CTT - Correios De Portugal, S.A.

simply click on the button to raise your hand and we will give you access to the microphone. If you are dialing from a phone line, press star nine to raise your hand and star six to unmute yourself. I will now turn the call over to Mr. João Bento, CEO.

Good morning, everyone. Welcome to our 2024 results conference call. It's been a great year that we chose to qualify from transformation to growth. So starting with slide number four. Guidance was accomplished with 85 million recurrent debits, but most important than that, with 71 million euros or 38% growth year on year for the PAC, logistics and bank. Logistics, we refer to logistics to the combination of mail and express. It was also a year of very strong cash flow with operating cash flow growing 6.7% to 70 million euros. and a year that enables us to keep a very balanced balance sheet flexibility, a very flexible balance sheet with a 1.6 net debt to EBITDA ratio, which is well below our own financial policy, which is in itself already conservative. So very good news in that sense too. It was a special year given the M&A transactions that we have disclosed at the end on the 18th and 19th of December. I'm referring to the acquisition of CASEZA and the joint venture with EHL, which enable further diversification and will fuel further growth in Iberia towards we want and we expect Iberian leadership. And the final initial comments to share all the remuneration, given that we decided to remain within our stated policy. So with the predictable dividend policy, which accounts for 70 cents to be paid. And we remain with the ongoing 25 million euros share buyback. Moving to slide number five, a more detailed description of these results. While I would highlight 38% growth on recurring debit for the logistics and banks, the business areas that we fully control, which beats our own guidance, given a very strong performance on parcels and the bank, and where we've seen a 17% growth on this logistics plus bank. a package that converts to a 38 growth on EBIT on the backdrop of a strong fourth quarter. We've also observed in this last quarter, for a long time we didn't see this, a public debt placement normalizing to levels that we have seen before. Moving to slide number six. And starting with a bit more detail on the X percent parcels business area, we've seen record volumes in peak season again, sustaining revenue growth throughout the year. And with a 30.9% quarter-on-quarter, that converted to a 33.7% growth on EBIT. which suggests, of course, that we can grow and having the margin also growing. We expect that 2025 will be another record year in line with what we have been achieving. Moving to slide number seven and going into further detail regarding the margin, we've observed significant margin expansion due to operational leverage, a statement that we are confirming consistently. You might observe that looking at the chart on the left, the line With the quarterly growth, you might observe a slight decline in the fourth quarter from 8.7% to 8.1% of the percentage EBIT, which is a common trend for the fourth quarter. Given the intensity of activities and operations, there are always purses of inefficiency in the peak season quarter, but here the decline is clearly better than the one observed in the fourth quarter of last year. Having said so, a huge improvement in the EBIT generated in the quarter. So quarter on quarter, fourth quarter on fourth quarter with a 57% growth. And if you move to the right hand side, the chart on the right, And looking at the yearly improvement, we came from 20 million euros of EBIT in this business area to 36, an 83% improvement. But interestingly enough, the 16 additional business million euros of revenue might be seen as a combination of the additional revenues and the additional costs. So the detailed chart we have on the top right part of the slide illustrates that the 138 additional revenues combined with the additional 88.2 million euros of costs computed the 16 million euros of new average generated or an 11.8% margin. So this drove a yearly overall margin of 5.8% in 2023 to 7.5%. percent in this year, but more importantly is that it somehow demonstrates that we can keep growing while expanding operating margin. So very good news in our view for the parcels business. It was also an year moving to slide number eight, as I said, with these important steps regarding CASES and DHL. And the slide basically attempts to illustrate several of the advantages that we have. So it accelerates our leadership, Iberian leadership ambition, because it expands our offer and strengthens our customer relationships. It diversifies risk, particularly in what regards much higher exposure to B2B, given the contributions of DHL and the wider presence in the value chain, because it expands, I would say hugely expands our presence in the customs clearance part of the value chain, which is very important, especially for out of Europe e-commerce, which is, as we're going to see in the next slide, a very important part of e-commerce expansion. It also effectively attacks our, allow us to attack international segment. given that we have not only an international presence with CASEZA but also the contribution of the DHL network for both inbound to Iberia and outbound from Iberia and finally enhances future opportunities given the incorporation of these new skills. Slide number nine, it's a very interesting slide, given that it illustrates the relevance of e-commerce, cross-border e-commerce coming to Europe from Asia. 19% of the global e-commerce is cross-border from Asia to Europe. But more interesting than that is that it also illustrates that the intra-European cross-border e-commerce is of the same dimension, 17%. according to the most recent data. And this is very interesting in the sense that it it shows the complementarity of the deals that we have announced at year end. On the one hand, given the Asia to Europe, our strong foothold on cross-border becomes reinforced by the acquisition of Casesa. And of course, given the European cross-border e-commerce, DHL, which is simply the largest operator in Europe, also differentiates our presence, given their ability to bring new flows to Iberia, given the quality and price that we allow them to have. And also it enables and promotes outbound exports of e-commerce from Iberia to Europe, given their ability to place them at very high efficiency rates. Moving to slide number 10, a quick word on our activities regarding strengthening our portfolio in e-commerce logistics. It was a very important year in terms of standardizing our Averian offer in all sorts of aspects, operationally, commercially, pricing, user experience, and so on. It was also a near important for out-of-home delivery since that we started deploying higher than 20,000 BUDOs. for our clients in Iberia, of which in Portugal already includes more than 1,000 lockers. And we are now expanding and started last year in 2014, expanding to Spain also the deployment of lockers. And of course, because of the organic growth that I've referred to. multiple times. For 2025, the priorities remain somehow the same or associated with this, given that we will keep expanding the PUDUs and especially the lockers network in Spain. We, of course, have a huge commitment to execute synergies that these operations, M&A acquisitions, have allow us to grow, it will be a very important year to keep growing organically, as we've done so significantly in recent years, and also a year where we are aiming at improving profitability in parcels, as we have been doing in a consistent way in the last years. And with this, we would move to the mail business areas, and I will ask João Souza to join us and guide us through the mail and retail.

