DFDS Group

The headline of our Q2 report is that the result was lowered by Mediterranean headwinds. On the one hand, the result for most of our network was broadly in line with our . As I said before, the underlying strength of our network is intact. On the other hand, the adaptation of our Mediterranean ferry business and the turnaround of logistics in Turkey and Europe South progressed in Q2, but with less speed than expected. As you know, this led us to update our earnings outlook with the range introduced with a lower midpoint than previously expected. This is, of course, not a satisfactory situation, but I do take comfort from the actions that, as we speak, are being rolled out to speed up the recovery. I also take comfort from the solid progress we made on our logistics boost projects. We'll report more on progress and actions as we go through the slides. Let's start with an overview of our market environment and the Q2 results. If you turn to page three, we just repeat our moving together towards 2030 strategy with the five pillars, the green transition, and the commitment to reaching our goals there. plus the focus on reduction of leverage, reduction of debt, non-core asset review, and working capital initiatives that Karen will talk more about. On page four, the geopolitical market and competitor environment on the U.S., Tariff talks, the disruptions are settling down some. The Ukraine war on certainty unfortunately continues. Germany's commitment to lifting infrastructure defense investments have not yet shown in the market, but will come. All in all, the nearshoring outlook is positive. Companies do move production closer and manufacturing closer to their customer base in Europe, either Eastern Europe clusters, Turkey, North Africa. The markets in Europe still experience very little growth. The Turkish export sees some challenges by the foreign exchange parity, i.e. the Turkish lira is not weakened as much as the inflation would say, although clearly the Turkish government is moving in that direction. We've seen lately some oil spreads. price spread increases that will help us in the latter part of the year where it has been a negative impact in Q2. On the competitive side, the capacity on the Istanbul Trieste corridor we are adjusting to meet demand. We see some increased capacity on some of the North Sea South routes from Flaringen to impacting our Flaringen-Felixstowe route. We continue to see oversupply of continent road warehousing capacity impacting, of course, pricing power. Turning to page five. and a walkthrough of the background for the adjusted outlook. Our Q2 earnings were lowered by Mediterranean headwinds, which means the ferry division result is below expectations due to this. The logistics division result, on the other hand, is ahead of expectations. helped by good traction on the booth projects and by transaction gains. Turkey and Europe South, what we refer to as TES, is below expectations. We'll come back to that. And a very strong first half cash flow driven by targeted initiatives. The focus area has progressed less than expected. The logistic boost projects showing strong progress, as I mentioned. Come back to that. The Mediterranean ferry volumes were in line with expectations, a little down versus last year. The market is growing due to the lower ferry prices, but our pricing initiatives were not effective. On the test turnaround, cost part, right-sizing X part is going as planned or better. Unfortunately, the volume development has disappointed and were weaker than expected, and also the ability to raise prices has been weaker than expected. Stable network and initiative launched to correct the lacking progress on the focus areas So on the Mediterranean, a new price model is launched, and further capacity adjustments will come later in the quarter. We have turned our focus and tests on a profitable volume growth. And for the rest of the network, we continue to see a relatively stable outlook, stable volumes, stable earnings. And then we continue to have a very strong focus on our working capital and on our CapEx spending. With that, please turn to page seven, where Karen will give you more details on the numbers.

