Deutsche Post Ag S/Adr

Thank you, and good morning to everyone out there. After yesterday's release, we stay on the fast track and have our call a bit earlier in the day than usual. So, nevertheless, thank you very much for joining. I take it you have the material we are going to talk about in front of you. And with that, I'd like to hand over right away over to you, Frank.

Yeah, thank you, Martin, and welcome as well from Whiteside. Good morning. So we want to structure the presentation in four pieces. First, to show how we have delivered our strategy 2020. Melanie will then talk about the key financials, then cash flow returns, and I will finally give you an outlook. So on page three of the deck, you can see that we actually have delivered along all dimensions. Here you see the EBIT development over the years. Yes, we had some dips on the road, but we did a finally fully loaded 4.8 and even adjusted 5.4. We had very high employee engagement, the highest ever we have seen as well increase. in our perception of the customers in a nice way and that's the reason why we today suggest an increase of the dividend to 135 and we announced yesterday a share buyback in addition. On page 4 you can see the development of our dividend over the years. Our finance policy we have not in place for quite some time. We followed strictly all these years and you can see here that we, you know, due to the underlying performance, we are able to increase the dividend by 20 euro cents, which is a significant step up without a doubt. And since we have delivered a lot of free cash flow, we can, as I already said, you know, also do a share buyback. If I look a little bit back on page five, you'll remember definitely our capital markets day with the announcement of Australia 2020 in 2014, our half our time report and of course also the launch of the new strategy 2025, which is a continuation of what we have created for Australia 2015 and 2020. If you look on to page 6, and that is a reflection of what we originally announced in 2014. I know that we have increased our guidance in UCROS to 5 billion, but the original guidance in 2014 based on 2013, a CAGR of 8% growth until 2020 for the group, 10% growth annually for DHL, and 3% growth for P&P. Of course, it makes me proud that we have delivered on all three dimensions over such a long time period, six years outlook, and we were spot on with all our numbers and also in the right mix. So that shows the strength of our portfolio. We were really able to deliver along these lines. We also, on the next page, have improved the mix of our portfolio from the revenue perspective. You can see here You know, the business unit, which definitely is the global leader in the express industry, has grown the most. But also the DGFF business has continued to grow. Supply chain is slightly down, but there are some portfolio measures. As you know, Williams Lee was sold. The China business was sold. You know, the accounting for NHS has changed. We have now a new member of the family, which almost already 5 billion revenue in e-commerce solutions, which we didn't have in 2013. And the mix in P&P Germany has, you know, much more beneficial now with significant bigger chunk, you know, from the revenue for parcels instead of mail. So I think this is a very good reflection of improved mix we have as a company, despite all divisions have contributed to that. On the next page, you see also the development of our margins. We have shown that now for a couple of quarters. You can see nicely that, of course, our start performer is expressed, but the group is also up. P&P is up. DGF is up after, you know, we had some challenges. And even supply chain, despite that they have significant headwinds from the shutdown of many of our customer operations, we are still ahead of what we have started with. In e-commerce, it's our rising star without a doubt. As we guided already quite some time ago, we are now on the journey to deliver 5% margin. So overall, over that long period, all divisions have improved and they all have contributed. That has enabled us as well to have significant investments on the next page, page 9, significant investments in our capex to expand our footprint, but we also paid a significant amount of the operating cash flow and free cash flow as a dividend. Despite all that, we still have a significant excess liquidity, which enables us, as I already said, for another share buyback. Over that period from January 2014 to end of 2020, I think we have generated with 91% a very good total return to shareholder. I think that's a sign of the tremendous strength of our portfolio. On the next page you see the underlying trends which we have already explained in 2014 and we re-endorsed them or said they are still valid in 2019, last year for 2025. So let me go through some of them. I think that's interesting. Our concept, which we have since 2009, our three bottom lines, have worked extremely well also last year. Our employee engagement is on record level. We have added another 20,000 people to our workforce. Provider of choice, we have improved our NPS score again and again, and last year we had record numbers, as I shall show later, you have seen We have really helped our customers to perform well, you know, and kept their supply chain stable. On the investment of choice I already talked about, and good news as well on the sustainability development, we are now at 37% improvement in efficiency, carbon efficiency based on 2007, which is two percentage points better and seven percentage points better than we originally fought for 2020, which was 30%. So we have delivered along all three bottom lines. We will announce on the 22nd of March our new ESG strategy or the next step of our roadmap. So please join us there. Then you will learn more about what we want to do along the ESG dimensions. On the next page, on page 12, you see the development where we started in 2013. We are now 90,000 people more. You know, employee engagement is 10 percentage points up. That's the highest ever, and it's definitely in line with what our target has been with 80. So we improved here well. On page 13, you can see the net promoter score. That means the attractor means the detractors, or promoter means the detractors, and you can see here we are in very good shape. All divisions have continuously improved, and also 2020 over 19 was not an exception. So we are in good shape here, too. If you think then about e-commerce, you can see here the growth we have seen in 2020, which is stronger than what we have seen over the whole period. But even the whole period, the 9% in Germany and the 8% expressed is a tremendous growth. Not surprisingly, e-commerce is still on the rise, and we are enabled of that and have, of course, benefited through tremendous growth as well. We have invested on page 15 significantly into that. The sorting capacity in Germany is up, in Express is up. The workforce and supply chain gets more and more tuned to e-commerce. We have launched our e-commerce solutions division which is growing now the fastest in our portfolio and the share of B2C in Express has increased from 10 to 45% in 2020. E-commerce definitely has been an enabler for our growth, but we also have been an enabler for the e-commerce or the e-tailers. Globalization on page 16 is continuing. We use vaccines as a good example of how well globalization creates solutions without the interaction of pharmaceutical companies around the world with usage of their capabilities in different markets and our logistics capabilities You know, the speed of the vaccine distribution has not been possible. It shows the power of globalization. Good news is that also B2B on page 17 is coming back. You will see the growth rates we have experienced from the B2B businesses. Q4 was already close to, you know, to the zero line in some parts, and above that, even for others, we have seen a continuation of that healthy trend for B2B in the start of the year. Digitalization. You know, it's of course important as well. We have talked about that several times. I don't have to go through the details of that, but we have a very comprehensive agenda supported by some centers of excellence on group level. We have, you know, made tremendous progress in our IT infrastructure, which of course enables digitalization. But you can see here some examples. You know, we have now the first, you know, full-fledged, you know, self-service operation in P&P. We have a digital postage tracking. We have in supply chain automated warehouses. In my year, July, the new tracking and booking tool and code tool for DJF is getting traction and also Express has done a lot to get more intimate, closer to our customers. So in summary, before I hand over to Melanie, I think the company is in a much better position than ever, much stronger. I think we have learned in the last 10 years a lot of things and have made our company much stronger. It's different now. Our purpose became very visible with connecting people and improving lives last year, which creates tremendous pride in our organization. We have a better mix, higher returns, better cash flow, and I also have to say we probably have on the two layers the best team ever. So that will help us to continue with our journey. We have a very clear agenda, and I have no doubt that the guidance we show you later is definitely achievable based on our strong performance we have demonstrated the last year and also with a good start we had into the year. With that, I hand over to Melanie for some key financials. Thank you for listening.

