Deutsche Post Ag S/Adr

Hi, thank you, and a warm welcome from my side. Good morning to everyone out there. I guess for the next call around, you deserve somewhat more upward music, upbeat music whilst waiting for the call. Okay, here we are. I take it you have the material in front of you as flagged. We have with us Frank Appel, Group CEO, and Melanie Kreis, Group CFO. And we proceed as usual. Melanie and Frank are going to take you through the presentation. And we're ready for your questions after that. And without further ado, over to you, Melanie.

Thank you, Martin, and good morning and welcome also from my side. So following up to our pre-release from October 7th, we will today show you the details behind our strong Q3 performance. And I'm very pleased to say that we're not only talking about good top-line growth and good EBIT numbers, but also strong cash generation. which further testifies the healthy operating performance and the cash flow focus that we have implemented over the last years across the organization. I'll quickly lead you through the most relevant aspects of the Q3 review now. In light of the still elevated uncertainties around us, Frank will then remind you of the key aspects of our Strategy 2025 and how these are providing us with a powerful compass to steer our company through the current turbulences in the world around us. So, turning to page four, I'll start the Q3 review with an overview of group revenue development. And I think there's quite a lot of good news on that page. Organic growth has accelerated to 9 percent in Q3, up from 4 percent in Q2. In essence, we have seen continued strong growth through the quarter in our e-commerce related activities across the group, i.e. partial Germany, Express, as well as DHL e-commerce solutions. At the same time, B2B activity has recovered from the Q2 low point, which is, for example, visible in the growth acceleration in Express and the good recovery in supply chain revenue and EBIT. The main KPIs on P&P, which you can see on page five, shouldn't come as a surprise anymore. We have seen continued double-digit growth in parcel volumes in Germany. It's somewhat slower than around the Easter peak in Q2, but accelerating again as we approach the Q4 peak season now. So Pastel clearly stays above normal trend, and as you can see on the right side of the slide, this growth remains supported by business customers across all sizes. Mail volumes at the same time also recorded a stronger decline than the long-term trend, although momentum has somewhat improved from Q2, also in dialogue marketing. Last but not least, revenue continues to develop better than volumes, reflecting our yield measures both in parcel and mail. Page six gives you a quick overview of the wage agreement which we reached for P&P in the course of the third quarter. We booked a one-time payment in Q3 EBIT, 42 million, which will be paid out in Q4. Wages will then be raised in two steps, each at the start of the year 21 and 22. And I think the very good news here is that we now have planning stability for P&P wages for more than two years, so no more fundamental tariff negotiations until the beginning of 23. Turning to the DHL divisions, yeah, so I guess when we look at the overall numbers for the third quarter, the express EBIT result is clearly one of the highlights in the third quarter, and page 7 shows you where this is fundamentally coming from. As you can see here, We saw an acceleration in TDI volume growth. The overall number was 15.8%. But I think what is equally important in the third quarter, we saw a much more balanced growth profile across the divisions compared to what we saw in the first half of the year. And this good distribution of growth across regions and trade lands allowed an excellent network utilization And that was ultimately the basis for the very strong EBIT margin of 15.5%, which we recorded in the third quarter. Page 8 gives you a quick deep dive on the product categories, which are driving the strong B2C growth in DL Express. So I guess there are some things which are not surprising. We have a high share of e-commerce in sectors like retail and fashion. We see continued good growth there. I think the interesting thing is that we have now also seen an acceleration of e-commerce growth in those sectors which have historically been less exposed and penetrated by e-commerce. For example, life science and technology, where you see growth rates in the high 40s. I think that is also an encouraging trend going forward. Just as a quick reminder, as you may have seen, we had a B2B e-commerce tutorial for DHL Express in early October. The material and the replay of the tutorial is still available on our IR website, should you be interested in more details. Key numbers for global forwarding freight on page 9 show similar trends compared to what we saw in Q2. Rates and GP per ton in air freight have come down somewhat from the very extreme levels in the second quarter. However, they remain well above previous year and hence still drive absolute GP growth in air freight year over year. As you can see here, GP in air freight was up 8.8%. In ocean freight, we have been rather selective with regard to volumes, and that has been the basis for the good development in GP per TU. Volumes are down, but in combination, as you can see here, GP is also up on the ocean freight side. EBIT performance for the division is overall furthermore supported by tight cost control. And the ongoing process improvements, which then led to a nice improvement in DGFF EBIT. I think that's one of the positive things to point out. All those continuous improvement activities, including the rollout of cargo vials, have continued despite the further complexities due to the COVID restrictions. So that is all going according to plan. Turning to supply chain, as we already discussed with the Q2 numbers, supply chain is the division where the fundamental business model is most directly linked to individual customer activities. That led to a significant decline in revenue in the