events. where we see early signs of recovery with a strong April in terms of operationals. Our EBIT is declining 35% on a comparable basis due to these impacts, namely on e-commerce solutions where the capacity management issues and regulations impacted the performance with 4.7 million euros decline. And in Mellon services, the impact of lower public debt placements also affecting performance with a 3.7 million euros of decline. The bank showing a flattish performance in line with guidance and with the phase of investment that we are now undergoing. The recurring EBIT performance is set to improve in the rest of the year. The second quarter started strongly with parcel volumes also posting strong performance and recovering profitability. On mailing services, we see financial services benefiting from not only higher interest rates, but especially from the increase on limits. The government increased limit is on the current series from 100,000 euros per person, individual limit to 250,000 euros. And as we mentioned, we see early signs of elasticity due to those changes. And the net interest margin in the bank will have tailwind from interest rates, but the investment will continue as guided. In page 15, we see cash flow and now the net debt. Our leverage ratios due to the working capital performance now sits at 2.2 times, still below the self-imposed limit of 2.5 times. We expect working capital normalization throughout the rest of the year. That will help the leveraging that coupled with the proceeds from the JV with DHL that we expected to close this month, we see leverage immediately below 1.7 and with the reversal to improve further throughout the year. And with this, I would move to my final remarks. We continue to We believe firmly in the future growth of this company, continue to building open our strategic foundations. We have been building this commercial franchise, strong commercial franchise throughout Iberia, and that continues very strong, especially in the dynamics of revenues, where we continue to see resilience growth in the e-commerce solutions. The first quarter was affected by anticipated headwinds with limited impacts throughout the quarter. And we see April trading showing strong signs of recovery. For the rest of the year, we see normalization underway with this recovery on margins of e-commerce and continuous strong volumes. Mail-in service is stabilizing on the back of recovery and better performance of financial services with the revisions of savings certificates. And Bento CTT will continue these parts of accelerating growth with no changes in our strategic stance in terms of investments. With this, we are reiterating guidance, notwithstanding a volatile environment in regulation and increasing execution risk, but we remain committed to achieve our full-year guidance that I remind it's a growing guidance. Deliveries will be driven by e-commerce execution throughout the rest of the year, and pay wins on financial services. We expect, as mentioned, our leverage trajectory to improve after DHL closing in May. We started very strongly our second quarter. We see the second semester also with strong fundamentals, but subject to the new regulations. We are preparing according to our scenarios. but we'll need to adjust according to reality. But we remain very committed to achieve our full year guidance. And with this, I will be ready to take 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 right here and we'll give you access to the microphone. Analyst dialing from a phone line should press star 9 to raise your hand and star 6 to unmute yourself. Our first question comes from João Safada. João, please ask your question.

Hi, good morning. Thank you, Ian, João, and welcome, Joana, to the team. So, I have two questions. I think they are related. The first one is just if you could, well, help us understand or try to identify the several impacts you mentioned. peak season spillover, volatility, foreign volatility, weather. So I don't know if there is a way to sort of give us an idea of exactly what are these impacts, what is the contribution of each of these impacts. And also the question here is also because it seems that And we've seen that as well in – it's true with different perimeter, but we've seen that as well in the first quarter of 25 that there was, because of quality, some deteriorations of margins. So here, basically what I wanted to understand is a bit if this is something that we should expect going forward. in the first quarter in the sense that, okay, I understand the weather, so definitely that is a one-off, but maybe the other impacts might happen on the return basis. So, this is my question, and so I don't know if you can help me understand this a little bit better. Then, just on the performance of Casseza, I mean, is it fair to assume that Casseza did relatively worse than the rest of the business? And the reason why I'm saying this is because we've seen some volume growth. in the quarter, which was quite strong, 14%. That should have triggered some operating leverage. And then, I mean, I don't know, or maybe it was just that the base for Cassez's margin in the first quarter, 25, was too high. I don't know. If there's something there that you could also help me understand a little bit better. And that's it. Thank you.