Yeah, thank you very much, Frank, and good morning, everybody, also from my side. Thank you for joining us so early. Let's now take a look at our financial results in more detail, and I will start with the 2020 revenue summary on page 21. Actually, I don't think there's too much additional color needed anymore. 2020 has obviously been a year of strong e-commerce acceleration, visible particularly in Express, in Parcel, and in e-commerce. But it was also a year of volumes. And I think that is the most important assumption going forward, which will apply to each division and which is the basis for our 21-23 outlook as given today. We expect B2C to continue to grow, although with growth rates normalizing in the course of the year. So slower growth over time, but growth and from a higher basis. Also, we expect B2B activity to continue to recover. Like nobody else, we have no crystal ball either to forecast how each of these two trends will exactly unfold. But what helps is that we expect them to be strongly related, as both depend on exactly the same external triggers. So if there is a faster way out of the lockdown, we will see a faster reduction in the growth in e-commerce, but should also see a stronger and faster acceleration in B2B and vice versa. So we don't know the timing, but we are pretty confident that there will be a relation between the two trends, and that should be helpful for stabilizing our results going forward. So the second comment I want to make is that, obviously, with all totally justified excitement around e-commerce, we should also not forget that we have sizable B2B exposure, mostly in Express, in global forwarding, and in supply chain, where we have seen volumes decline in 2020. and their volumes have now started to recover, which is then, of course, also a growth opportunity into 2021 and beyond. If you look back at 2020 and at the organic revenue growth in group revenue, taking out the significant currency headwind, we were up 8.5% for the full year, and then you look at the fourth quarter, we were up 18%, which reflects the very strong peak season driven by e-commerce, but also the fact that B2B is no more dragging down growth. So we clearly saw, and Frank showed that in one of his previous slides, clearly saw that B2B volume started to come back in the fourth quarter. And that is also the dynamic with which we have entered 2021. We had a very strong start into the year, and we indeed plan with EBIT growth in all divisions for the full year 2021. That takes me to the EBIT development on page 22, which very much reflects the same logic I have just talked about. Express is, of course, standing out, reaching a new record margin of 14.4%. I will discuss each division in a bit more detail in a second, but overall, same key message, strong growth in B2C and recovery towards year-end in B2B. As you will see later in the underlying EBIT bridge, which we have also shown you a couple of times before, the reported full-year 17% EBIT growth was actually 34% when you adjust for the 2019 and 2020 one-off factors. Now, I will start the review of the divisional performance with the strongest contributor, the group EBIT, DHL Express on page 23. The overall full year volume number actually hides a bit the extent of B2C growth, as that B2C growth was offset by declines in B2P. In Q4, you see the full strength of the B2C peak season, with B2V volumes also back into growth territory. So I could say a lot about the tremendous express performance in 2020. I think when you put it all together from a financial perspective, The basis for this performance was a combination of volume growth and operating leverage, a very efficient and agile network management, as well as our well-established yield mechanisms. And that combination was what drove us towards these record results. As mentioned before, for B2C in general, we expect growth to normalize at some point in time over the course of 21. But we certainly expect Express to contribute continuous year-over-year growth in EBIT in 21 and beyond. Because, again, don't overlook the B2B recovery, which should also positively benefit the Express division. Let's continue the 2020 review with more B2C growth and our e-com solutions division on page 24. Obviously, in that division, we first of all had an operational challenge, and that was to cope with this very strong volume growth in the domestic and in the international networks. And supported by Ken's streamlining measures also on the cost side, the division was able to translate that very strong volume growth into the first profit contribution in 2020. That was something we had been aiming for since we started e-commerce solutions as a division. But you may recall that at that point in time, the aspiration was to take us to 50 to 100 million EBIT contribution. Obviously, the team has done much better than that. But looking forward here again, we don't think that's the end of the story. We expect B2C growth rates to slow down eventually, but we have now reached a higher basis. And on that basis, we also expect more EBIT growth and further margin improvement from our youngest division into 21 and beyond. Turning to P&P, which is a bit kind of like the transition division, we have a B2C positive growth component here in parcel, but we also have a more B2B associated mail business, which obviously had a challenging year in 2020. Obviously, overall, we have seen a significant acceleration in the parcel to mail volume shift in 2020. Here as well, tremendous performance from the team to adapt the networks and make these levels of e-commerce growth possible. I think what really paid off here was that Tobias had, over the last two years, systematically prepared for being able to handle small parcel volumes also in the mail network. If he hadn't done this pre-work, we would have drowned in volume. But given the pre-work, we were able to operationally cope with the volume growth, and that was, like in Express, complemented with network efficiency, cost focus, and also very strong parcel yield management. These were the key ingredients to see P&P now fully recovered from the 2018 challenges. Going forward, the name of the game obviously remains to manage the mix shift successfully on the operations side and financially profitably, and to balance the parcel growth with the ongoing mail decline based on what we have seen from the team in 2020, I'm more confident than ever that this is actually really doable also in the long term. Turning now to our more B2B-oriented businesses, starting this global forwarding on page 26. So obviously, the market circumstances in air and ocean and road trade have been extraordinary. We saw very tight capacity conditions, first in air freight, then also in ocean freight. That was, in terms of volume development, a challenging year. In financial terms, given the capacity constraints, we saw very high GP per unit, which drove GP up despite the volume decline. And that, together with TIM's efficiency focus, has allowed us to drive EBIT and margin up