second quarter when quite a number of our sites were really locked down either due to government regulations or due to lack of business activities in the customer. As you can see on page 10, there has been a significant improvement, but reported revenue has still been down. When you look at the organic revenue development, we were almost back to last year's level. Organic revenue growth was minus 2% compared to 13% in Q2. And you will also see when we talk about the EBIT, if you adjust for the special bonus that was booked in Q3, operating profit in supply chain was also largely back to last year's level. So not yet back to what we would have hoped for the division, but more in line at least with last year's level for supply chain. Last but not least, DHL e-commerce solutions on page 11. Yeah, I think you just see some very nice numbers on this page because our DHL e-commerce solutions portfolio shows the full benefit of the e-commerce acceleration. Overall revenue up 26% in some of the markets, well in excess of that. And as you will have seen already in the preliminary numbers, our youngest division has on that basis delivered sizable positive EBIT, a contribution of 76 million in Q3 2020. based on better network utilization and continued strong cost control. Page 12 shows the summary of divisional Q3 EBIT and the detail of all noteworthy effects. I'm not going to talk through all the details. Just to point out that the final number for the special bonus, which we booked in Q3, was 163 million. So if you take that into consideration, the underlying EBIT improvement was even stronger than the 46% you can see here on the top of the page. And when you look at how the divisions are doing, I mean, the two divisions which are most impacted by the one-time bonus, most people-intensive divisions, P&P and supply chain, both had an impact of more than 50 million. When you take that into consideration, we actually have four divisions with very strong EBIT growth year over year. And as mentioned before, on that basis, supply chain is pretty much on last year's level. Turning to the group P&L on page 13, I guess there's not a lot of explanation needed on that slide anymore as the numbers do speak for themselves. Revenue growth organically 9%, EBIT growth 46%. group margin up from 6.1 to 8.5 percent. Taxes are also up because of higher EBIT and a higher tax rate. But putting all that together, when you look at the consolidated net profit line and earnings per share, a growth above 50 percent, I think that's a very pleasing result for the third quarter of 2020. Our cash flow statement is actually pretty straightforward for Q3 2020, so there haven't been any exceptional movements. You can see how the 435 million euro EBIT increase is translating into a 500 million plus OCF increase. On the CapEx side, last year we had the peak of the 777 investment. On that basis, CapEx is 200 million lower. And that leads then to a very strong free cash flow improvement year over year, up more than $750 million. When you take out the triple sevens, as you can see in the last line, our free cash flow improved by $500 million year over year and ended up at $1.28 billion. I think that is a very encouraging development. And I guess there's hardly any better conclusion on the Q3 numbers than this nice free cash flow performance to conclude my numbers review. And with that, I want to hand over to Frank for some of the strategic considerations.

Frank Langemann- Yeah, thank you, Melanie. Good morning, as well, from my side. So, yes, let's go straight to page 16, where you really can see, you know, a reminder to our strategy. As you know, we have launched the strategy last year's autumn. Of course, since April, we have looked into the strategy again and again, giving the permanently changing environment and the outlook. We believe the strategy is a very good compass and very robust against any scenario. The elements are clear. Our purpose, our vision, and values are right. Excellent, simply deliver is the right focus. And, of course, we will continue to invest in our profitable core strategy. by, of course, allowing for more digitalization. On page 17, you know, I said several times already, starting in last autumn, that the company has never been in better shape than now. And we left 2019 and started in 2020 in a great shape, and then the pandemic hit us. What we definitely have proven is that our purpose, which we have now since 2009, has helped the organization through the crisis. Our team is very proud of keeping the world moving with connecting people, improving lives, and that definitely has helped us to perform well through this particular crisis. You can see that easily in our three bottom lines on page 18. What, of course, is a very early indicator for the future is the employee engagement. We had a record score. We got that just three weeks ago. The score is now 82. The goal was to go to 80 until 2020, so we outperformed that goal. At the same time, we were awarded as the second best workplace in the world from Great Place to Work, which is a proof that we really have done the right stuff through the pandemic and our people are really committed to work for our company. And that is the earliest indicator because in the service industry, People who are highly motivated and more motivated than ever before definitely provide fantastic service. And we see that our indicators are heading in the right direction. We have really helped many customers to keep moving. And, of course, that is finally reflected in our financial numbers as well with our, you know, guidance we took from today and, you know, with the improved free cash flow situation we are facing. Page 19 is also where we are working on, and I know that many of you are becoming more, you know, see that as a more important part now. We are currently working on our ESG strategy 2.0, but we have already taken certain decisions. So, we have launched a carbon-free product since summer in EUREPID, in our freight organization. Now the less than container load, we will offset