DFDS Group

Ladies and gentlemen, welcome to the DFDS Q3 Report 2025 conference call. I am Healy, 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 0. 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 very much. Good morning and welcome to DFDS's Q3 2025 conference call. I am, as usual, joined here by Karen Bosen, our CFO, and Søren Brønhold, our Head of Investor Relations. It has been an eventful morning. On this call, we will focus on the Q3 report, the cost reduction program, and the assumptions behind the outlook change for 2025 that mainly relate to uncertainty about Q4. With regard to the board's initiation of a search process to find my successor, we'll try to not make that a focus in today's call. I'm of course sad to be leaving DFDS. I have truly enjoyed every minute here. Let me emphasize also that I am still at DFDS. I'm staying until a successor is in place. Fully committed obviously to my responsibilities and dedicated to support DFDS throughout the CEO changeover and also of course the initiation of our cost reduction program. What's important is that we are staying the transition course. We made further progress on the logistics booth projects in Q3. Our new Mediterranean price model raised rates in September. And our third focus areas, the Turkey and Europe's south turnaround, progressed, but with less pace than expected, also in Q3. But let's start with putting it all into perspective on slide three. There you see our pathway to a higher level of financial performance. We launched as part of our first outlook for the year three focus areas that we needed to resolve in 2025. our logistics booth projects 810 areas with challenges in our logistics network adapting our mediterranean ferry network to a new competitive situation and then the turnaround of our newly acquired turkey and and europe south business we are now With the challenges we've had in primarily the two latter focus areas, adding a cost reduction program to the effort, it will have a 300 million Danish kroner impact in 2026. It will unfortunately mean a reduction of around 400 mainly office positions. assisted with a number of specific cost reductions that we are carrying through. To implement the program, we foresee one-off costs of around $100 million during Q4. Moving to page four, just a repetition of our overall strategy of moving together towards 2030. which is about, as you know, unlocking network value. A lot of that is about organic growth. Green transition is still there. During this quarter, we've signed off for the SBTI targets and now have 24 months to get a pathway approved, a pathway that is not too dissimilar to what we already have planned. And then, of course, a cash flow focus to bring our leverage down through debt reduction, non-core asset review, and specific net working capital initiatives. Moving to page five, a little talk about the... macro backdrop and market situation. Geopolitically, you are as informed about this as us, but still some turbulence. U.S.-China seems to be a little more support for Ukraine and Europe in the war from weights by Russia. And the German spending, we are not seeing the impact yet, this 1,000 billion euro program, but we expect that to come late next year. So markets growth still very slow, and we expect that to continue in Q4. Luckily, the meat export ban following the and mouth disease have eased and we are almost back to normal in terms of volumes. We see some oil spread increasing, also quite a volatile market as I'm sure you all have noticed. Competition-wise, the Turkey-Europe market is volatile. We've seen intensified competition during Q3 on the Italian corridor, and we've seen attempts that now seem to succeed to start a route by a different competitive group from Turkey to France and Spain that will presumably impact us in Q4. On the continent road market, where we've talked a lot about over supply, we see a move towards normalization of the balance between supply and demand, also helping in our general boost and turnaround of logistics performance in Europe. We have entered a space charter agreement with TT Line, which gives us better balance between supply and demand in that market, but also access to new markets and higher frequencies for our customers. We've seen some additional freight ferry capacity in the North Sea South, which obviously can have some spillover effects on our routes, primarily from Rotterdam to Felixstowe, which is also part of the Q4 uncertainty. Moving to page six, staying the transition course, some September positives. The Q3 results, are on level in the ferry division. The logistics division excluding tests, so the Turkey and Europe South new network performed well above 24 in line with what we have previously communicated. The test business was below expectation. Primarily, an extended seasonal dip affecting August caused this delay, but also some continued issues with rail performance and problems in accessing enough visas for our drivers. In terms of cash flow, Karen will come back to that. We have a negative adjusted cash flow for the quarter, but this is driven by the high-season passenger reversal of prepayments and then a yearly ETS payment where we, during the year, receive the money from our customers. Three focus areas, logistics boost projects on track, further improvements coming in Q4. The new pricing model in the Mediterranean has been launched, and we see increasing rates per meter. The test turnaround continued progress, but not at the targeted pace. So a lower Q4 outlook due to the uncertainties of primarily the two of the three focus areas. Rest of network looks stable. we have implemented, will implement various asset sales in Q4 to strengthen the cash flow and then as mentioned we launched a cost reduction program that will not have a positive effect in Q4 but will accelerate the transition to improve performance for 2026. With that I will hand over to Karen, so please turn to page 8.

Thank you, Torben, and good morning, everyone on the call. Turning to our revenue first, we continue to see growth in our revenue, again, driven by inorganic addition, so the addition of our BU tests and organic growth was slightly negative when you clean out for the acquisition. Slightly positive story on our passenger revenue from the existing business channel and Baltic where we are slightly up. However, overall a negative impact on the revenue by the loss of the Tarifa-Tangeril route and the Oslo-Copenhagen route compared to last year. Great ferry. obviously down because of the situation in the BUMED and the competition there. However, some positive impacts from our new route, the Jersey route, the Spain route, and the Egypt route. Overall logistic on par, and that overall takes us to the revenue of the quarter of 8.3 billion. Turning to page 9, the income statement, EBITDA down following the challenges we face, 7%. Depreciation up, which is all activity driven really by adding the U-test and other new activities, taking us to the EBIT of the $532 million for the quarter. Finance costs slightly up driven by higher debt and some leasing interest payments that are higher. That is profit before tax then $331 and then the profit after tax of $304 million. Turning to page 10, just putting the Q3 a bit in context with previous years. Obviously not where we want to be, and in line with our year this year, we are down compared to previous years. This is all coming from, in this instance here, from with the situation that we have mainly in the BU Med, but also some impact from those changes. That is exemplified on page 11, if we turn to that, where we have the impact from Safari EBIT. Again, overall, the existing business is performing at level with last year, and we find that important to mark. We then have some route changes, which is really the loss of the Oslo Copenhagen and the Tarifa Tangerville, both routes that have their strongest season in Q3, so therefore the impact is strongest in this quarter. And then the Mediterranean challenges with the competitive situation down there. Those are the two things really impacting the fair result for the quarter. And then turning to page 12, we have a similar clarification on the logistics performance. Actually, we see an uptick for both Nordic and continent, so a 48 million stronger position for those two entities compared to last year. Again, I find that worth noting. And then UK and Ireland at level, then with the loss-making EU test that we have acquired, that drags it down again to the result for the logistic division for the quarter. Last slide on the financials, turning to page 13, the cash flow. An operating cash flow of just shy of 600 million, with a capex close to 400 million, Interest payments takes over all our adjusted free cash flow down to just below zero. However, our year to date is at $740 million. The $600 million of operating cash flow is, as Torben mentioned, impacted by some unfavorable move in our working capital. This was expected because it's seasonal in the way that the ETS clearance payments for 2024 all falls in August 2025, which means that all the prepayments we have received for ETS charges from our customers or passengers throughout the year, then are due payable in August 2025. And in addition, we then have a classic seasonal for our passenger business where we have prepayments for Q3 that then gets reversed by the end of the quarter. Turning to our leverage situation, we have reduced the net interest-bearing debt down to 15.9 million, despite taking on more debt, so that's an improvement within the year of more than 1.3 billion. Our leverage ratio with one decimal then ends at 4.3, driven by the lower EBITDA, and we are seeing that reducing slightly towards the end of the quarter. With that, I will hand back to Torben.