thank you for your question um i will start with the first one so you are right when you see when you say that there is some seasonality effects on the first quarter and it's easy to explain why that is the the market is still uh very exposed to asian volumes and and on the first quarter We have February typically with the Chinese New Year and normally we have very low volumes around those weeks because production in China stops and as such that impacts the supply chain and that is the reason why the first quarterly normally has lower margins because it's difficult to just for one week or two adjust capacity to then resume with significant volumes uplift in March and normally we have lower margins in the first quarter. That trend this year was aggravated further by specific impacts. That was the peak. and the war. And that's why, because we are in every month, so in January, February and March, a high volatility from one to three times the volume, week on week. And that poses tremendous challenges in terms of managing capacity, because when it's low, you are under capacity and having margin loss because of that. And when it grows, you need to put extra labor and hire people at higher costs in order to face that extra growth. On average, growth was resilient as you saw, but with this volatility impacted. And that volatility was driven in January because of the of the spillover of the peaks. February normally is slow because of Chinese New Year and no news there. But when we were expecting a strong recovery after the New Year in China, as every year happens, we have the Middle Eastern War crisis. that impacted all the flows that come to the Middle East and that took some time to recover it. Luckily, the supply chains were agile enough recovering, but we have a huge amount of volumes coming on the end of March that once again impacted margins. So, good news is the business remains strong. we had this volatility that impacted margins temporarily. As I mentioned, we continue to protect quality of our customers in order to keep loyalty of them. And that's what we see in the long term generating more value. But unfortunately, we have these impacts on the quality of margin. In terms of the storms, they were more contained on the Mellon Services. In fact, no, not on the PASO division. CACESA, in terms of margin, in terms of top line, we discontinued some legacy business they had from their past in Iberia. Remember that CACESA used to be an Iberian division. and they had some handling services that were non-core and low margin that we discontinued throughout last year. But in March, the Spain Customs Authority was the first in Europe to introduce a new EU regulation that is G4. and that poses a number of problems in the Madrid airport, not only for us, but to every customs broker in the market, with the inability to clear volumes due to mainly constraints on the customs authority side in IT that was unable to respond to the clearance requests. And that has a double impact on margin in revenues and in margin because we have more costs of storage in the airport side due to that. Since then, things are improving as normality with tax authority resumed and we are seeing things going back to normality.

All clear.

Thank you very much. Our next question comes from Phillip Light at CaixaBank. Phillip, please unmute yourself and ask your question. Phillip?

Yes, hello, can you hear me now?

Yeah, we can.

Yes, good morning. Okay, perfect. So, good morning, everyone. I have four questions, if I may. First one is regarding DHL, the joint venture with DHL, because you, as you mentioned, it's expected to be closed this month. Just to confirm what will be the net proceeds, the final net proceeds for CTP, and also if we can already assume that DHL will not take any stake in CACESA. Second question on e-commerce solution, because you mentioned profitability improvement in April, and he was just explaining that. But in terms of numbers, can we assume that the EBIT margin in April is already close to the almost 10% reported in the second quarter of last year? Or the sequential improvement, as you mentioned in the presentation, means that probably in the second quarter, we will still have an EBIT margin for this division below the close to 10% reported last year. Third question, also on e-commerce, and it's actually a clarification because you mentioned new regulation affecting parcel volumes, but just to confirm that this new regulation will be implemented only in June or July, right? So my question is just to understand how this, Regulation that will be implemented only before summer already impacted the volumes in the first quarter. And last, a clarification on Banco CDT and on recent news that apparently you hire a financial advisor to evaluate your options on the bank, just to confirm how is the process and if there is any official process open to divest part or the entire stake that you have in the bank. Thank you.

So, Philip, thank you for your question. Starting on DHLJV, so it will be closing on the next weeks. We still cannot confirm the final number, although we are not expecting material differences from the number we announced. We announced a number that is a non-debt basis and we'll have a cash adjustment according to the accounts of April. We are still finalizing that number, but we are not expecting a material adjustment due to that. Regarding the margin, we see a special improvement. The last quarter margin was close to 10%. We see conversions to that number. Still early days to commit to a specific number, but we see signs of normalization. In terms of the bank, I won't comment news, but I can say that we didn't hire any advisor. at this point, so nothing else to comment on that. On regulation, you are right to ask that clarification, so from 1st of July onwards we will have the de minimis removal, But that is encompassed in what the EU calls the European Union Tax Reform, where there are several changes. Those changes are not material in terms of taxation or any kind of levy charged to the goods like it will be from 1st of July onwards. But there are changes in the amount of information exchanged between the platform, the e-commerce platform and tax authority. And that is increasing materially because one of the aims of the European Union is also to increase transparency. in what arrives and enters the European space. And as such, the number of information collected increased materially, and that's what driven the chokes on the IT systems from customs side. because the number of information increased by almost 100 times per parcel. And those throughput issues posed temporary issues on Casa's business in Spain. That is, as you know, the big chunk of Casa's numbers and profitability.

Just if I made a follow-up on DHL.

On Cassetta, right? I forgot to mention that. Cassetta will not be on the primitive.

Okay, thank you.

We continue available to take questions. Analysts that wish to raise your hands. And we'll give access to the microphone. Analysts dialing from a phone should press star nine to raise your hand and star six to unmute yourselves. As we don't have any other questions at this point, I will turn now the call back to our CEO, Deepa Sheikh, for additional and closing remarks.

Thank you for attending. We have a new management team in place. We are very excited to take on this new challenge. We see encouraging signs of recovery and an encouraging start of this quarter with our April numbers and we remain very committed to deliver our commitments to the market. Thank you all and see you next time.