in 2020. We now see volumes starting to recover. They were still in decline in the fourth quarter, but the decline has obviously come down. And we are now entering a phase where we already saw in 2020 the impact of the pandemic. So we do think that in terms of volume, things are moving in the right direction. Obviously the market is still quite distorted and we expect market imbalances and rates to normalize only over time, i.e. not extremely quickly. So if rates gradually down, we expect volume to come back and on that basis, GCFF should also contribute to EBIT growth in 2021. not at least also thanks to our continued internal improvement measures. Talking about what to expect in 2021, let's finish the divisional roundup with the one division where we had a setback in 2020, negative revenue growth, which of course now positively means a good base for recovery in 2021. And that's our supply chain division. We talked about it since the second quarter. Supply chain is most directly linked to individual customer activity levels and individual sites where many were impacted by heavy lockdowns, complete site closures and volume declines. That is why supply chain revenue declined in 2020 and therefore is and will now see the most pronounced cyclical recovery. Continued growth in e-fulfillment and our whole digitalization and automation agenda will further support that momentum. So we certainly expect supply chain to return to its already previously achieved target margin of 5% over time. To wrap up the operating performance review, the final update of our 2020 e-bill bridge on page 28 shows what I mentioned earlier. excluding runoff EBIT growth of 34% to an underlying 2020 base of 5.4 billion. And I think that number is probably the most important number on this page because that is the basis going forward. We consider the 5.4 underlying base our starting point for further growth. And that has obviously been the base also for our guidance 21 and 23. That takes me to the third chapter, cash flow and returns. The cash flow summary on page 30 is actually quite simple. We have more detailed slides on the cash flow in the backup. But I think actually a fundamental message is very simple. Record EBIT was driven by a clean, strong operating performance, so no one-offs, no funny things. And part of the EBIT one-offs were actually non-cash when you think about the asset impairments we did in the second quarter. So this very strong, healthy operating EBIT performance drove up operating cash flow and ultimately led to a record group free cash flow of 2.5 billion euros. When you compare it to last year, I think there are two effects to bear in mind. CapEx was lower. as we had the Boeing 777 investment peak in 2019. But at the same time, we had the cash in from the China supply chain disposal in 2019. So if you take out both effects, the year-over-year increase was actually pretty close to what we now show here in terms of reported free cash flow growth of 1.668 billion. So I think a really pleasing performance. And I think the important message for you is that we really see that as a new and sustainable order of magnitude for free cash flow. So it's not a one-hit wonder. We have really kind of like entered a new territory in terms of cash generation here. Frank will cover the guidance, but maybe a quick sneak preview and a quick comment on our free cash flow guidance from my side. Because you may be wondering, after what I've just said, why is the free cash flow guidance for 21 actually cheaper than the 2.5 we delivered in 2020? I think it's actually quite consistent with the increase in EBIT we are forecasting, but also the fact that we are spending more on CapEx, 400 million more. I think that nicely explains why our CapEx guidance is for 21, 2.3 billion. And you then also see in Frank's slides what we expect in term horizon. So overall, I think this new cash flow generation territory has really now put us into a position to balance growth into the future business and do the investments we need to do to keep growing healthily. but also generate significant shareholder returns. So let's talk about investments first. Very briefly, we expect a slight increase compared to the 2020 levels out to 2023, which I don't think should be a surprise given the enormous volume growth we have seen in our networks. So I think this is really a continuous increase in moderate steps in CapEx to really cope with the volume growth which we have seen so far and of course also with the volume growth we expect going forward and as an important reminder numbers out to 23 include the full expected cap expense in both 777 orders so that was the investment side so now let's look a little bit on return on our asset base on page 32 I think this Page should also be quite encouraging because it shows you that over time we are generating increasing returns. We are investing more, but we are also generating increasing returns on that basis. One comment I always have to make, you can see that there was a change from 17 to 18. As you all know, we changed to IFRS 16. That significantly increased our asset base. So in our asset base for the calculation since 2018, we actually include all the right of use assets. That's about one quarter of the overall net asset base. So we pretend that this cash has already been spent and we have to earn a return on it, even though in terms of cash flow phasing, this is of course only going out over time. So again, I think a very conservative perspective. And, yeah, what counts for me most is to see the positive trend, which is very clear in both accounting worlds and shows how our continuous investments generate increasing returns. So we invest into the business with increasing returns, and at the same time we are generating sustainably stronger cash flow, which allows us to combine continued profitable growth investments with increasing shareholder returns. Page 33 shows the development of excess liquidity, which is defined as free cash flow in excess of dividend payment, something we have laid out in our finance policy more than a decade ago. As Frank already mentioned, we decided on our second large share buyback program yesterday. You can see here on page 33, the first one in 2016-17 had been distributing the excess liquidity generated in the years running up to that. and this time we generated significant excess liquidity in 2020 alone, more than a billion just last year, and on that basis decided to return one billion of that to our shareholders in the form of a share buyback program to be executed in the next 12 months. We are very happy that we were able to take this decision and thereby deliver on our finance policy. Our decision was partially based on the strong 2020 financials, But partially, this decision has also been linked to the fact that we are looking forward with confidence to further performance improvement in the years to come. And with that, I hand back to Frank, who will finish our presentation with some more details on our outlook and the base assumptions.