as well and reduce the carbon footprint as well, but generally one, so you can buy that as well. So these are just a couple of elements of our Go Green strategy. On the social, as you know, we have several Go initiatives with Go Help, Go Teach, and that's the third one on the social where we really educate small and medium-sized customers and companies in emerging countries to get better connected. We believe that this can help tremendously these companies to get or to participate better in the world. And finally, on the governance, of course, you know, we are a company who follows, you know, in a compliant way the laws, but we want to do now even more and want to report more, and that's the reason why we will integrate, you know, the ESG report now into the financial annual report. If you then switch to 20, We have shown that picture to you for many, many quarters now. It shows that we have a very balanced, diversified portfolio, which definitely stabilizes the situation for our company. On the right, you can see as well, in comparison to the launch of our strategy 2020, we have improved all our margins across all the divisions if you compare to 2014. which is nicely to see. The group went up by more than a percentage point, but it's driven by all five divisions, which all have improved over these periods. Of course, eCommerce Solutions, our youngest kid on the block, but also shows now a positive contribution to the company. And of course, that shows that our portfolio is really in good shape and delivers consistently to the success of our company. On page 21, we are just reflecting on what we have seen now in the last months. We saw a a leapfrogging of e-commerce for a couple of years. The share in the total retail sales has increased significantly. We believe that we will see next year a normalization of the growth rate, but we definitely see a fundamental higher level of share of retail sales of a total, you know, e-commerce sales of a total retail sales, so that will continue. And we are, with our portfolio, well equipped to participate in that, as you can see on the next page. We really show for our divisions what they are doing, where they participate. We are enlarging our parcel locker network, which is really a competitive edge we have in Germany. We have now significant volume in our e-commerce solutions countries. Supply chain has already 30,000 people working in the e-commerce fulfillment world, and we win a lot of new business here. And finally, express, you know, the growth is not only driven by B2B, and definitely B2B will come back in the next quarters. We have now a 30% plus share of B2C already in that business without any compromises on the profitability, as you just saw in the third quarter. Digitalization on the next page is also on page 23 is key as well, without a doubt. And we are doing a lot. My DHLI is a new portal for our customers of DGFF. The acceleration of digitalization, many of these things have been explained anyway recently in a virtual tutorial, but supply chain is really getting now to a more automated approach to their warehouses. Data analytics, we learn a lot on a daily basis how valuable data is for us to optimize ourselves and the experience of our customers. For P&P, you can see on the bottom a lot of things which we are just introducing or augmenting but we have already. So all that will definitely help us to grow faster and become more profitable as a company. So that brings me then to the guidance finally on page 25. We reconfirm what we have given you on October 7th, the upgrade in comparison to summer. We upgrade one element of the free cash flow projection. It's now 200 million better than it was in October 7th. that we are not only improving your profitability, but also the cash conversion consistently, and that we are doing already for a couple of quarters. So, I'm, of course, very happy about that. All the other indicators and guidance numbers are staying the same. On page 26, you see the bridge. If you exclude the one-time effects of this year, the announcement of street scooter, we have given the market already in February. You see here 350, because 50 million of that Restructuring costs will be moved to 2021 because we will now produce a couple of more cars, and that has led to a shift of some of the cost to next year. But that is good news and not bad news. So the cars are in good shape, and we can use more material when we originally planned, and that helps us. You can see here, if you exclude then the bonus in some of the other one-offs we had this year, we would end up with $4.725 billion. significant lift over the performance of last year. Finally, the guidance for 2022 is exactly the same as it was. We don't know yet what we will get as a V, U, or L shape. The likelihood after the announcement of Pfizer and BioNTech about the vaccine makes it more likely that we will see now a faster recovery, particularly if a vaccine really is coming. But overall, we are reconfirming all our guidance we have given you in July. So, in summary, on the last page, 28, you know, we are very well positioned to capture the potential of the e-commerce boom. The organization is on high energy at the moment. When I talk to country management and teams in a virtual form, you get tremendous, you know, impressions from the attitude and the mood of the people we have around the world, and that's great because it definitely will help us to continue to grow our business profitable. We also see that the trends, fundamental trends we are talking about since 2015, globalization, e-commerce, sustainability, and digitalization will continue. Digitalization and sustainability definitely will gain more momentum through the crisis now, and as I said, we are working on both quite intensively. And with that, in summary, we had a great quarter. Without a doubt, we are heading to a very good number this year, and we feel with our strategy well prepared for whatever the future will bring. in the next quarters. Thank you for listening and now the floor is yours. Thank you.