Thank you, João. Good morning, everyone. As you can see in slide 11, we saw good news after the third quarter where we felt the impact of some clients' backlog, mainly in the government. We saw a recovery in the fourth quarter, and this combined with more business days had a positive impact on the volumes of Key4. We also saw an increase in the average value per item all the year in 24, considering the price increase you have done and also the product mix during this year. And as you already know, this year we already implemented in February the price increase of 6.9% in mail. On slide 12, you saw the results of these. So we had a solid revenue performance in address mail in the fourth quarter. When you saw the fourth quarter comparing with the last year, we've seen increasing on 4.1%, achieving 92.8 million euros. And we can say that was the second best quarter in 2024. And if you take the elections on the first quarter, you even can say that the first quarter was the best quarter of the year. And with these, we see in the last semester of 24, revenue per business day growing, grow during the second half. On slide 13, We see strong revenues in Q4 in mail and others with a good performance also in business solutions and payments that helps also the performance in mail. Constantly we achieve a night margin of 4.4%. We can say that it was the highest margin with size 2022. through increasing traffic, this comes from the increasing of traffic we see, the better cost-cutting measures, and also, like João Bento was saying before, an improvement of public debt we saw in this last quarter of 2024. On slide 14, We maintain our focus on cost cutting strategic to protect the margin in mail, because as you can see, even the cost reduction we have done in 24 only offset the impact of inflation. So we still maintain this focus on cost cutting and always maintain the quality in mail. But we are doing a lot of pings in operations to have discussed scouting but saying this with this impact of the inflection we saw the margin decline in 24 for 8.2 million euros in the year. On slide 15, we have the path in 24 and also we're going to continue to do it in 25 to significant improvements in quality of services, but also new services to our customers. We have, as you know, after a few years of discussion about the quality indicators, we have a change of the quality indicators. And also we design new product that we call traceability mail, that we have new services and bring the elevated service to our customers in mail. We still maintain a reorganization of the network that improve quality. At the same time, we felt a cost cutting effect. in this area of business and for 25 we're still promoting digital alternatives because as you know the the main computer in mail is digital and what we have is creating digital offers to our customers and we're going to continue in 25 to doing additional operational efficiencies like i told you before for have this focus on cost cutting and also retention in our in our customers On slide 16, now coming for financial services and retail, in Q4, we saw a strong recovery in the public placement debt driven by the adjust of the cap. As you remember, during the calls we had in 24, we talked and we said that the cap was a problem to sell more public debt. After the government changed these in October, we saw a strong recovery. However, with the challenge we had in the three first quarters of 2024, we had designed a lot of advertising campaigns and also implementing the Foro Digital that was bringing the subscription of public debt to digital, and this allowed us to become more strong. And when we saw the change of the cap, we saw a recovery of public debt placement. but also now the CBD is more strong to sell these. Why I say this? We saw a lot of new foristas, if I can say it in this way, go for digital. So I think we opened the public debt for new segments and we see a very strong trend, a positive trend for digital. And as you saw also in the numbers of January, we see a positive outlook for 2025. in public placements. On the slide 17, as you know, we also are implementing a new strategy for our retail network, launching new services for citizens and also for SMEs that enable us to have different services in our stores, in our retail network, that also bring us new revenue streams and predicted revenue streams We launched insurance that is running pretty well, but also these healthcare plans, as you can see, with an increasing of 740% against 2023. And we have also a very, very positive outlook for 2025, because we see the market like this kind of services and well connected to what is the retail network of CPP. For these, On the slide 18, we are taking a lot of actions in our retail network. We are investing and expanding new layout services. We already launched these new stores in Cascais, in Maia, in the last quarter of 2024, and we're going to still maintain these in 2025. This is a co-investment also with the Bank of CDP. because this new layout helps to sell more services for HTTP also in the bank. We are investing and we are investing in 24 in a new customer data platform. So know better the customers help us to retain and sell better and more in our retail network. And we are training ourselves persons in the stores to sell these new services to suggest better service to our customers. On this, we are also working on Omnichannel. And like I told you before, this for digital was a good example what we have done to have also our physical retail, but also digital working together and continue to expand the services portfolio for this network. Saying this, now I pass to Yves Pacheque, my colleague, to talk about the bank.