Yeah, thank you, Melanie. That brings us to page 35, where you can see parts of our new guidance for 2021. We believe that we will see a significant improvement in the DHL divisions this year to 4.5 billion, around 4.5 billion, which should be driven by two things. One is a recovery of the B2B business, as I already said earlier, that we have seen that already in Q4, and I've seen also in the beginning of the year that trend continuing. On the other side, we expect that the growth rate will decelerate for B2C, but on an increased base, and that's the combination of both should give us sufficient tailwind to really deliver around 4.5 billion for the DHL divisions. On the P&P side, it's too early to judge what might happen the second year, but of course, in the first quarter, we will see a continuation of the decline we have seen last year, an accelerated decline. Mid-term, it should normalize But we will see a continuation of a male decline, male volume decline on the other side. We will see a continuation of strong growth in the first half, but that will, of course, come down as well for B2B for the second half. B2C in PNP and the mix and match, we believe with all the measures Tobias Meyer is doing here, that we can keep the EBIT level on the same level as previous years. If we then go to the next page where you can see the full-fledged guidance, we have increased our guidance from better than 2020 to now better than 5.6 for the group. There are two elements I've already mentioned. The group functions will contribute a minus 400. The free cash flow, as Melanie already explains, will be at 2.3. Gross capital should be around 3.4. Tax rate will slightly improve further you know, due to the, of course, improvement in profitability. The base assumptions I already said are there. The midterm guidance is that the new one where we give a rolling three-year outlook, as we introduced about two years ago, is now above $6 billion. The free cash flow would be $7.5 to $8.5. I think that's a further improvement over the last years. And cross-CAPEX, will be also around 9.5 to 10.5, which, of course, will enable us to continue to grow. With that set of numbers, you know, we have improved our guidance even further, and we believe that we can do all what we need to do to continue to invest into the growth of a company, but also, you know, contribute significantly free cash flow, which, of course, in line with our finance policies, will enable us to have our shareholders participate in the long run as well. And with that, to conclude, the page I have already seen on page 30, I have already shown, page 37, you know, the company is in much better shape than ever before. I said already a year ago, before COVID-19 started, that we are in the best shape ever. We have improved further. Our people really are strongly supporting us and doing a fantastic job. And that's the reason why we believe that the goals we have outlined, or I have just outlined a minute ago, are definitely achievable from our perspective. And with that, thank you very much for your attention.