Thank you, Torben, and good morning, everyone, on the call. Turning to the numbers that we have published today, overall a slight growth in our revenue driven by the addition of BU tests compared to that same quarter last year. So overall we see an uptick in revenue. If we take them sort of group by group, we also see a positive in the ferry passenger. It's up and this includes, the revenue includes onboard spend, which is a positive for us. On a like-for-like basis, when we adjust for various routes, and this, amongst others, means excluding the Oslo route, which we had included last year, fate is down. However, if we adjust for these things, then we stay on level, more or less. Logistic organic revenue is down, but this is A deliberate choice, you can almost say. It's the result of a shutdown of some unprofitable activities, mainly in the Nordics and a bit in the content. So this is why that is slightly down. And overall, you also see the net effect of the acquisitions, the addition of and the sale of . Turning to page eight, income statement. Overall, it's hitting our messages from the day, right, and revenue up, however, and EBITDA down due to the lower quality of earnings, so 28% down EBITDA for the quarter compared to last year. Depreciations broadly in line. We had last year in that line as well a reversal of impairment on the Oslo route as the route had been sold by that time, so at a price that justified the reversal of the impairment. So there was a one-off of 33 that we show here again. This quarter, we have a one-off of 51 million, which is a result of a sale and leaseback transaction of two Swedish warehouses with a net gain of 51 million in the logistics division. So comparing, there's a net effect of 18 million here compared to the same quarter last year. EBIT at 163, as we discussed, and I'll come back to that from the divisions in a minute. And then overall, we see an uptick in finance costs, which is driven by currency costs. Overall, our finance interest costs are down due to lower interest rates, and this is despite a higher debt compared to the same quarter last year. But we have some where last year we had a gain. We have some losses on currency this quarter. Moving to slide nine, a quick overview of the EBIT of the quarter, also seen in context of the past four years, so obviously not a satisfactory result, as Torben also said. And in the bottom right on this slide, we show you that this is mainly driven by our challenges in FAERI, in the Mediterranean, as Torben also presented. And then we have also a lower result in logistics driven by our new logistic division in Turkey as well as some one-off items. I'll come back to now in the EBIT on the next slide, slide 10, ferry division. We've chosen to show our EBIT variation in this way this time. You will see rest of the network, which is the vast majority of the network. So if you, apart from our BU met, is broadly in line with last year. Of course, there are some variations, but if overall on the sum of the thing, we are broadly in line with last year's performance. We then have the loss in the Mediterranean due to the lower pricing and also some additional costs that we have faced in the Mediterranean, but mainly the pricing, as we have also communicated, volumes are Not that much down at all, but it is the pricing that hits us. And then we have a quite significant net effect of one-off items, which is a combination of some quite a lot of positive one-offs in last year's numbers, and then negative numbers in this quarter's numbers, which gives a net of minus 116 million. Turning to page 11, logistic abit, we have tried to project it the same way. Again, the sum of Nordic, continent, and UK and Ireland business units, if we exclude the impact of the food and mouth disease, which we have then included elsewhere, then that is broadly in line with our performance last year. So trying to show and demonstrate here that we are, for a vast majority of our business, in a good state. Obviously, and as communicated from the beginning of the acquisition of Turkey in Europe South, the former ECOL, we are seeing losses. They are here slightly below our expectations, but not that far from what we were anticipating. And then a net effect of one-off of positive 12. This includes the warehouse sale that I mentioned before, the 51. And then a number of redundancy costs steaming out of both the EU test, but also when we have closed activities and traffics in the Nordic and the continent. So that leaves 33 million. Last page on the financials, our Q2 cash flow and capital. We had, despite our challenges, a relatively strong operating cash flow of 1.1 billion. We stayed on our CAPEX, meaning that our CAPEX were around 300 million. And as you have also seen, we have slightly lowered our 200 million, lowered our forecast of CAPEX for the year. That leaves us with an adjusted free cash flow of half a billion for this quarter and year-to-date 800 million. So that is supporting well our target that we also maintained in our outlook. This has been achieved not only by by the CAPEX discipline I mentioned, but also by a range of working capital initiatives and the factoring program that we have previously communicated. We only added marginally about $150 million of additional factoring in this quarter, but improved both on our payables and receivables to get to this result. As a consequence, our net interest-bearing debt is lowered by $1.1 billion compared to in 2024. But with the reduction in the last 12 months EBITDA performer, including a BU test for the last 12 months, we are now up at 4.2, where we at least know we will decrease by Q4.

