DFDS Group

Ladies and gentlemen, welcome to the DFDS Q1 Report 2025 conference call. I am Hili, the chorus 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 1 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 Torben Carlsen, CEO. Please go ahead.

Thank you, and good morning, and welcome to DFDS's Q1 2025 conference call. I am joined here, as usual, by Karen Bosen, our CFO, and Søren Bonnhold, our head of IRR. Our Q1 report headline is that our 2025 transition is progressing. As you may recall, we labeled 2025 a transitional year in our latest annual report. So 2025 is a year where we lay the groundwork for improving financial performance following the events of 2024. I'm pleased to report that the earnings trend improved towards the end of the quarter following execution of multiple turnaround actions during the quarter. There is still a lot of work to be done and further actions are being executed as we speak. When we report Q2 in August, the improving earnings trends should become more visible. In a moment, I'll give you my view of the current geopolitical events and macro trends and how they can impact DFJS. With our exposure to high-growth net-shoring markets, we believe DFTS is well positioned for what seems to be a de-globalization trend. Before we start, let me highlight our focus on financial solidity. Karen will take you through the details, but we do expect to end the year with a financial leverage ratio that is below the current level. Let's now take a closer look at the evolving market changes and at the Q1 results. If you turn to page three, a reminder of our moving together towards 2030 ambitions, unlocking network value, delivering on our green transition, and a strong cash flow focus with a long-term leverage target of two to three times. Page four. Geopolitical market and competitor environment. Geopolitically, the U.S. trade and tariff policy changes, of course, make intra-European trade flow impact uncertain. There is a recession risk. But as I mentioned in the introduction, long term, this should be positive for nearshoring, positively positive. favoring DFDS. Unfortunately, the war in Ukraine, the duration remains uncertain. We've also seen in Turkey some political risk increase. But lately, of course, we saw that President Trump reached out to President Erdogan to see if they jointly could solve the Ukraine situation. On the market side, as I mentioned, the geopolitical events could cause European recession. We haven't seen it yet. We don't see it in our volume numbers. The continent road market remains very competitive. The food and mouth disease that has stopped meat export to UK has now resumed, but it at least initially very low volumes. The oil spread between MGO and HFO is down, putting some pressure on our earnings. On the competitive side, especially Istanbul Trieste, we are dealing with the competitor entry in 2024, and we also see some increase of freight capacity between Holland and UK, lately. Moving to page 5, as I mentioned also in the introduction, the transition is progressing as our actions start to deliver. If we look at Q1, Then the ferry division, excluding BU-Med, delivered above 2024. It was helped by some one-off events, but still the Mediterranean result was reduced significantly, as Karen will come back to. The new BU in logistics was adding a lot of cost. from the turnaround impacting Q1. The remaining logistics division was below expectations. This is now primarily driven by some situations in the BU continent. We are progressing on our three focus areas. We have adopted the Mediterranean capacity to the new competitive situation. And we have started to implement price increases after the significant price reductions we saw during Q4. These price increases have been well adapted throughout the Mediterranean system. The test turnaround, so the former ECOL We maintain the break-even target towards the end of the year, although the turnaround has proven slightly larger in scope than originally seen. Logistics boost projects are progressing. We are deploying structural solutions, and in other places, commercial and cost initiatives are making the trick. So performance recovery cash flow focus is what we are focused on in DFDS. And we see the transition year progressing according to plan. The three focus areas are delivering as expected. Despite this, Q2 and Q3 will also be below 2024. and only in 2025 will you start seeing results significantly above 2024. We have a working capital program in place. We have strong CapEx focus, and we are going to reduce leverage as we get into the second half of the year. I will hand over to Karen on page 73.