Emma, you want to start the Q&A round, please?

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selection. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question today comes from the line of Mark McVicker with Barclays. Please go ahead.

Yes, good morning, Frank. Good morning, Melanie and Martin. Two questions for me. First of all, on the share buybacks, if your free cash flow stays as strong as you expect it to through 22 and 23 and presumably beyond, should we be starting to think about A more regular buyback pattern is my first question. And the second question is, you've mentioned the strong start to 21, or the good start to 21, sorry. Can you say how you're thinking about the shape of 21 against 20? Should we expect a very strong first half of the year and then slower growth in the second half as you start to run into the very tough comms, or is it a little more even? Thank you.

Yeah, so may I take the second question, then Melanie can answer the first somehow. So, yes, you should assume that the first half, you know, with all the lockdowns we have seen in parts, of course, and the first quarter last year was only partially impacted by COVID-19. We expect a significant growth in the first quarter, which should come down over the quarters, but we still believe that we should see some growth by the end of the year, despite a very high base we had seen last year.

Yeah, and on the share buybacks, very good question, Mark. So I would answer that at this point in time. So we have now delivered the second share buyback, honoring our finance policy, And I think that's a very clear statement. Should we come into the position where we generate more excess liquidity and keep doing that, then we have to revisit that. But I think for now we're very happy that with the full support of the corporate board and the supervisory board, we took the decision for our second-ever share of Habeck yesterday.

That's great. Thank you.

The next question comes from Daniel Rusko with Bernstein Research. Please go ahead.

Good morning, everybody. Please, if I may. In Express, TDD saw a substantial increase in Q4. Could you elaborate a bit? Was that driven by B2C, and how should we think about kind of the mix between TDI and TDD as we go through 2021? Secondly, on the PostGesetz, there was a subcommittee meeting earlier in February and I was just wondering, is there any update to the progress on the new post-legislation in Germany? What's the timeline and what would you be expecting in terms of will this be a narrow or broad reform at this point in time? And Melanie, maybe on the use of cash. You already outlined kind of your distribution policy, but could you just talk about your CapEx planning a little bit more? You gave a range in the outlook, Frank. How are you thinking about the balance between kind of maintaining the business and growing the business? How much of that CapEx budget kind of goes towards growth, and how much of that goes towards maintenance CapEx? Thanks.

Let me start with a second, and Melanie will answer them, the first and third. So, on the Post Gazettes, actually, both chambers of the Parliament and the Bundesrat have now approved a change, a small change in the Post Gazettes, which is mainly the takeover of what the postage regulation was into the law, which allows the regulator to continue with what they have done the last two cases. That is of course good news because we have now really a continuation of that. The process for the postage for next year will start soon and then we will see in due course what that means in the planning. But overall, the law has been changed. You might remember there have been some court cases. You know, that is a reflection of that somehow that now what the court said this is not right is now reflected in the law which the court requested. So we consider that as done. The more broader postal reform will only happen in the next legislation of the Parliament. So we have to wait until the new government is in place depending on the outcome. And, of course, then we will start again discussions here how the postal law might change on the longer run. But short term, good news, the regulatory base is now exactly the same as the last two cases.

Okay. Then on the first question, TDDs. So our TDD business is dominated by a couple of important countries and that is where we also saw the growth in the full year 2020 and in the fourth quarter. Countries like Mexico, Italy, UK, Germany and here again the growth was very much driven by B2C volume growth. I think in terms of relevance going forward, I think we have to bear in mind that overall TDI is more than 75% of the overall express revenue. The share of TDD is around 7%, so compared to TDI, it is significantly less relevant overall. In terms of use of cash, how much is maintenance capex, how much is growth capex? That is always a difficult question to answer, particularly in the network businesses. In supply chain, it's relatively easy. The CAPEX goes into implementing new customer projects, so that is really linked to business goals. In the express network, if you replace a small aircraft with a larger aircraft, that's part maintenance, part growth. We have tried scientifically from the corporate controlling perspective to get a precise number on it. It's really... difficult, which is why my answer would be that with what we have now outlined in terms of medium-term capex, we are prepared to cater also with continued volume growth to catch up a bit for the surprisingly high growth we saw last year, but to also cater for future growth.

And if you weren't able to arrive at a scientific number, kind of what's your high-level estimate of where that is? Or maybe has that changed in the past? Has there been a shift between growth and maintenance ethics in your view?

Yeah, again, it really depends on the business. Like I said, in supply chain, it is really new customer implementation, so you could say this is predominantly growth. I think when you think about the strong volume growth-driven networks in part of Germany, in express, in e-consumptions. There is clearly now a higher component associated with a stronger volume growth than there was five years ago.

Thank you. The next question comes from Robert Johnson with Exxon BNP. Please go ahead.