So with that, I will turn back to Torben. Thank you, Karen. Page 14, continue to reduce our emissions from our ferry operations 4.1%. And in addition, we have introduced biofuel on our Amsterdam-Newcastle and New Route, Villa Garcia, Rotterdam routes. The way the emission systems work, we can benefit from those biofuel emissions also other places in the country. E-trucks, another seven E-trucks, adding in Belgium and the UK. Safety, very significant improvement in lost time to 5.2 from 7.2 with improvements both in the ferry and logistics side and with reducing fluctuations month by month following the significant initiatives we have in this area. Women in management positions up one percentage point. And on the deck and engine side, we have increased the female ratio from 4 to 10 percent over the last year. Moving to page 16, three focus areas to resolve in 2025, the logistics boost projects, adaptation of the Mediterranean ferry business and the turnaround of Turkey and Europe South, starting on page 17 with the logistics boost projects. We launched eight projects that we talked about to you in 2024. We started the year with, you know, a double-digit monthly loss from these projects. And by June, they collectively turned positive. Five of the eight are now above threshold level, which means they're exceeding 3% EBIT and have left the food program. Three units are still in, but with significant initiatives already happened, so that we expect also in a short timeframe to see those projects leaving the boost extra focus. A lot of initiatives have been carried through. in terms of FTE reductions, traffic reductions, office close downs, and office mergers to achieve . Moving to page 18, we are, as the headlines say, launching a new pricing model effective September 2025. The ferry capacity, as you know, as background, was increased when three row-row ferries was entered on the Istanbul to Est corridor by a competitor from mid-September 24th. We have reduced capacity on our corridor to compensate for this. We have further re-delivery of row-row ferries in Q3. On the volume side, as you can see in the table, our volumes have stayed relatively stable, some downturn, of course. This is not because the competitors have not gained market share, but because the market has grown as fair pricing has gone down. We have tried in the first half to increase prices with less effectiveness than we had hoped, and this has led us to change our pricing model in this market for a more simple one, a more transparent one, and we will see a yield recovery from September 1 with the launch of this model. Turning to page 19. A quick recap of what Turkey and Europe South is. The former ECOL basically entering a high-growth logistics market, driven by Turkey's role as Europe's manufacturing hub, replicating the model we've seen successfully applied in the North Sea, where we have both ferry routes and logistics. and with the combined offerings from Turkey providing, in our mind, an unbeatable combination. But on page 20, little details on how we are then doing. Turkey and Europe's south turnaround slowed by weak volumes, as you can see in the headline. carried through with the right sizing of the operations, reduced fleet, reduced assets, increased subcontracting. We have on the organization side to the right reduced staff by almost 1,000 people. We are closing down three country organizations during this quarter to focus on the business that mostly support the Europe-Turkey business and therefore also our ferry line. Commercially, we have focused on a large portfolio review of customers, introduced price adjustments. The result of this has been that Price adjustments have been hard to achieve to the extent we had hoped due to the competitive situation in the market and also the newly created dynamics from the ferry competition. There's been so much focus by the organization on the right-sizing that maybe we've lost a little bit eye on the commercial side that has been changed over the last couple of months. And we are now ready to fill the system with more volumes. We have already seen some traction over the last couple of months on this. There is an operational challenge in the intermodal. Rail operations in general are less reliable than other modes of transport due to the failure of fraction for many different reasons. As we have reviewed our contract portfolio, we don't have the right mix of risk sharing with our customers and suppliers when something goes wrong on the rail, and we are working also to improve this. It will take some time, but gradually we'll see the improvement from this as well. A number of initiatives ongoing, some with even more success than we had planned for and others with some delay that we have addressed. Moving to page 22 and our revised outlook, which now, of course, reflects the Mediterranean headwinds we've talked about here. We still see a revenue growth of around 5%. The EBIT is now expressed as a range of 800 to a billion rather than around a billion. We made the adjustments per division, as you can see, and we have reduced the CAPEX guidance from around 1.5 billion to 1.3 billion, as Karen alluded to, so that we so that we compensate basically for the missing EBITDA that we potentially face. In terms of free cash flow, this means that we maintain our guidance of one billion of adjusted free cash flow. Key priorities for 2025, organic growth focus, profitable organic growth focus obviously, deliver on the turnaround focus areas. We still have three with the remaining booth projects, of course. Cost focus throughout the organization, cash flow focus with targeted initiatives as Karen touched upon. We continue to be committed to the green transition pathway required to meet EU and IMO requirements. And on the DEI side, full support from the board to continue our initiatives in this area. And as you heard, good traction on several areas throughout the company. With this, We will hand over to the operator to manage the Q&A.