Thank you, Torben, and good morning, everyone. First, revenue, a positive story of 8% growth in Q1. This is all driven by the acquisition of the former , now , Turkey and Europe South. If we eliminate for the acquisition, the growth is slightly negative, and this is mainly driven by operations that has some revenue decline coming from the Mediterranean situation. and some impact of the Easter, which in 2024 were included in Q1 and in this year is in Q2. On logistics, we still see organic growth of 2%, and then that is driven by the UK and Ireland, which is positive for us. But again, overall growth driven by the acquisition. Turning to the next slide, slide number eight, our income statement for the quarter. You will see another income, which is a compensation from insurance from a total construction loss of one freight ferry, the Finlandia ferry that grounded back in late 2024. And that income obviously helps and supports our EBITDA in this quarter. Still, we see a lower EBITDA driven by the troubled areas that we have talked about before and that we'll come back to later in this presentation. Net effect of depreciation with the addition of the acquisition of ECOL and the sale of the Copenhagen-Oslo route makes the development more or less flat. And then we have an offsetting write-off of the Finlandia ferry of $83 million, taking the overall net EBIT impact of this particular situation with Finlandia ferry to $33 million that is included in the EBIT below. Financing costs reduced $10 million to $185 million, and this is despite the increase the increased net interest-bearing debt of approximately $1.5 billion interest-bearing debt, and this is due to lower interest rates of just above one percentage point compared to the same quarter last year. Then turning to page 9, we visualize here our EBIT this quarter as opposed to the following for the previous four years. And obviously, this highlights that this is not a satisfactory result, as we have also clearly communicated. However, it was expected. We see the reductions mainly driven by the two divisions almost half-half. And in the following page, I will go into more details about what drives those reductions. Turning to page 10. If we look at ferry division, overall, if we disregard the Mediterranean, which I will come back to, we have a reduction overall of around $48 million driven by the rest of the network. This is a combination of higher bunker cost and the easter timing difference that I referred to before, and then overall also some performances above that sort of offset these. Overall, the impact for the rest of the network is minus 48 million. If we then look at Mediterranean, we see a significant reduction as opposed to last year. This is expected. We saw it in Q4 2024 as well. However, this is not an average over the three months. We see an improvement coming in March already compared to the impact in January and February. and we are on an improving trend and therefore are beginning to see it reintroduced. Price increases in the beginning of the year, a new price increase in 1st of March down there, following a period where competition had been a lot on prices and we had had to lower our prices to keep the volumes. We are now in a situation where we start increasing our prices and therefore we expect this to be the bottom out of this situation. Several one-off items included here. I mentioned the 33 million from the total construction loss. And then also, we had the Ulster-Copenhagen route in as a negative in Q124. And as we no longer are the owners of that, that affects our comparison of variance positively. So that's our ferry. If we then turn to logistics, try to display on page 11. We try to display it the same way with an impact if we isolate the newly acquired business of 53 million negative coming from our existing or previous business units also with Nordic continent and UK island. UK island, solid performance on track. The main impact we see is coming from from the continent where we were impacted by the food and mouse disease in Germany that prevented meat export throughout Q1 from the continent into the UK. And there were also some lower flows on the automotive side in our, again, the Belgian area. Overall, then, we're coming to the loss that we see from our newly acquired business unit. This is in line with expectations, slightly lower. but we knew it was going to be a tough quarter. Turnaround is ongoing, and Torben will come back to that further on. The one-off item is reflecting the fact that we had a positive income in Q124 of provision releases that we no longer have, obviously, in this quarter, so I wanted to show that transparently. Then turning to my last page, page 12, our cash flow and capital. I'll take you a little bit through that. We had a net improvement of working capital of about 400 million, which helps obviously our operating cash flow quite well. CapEx under control and about just below 300 million offset by the income from the fairies' construction loss, which takes us to a free cash flow of just about 500 million for the quarter. and an adjusted free cash flow of around $250 million. The net interest-bearing debt increased compared to the same quarter last year of about $500 million, driven mainly by the equal acquisition facility that we entered into in November. But if we look at it comparing to Q420, our net interest-bearing debt actually reduced $400 million, mainly driven by the working capital improvements. The leverage ratio is slightly up compared to previous quarter and, of course, significantly up compared to same quarter last year. And this is driven by the lower EBITDA now with the loss-making activities included for this quarter and the increase in net interest-bearing debt if you compare to same quarter last year. With that, I will hand back to Torben.