Good morning, everybody. A couple of questions from me, please. First of all, on B2C volumes, you talked about B2B during the presentation and how volumes are strengthening, and I guess we'd all expect that to continue during the coming courses. But could you maybe just provide some more detail on your expectations for B2C volumes specifically as lockdown measures are eased or as they're hopefully eased at least over the next few courses? I guess from Melanie's comments during the presentation, it sounds like your base case is that B2C volume growth will remain positive. Could you maybe just provide some kind of color on your visibility in that respect and maybe just also address the risk that B2C volumes may turn negative? So how can we think about that? And the second question is just a quick one on M&A. We've recently seen a bit of an M&A spree here. across the European logistics space. Maybe talk about your latest thoughts with respect to M&A going forward. Thank you.

Yeah, Robert, may I take both? So on the B2C volume growth, what we actually expect happening this year in continuation that we will see in P&P a normalization to a 5% to 7% growth rate on an, of course, increased base. We also expect that in this year Why is that? We looked into markets where we had only short periods of lockdowns and shutdown of retail, and what happened is that, for instance, in China, that not every volume came back to retail, and the volumes are still not 100% back to retail, and people continue to buy online. The reason for that is that the number of people who really buy online has been increased. You see that in many markets that a lot of elder people are now used to that. and have seen the convenience. That's the reason why we don't expect a decline in the second half. But of course, the growth rate will be lower. And of course, it might be different by month because, you know, the pattern was not stable. There wasn't waves because you might remember we had no lockdown until mid of November and then it started again. So it might be slightly different month by month because that definitely will influence. But overall, we expect in PNP, a continuation of growth, and the same for Express. We've seen a digit growth going forward. So that is our assumption at the moment, and we believe that is also shown by some markets who went only through one lockdown, and the recovery of retail took so far quite long, and people continue to buy online because they saw that the convenience and the variety of offers is just striking. M&A. M&A. Of course, there is some activity. We have not changed our approach. We believe that we have in all our business unit a very strong market position. We always said that we might consider smaller acquisitions in DJF or supply chain to augment our capabilities in express P&P and e-commerce solutions, I would say. Our e-commerce solution belongs to the same supply chain, and DJF, if we can augment our capabilities, we would consider, but there is nothing huge in the pipeline at the current stage.

Thank you very much.

You're welcome.

The next question comes from Christian Ndeku with UBS. Please go ahead.

Hi, thank you very much for taking my questions free, if I may. The first one, looking at Express and Parcels Germany, your price mix was up 5% to 7% in 2020. So how do you see 2021 in terms of price mix? And maybe if you can touch a bit in terms of the supply additions from your competitors. Secondly, looking at Parcel Germany, In the press, it looks like Amazon is continuing to build large facilities in Germany. There are a couple of ones planned for later this year and next year. I guess, can you give us an update in terms of the volumes that you generate with Amazon or the revenues you generate there and how you see that over the next couple of years? And the last one, just looking at the credit rating metrics, it looks like you are doing better than your current credit rating requirements as you advance to 22 and 23. So I guess my question is, is your target also to improve your credit rating from its current level? Or if it isn't, would you consider when distributing cash to shareholders, would you consider doing that out of debt? Thank you very much.

So may I take this second, and Melanie can take the first and the third. So maybe with Amazon, in particular P&P Germany, our share of Amazon volume has declined as a region. We expect the same happening going forward. We have seen tremendous larger growth, and I think we showed that already in the Q3 reporting. Our growth is smaller in mid-sized customers, has been significantly higher. Then the growth is large e-tailers, including Amazon, and we believe that this will continue. Our capabilities are just spot on for the small e-tailers. They have learned now, many of them actually have been more or less only retailers have learned that e-commerce is a good addition to their offerings, and that's the reason why we believe that we will see definitely the small and mid-sized customers a faster growth. than with large e-tailers. And as I said, we had around 2% of revenue in the past with Amazon on a global scale, so significantly less when one of our larger competitors has mentioned that recently, and so namely UPS has said they have around 11%, so we are much less involved with Amazon than these guys. We have seen no increase in the last year, particularly due to the relatively small growth we have seen with Amazon in Germany as a consequence of their logistics activities.

Just to add, the number we have also given for P&P is that the share of Amazon revenue there is 6%, and that is still the order of magnitude, but the number has come down. So we have seen a healthy development in the mix in 2020. Which takes me maybe to the first question, the price mix. So you asked about Express and Path of Germany. So I think on Path of Germany, it has really been a continuation of our very systematic yield management, which we started in the mid of 2018. So I think that's very healthy development, which we intend to continue. On the Express side, it has been a continuation of our general yield management, which we have successfully been doing for many, many years. I think the extraordinary thing in 2020 in Express was obviously the emergency surcharge, which we had to put in place to offset the significant increase in costs in our aviation network, where we had to put on additional flights to compensate for the lack of commercial capacity in the belly space of passenger aircraft. We have been very transparent about it, that we want to use that as a cost offset, So obviously over time, once we get into a more normal capacity configuration, that is going to fade off. Obviously now in the first quarter of 21, we are not in a normal situation yet. So that will be a gradual process going forward. In terms of rating, do we see an upward push? I think the important thing for me now was in connection with the share buyback decision we took yesterday, that we don't see any risk for our rating from that decision. And obviously, this is a parameter we are watching carefully. Our aspiration is to maintain our solid BBB plus rating in line with what we have stated in our finance policy. For now, it's important that we don't see any implications from what we announced yesterday with the $1 billion share buyback.

Thank you very much.

The next question comes from Andy Chew with Deutsche Bank. Please go ahead.

Good morning. Just two questions from me, please. Just on the PMP guidance, I think you mentioned that you're sort of forecasting a sort of flat EBIT. But when you look into last year, 2020, you had a number of sort of one-offs, including the sort of COVID bonus and a bonus as part of the wage agreement. So the underlying EBIT probably looks more like 1.7 billion, yet you're forecasting around 1.6 billion. So just wondered why directly that looks like it might be down on a sort of like-for-like basis. And then the second question is around the sort of fleet investment. I think the sort of commentary around the first 14 aircraft we ordered a few years ago was that was a sort of one-off transaction. And obviously you followed that up with more aircraft, which kind of makes sense. So just wonder what your thoughts are in terms of aircraft orders going forward and how that might or could impact your 9.5 to 10.5 billion gross capex guidance for 21 to 23. Thank you.

Okay, so on the P&P guidance, let me say I can follow your logic, and so overall, you see it's around 1.6, and I think it's early in the year, so maybe good to be a bit on the cautious side with the guidance overall. In terms of fleet investment, Yeah, so I have to say we obviously learned a lot about how to best do the financing for those expensive 777s over the last years. And we have further developed our portfolio of available financing structures, which is why we now have the full 14 plus 8 included in our CAPEX guidance going forward. We expect the remaining four from the first 14 in the course of 21, and then from the second order, four aircraft in 22 and four aircraft in 23. So those things are always quite long-term programs. We have obviously included a chunk and a not too small chunk of aviation CAPEX in the medium-term guidance. So we feel that comfortable that this gives us the wiggle room we need to do what is necessary from a reflating perspective within our medium-term guidance.

Could I just maybe ask one more just on share buybacks and just to sort of follow up on Mark's first question. In 2013, I think you delivered about $820 million of excess liquidity. You didn't give that back to shareholders initially. in 2013, the first buyback was in 2016. And just sort of looking forward again, it looks like you're going to generate some pretty decent amounts of excess liquidity. I mean, what would sort of stop you sort of handing that back to shareholders? Or maybe as a sort of recap, why did you not hand the cash back to shareholders in 2013 despite such a large amount of excess liquidity being generated in that year? Thank you.

Yeah, I think we are, from my perspective, now in a different territory where it is our aspiration to generate excess liquidity on an ongoing basis. And I think we very clearly say in our finance policy that once that happens, we will think about the right way to distribute that also to our shareholders. But I think it's also a good thing to first deliver and then take the decision. on how to distribute it. So I'm really happy that we are now honoring our finance policy with a one billion euro decision from yesterday. And now let's work in earning more exit liquidity in 21.

Yeah, and Andy, may let me add to that. You know, I said twice, the company is in better shape than ever before. And of course, the situation is now very different from 2013 in many dimensions. So we have just approved last year that an even accelerated male volume decline can be compensated by parser growth, and we still see an improvement of profitability. In 2013, we were not so sure that Express really can digest B2C volumes of that scale in a profitable way. We have seen that the bigger B2C volume growth has been treative to our P&L, We were still in 2013 not in the position to know what will happen with the SAP platform, which ended up as a quite challenging situation. Now we have in DGF, cargo has rolled out for ocean completely and an air freight on a very good journey. So the supply chain has improved tremendously, has fixed a lot of problems on a journey, and e-commerce solutions was not even thought about. So the quality... of our company is so much better. There are no foreseeable futures and foreseeable challenges in these business units in the same way as they were in 2013. Of course, at that time, we had to take a conservative approach to that, knowing that there might be some hiccups in certain parts. Of course, the situation is now slightly different. That doesn't add anything to what Melanie already said, but of course the quality of our earnings has improved tremendously.

Okay. Thank you very much. That's very helpful. Thank you. You're welcome.

The next question comes from Johannes Braun with Stifel Europe. Please go ahead.

Yes, good morning. Thanks for taking my questions. Back on the fancy topic of excess cash, you already mentioned your thinking in terms of the usage of Future excess cash, just wondering if that excess cash would continue to be spent as share by VEX or if special dividends would also be an option. Second question, I think in the last Express seminar, you were talking about B2B e-commerce being the next big thing for Express volumes and profits in the medium to long term. Just wondering, is there anything of that incorporated in the current midterm guidance or is that an additional upside risk, if you will, if e-commerce would start to unfold. And then lastly, I think Express has started a partnership or signed a partnership with Condor. Just wondering how much capacity that will add to Express and what the rationale is to do that if Condor obviously is a leisure carrier and not necessarily operating on cargo routes. Thank you.

Yes, I may start with the second and third, and Melanie can say something about the first. So, you know, I would say, of course, we see all these trends, and when we give guidance, we consider all these trends, because what we have experienced, some of the trends have been stronger and others weaker. So in balance, I think that will neutralize that. If all trends which are happening are are accelerating or stay very strong. Of course, the picture is more positive than assumed here, but here it's a balance of all. On Condor, I think this is what press makes out of that is out of proportion. It adds capacity, but it will not change the picture. We are flying in the lower deck somehow and a little bit once in a while because the processes are not equipped. If it's ULDs, you could put them in the in the passenger seats. You might add some passes there, but it doesn't change the capacity. I think it's a nice win. And because the rates are so high, you can even fly these airplanes with just belly capacity, which is there. Of course, it helps also these carriers because they need to keep their airplanes running. Otherwise, they have to go to COD checks. Even the pilots have to fly because they need the licenses. So it's a win-win for both. but it's only doable because the rates are very high at the moment and therefore additional capacity helps, but it's not something for the longer.

Maybe before I come to the excess liquidity share by back versus dividend question, I also want to add something to the second question because I think that is a very nice question. in the sense that it shows how systematically we work on the e-commerce trend. So, I mean, sometimes we get the comments, oh, yeah, in 2020, that was all Corona-driven upside, which just happened to you. And I think what we have done in Express, we have systematically for many years now exploited and prepared for the e-commerce trend in B2C. And we have trained the sales force and we have put programs in place to really benefit from the right type of e-commerce business for our Express network. And that is what we are now systematically doing for the B2B portion of e-commerce because we think that it's going to be a growth driver going forward. The same is true with the setup of our e-commerce solutions division, right? That was something we did because we saw this had now reached a readiness where it was warranting its own division, and that then nicely paid off in 2022. So I think the whole B2B e-com approach is a nice example of how systematically we are working on getting the benefits from this long-term trend, which, as Frank showed, has been one of our core strategic trends for many years now. So in terms of exit liquidity, share buyback versus extra dividends, That's always an interesting debate. Some like it this way, some like it the other way. You can do a scientific piece of work about it. From our feeling in terms of the overall feedback we get, there was a preference for a share buyback. There are also a number of technical benefits in terms of AGM authorizations and so on. I feel very comfortable with having decided for a share buyback and not for an extra dividend.

Thank you, Chip. Just one more on the B2B e-commerce. I mean, from today's point, obviously that thing is still just starting. It's not as established as B2C e-commerce. But from today's point of view, would you think that market or the B2B e-commerce growth can be comparable with what we saw in B2C e-commerce? Or is it larger, is it smaller? What's your feeling on the potential impact on Express from that thing?

You know, I believe there is a significant opportunity. We have seen that already that companies have started to sell online. Of course, it depends on the product, but of course the manufacturer of certain products have learned through the crisis. They were usually pretty reluctant to to bypass wholesalers due to the pressure they got. They have now tested it and have seen that customers, their B2B customers need these products, wanna buy the products. So how big that market will become is unclear, but we definitely will see a continuation and acceleration of the B2B e-commerce, which of course, as you rightly pointed out, is a great opportunity for us in all parts again because that's even more fit for purpose with a higher amount of stops or passes per stop, for instance, when you bring it to craftsmen who are doing fixing or something, just to name one. So that is definitely still in the infancy, and we should expect a good development. And the B2B customers have learned that this works well, so there is more to come without a doubt. Okay, thank you. You're welcome.

The next question comes from Sam Bland with JP Morgan. Please go ahead.

Oh, hi there. I've got two questions, please, both on forwarding. The first one is just interested in what sort of held back the Q4 EBIT. You know, volumes were improved. Unit margins are still pretty good, but I think the EBIT slowed a little bit. And the second question is, you know, I see pretty good progress on cargo-wise. Just kind of a bit of an update on where you think the conversion rates, particularly on the forwarding side of that business, So I think you said in the past you'd like to get to best in class, but those operators keep on improving as well. So any updates there would be helpful. Thanks.

Yeah, so on the first question, Q4 EBIT, I think that is mainly linked to some cost phasing topics because we are making progress with some of our improvement programs for took the opportunity in Q4 to book some restructuring costs. No major amounts, but some of these cross-phasing topics added up. So Q4 was in line with my expectations. And as I said, we clearly expect a good year-over-year growth in global forwarding EBIT in 21. And that should, of course, be accompanied by a continued margin expansion Thank you for mentioning CargoWise. We didn't talk about that, but that is also, I think, a piece of good news when you think back on 2020. A year ago, we were sitting there thinking how to continue with the rollout, how to do it remotely. I think the team has done an outstanding job. We had very little delays with the CargoWise implementation, despite having to change the whole support concept to remote. So that is progressing really well. And on that basis, I think we are continuing with what we said, launch strategy 2025. Every year we expect 100 to 200 basis points margin extension in the DGF conversion ratio, and I'm quite confident that we should see that also in 2021.

Okay, thank you.

The next question comes from Monita Kayani with Bank of America. Please go ahead.

Good morning. So on e-commerce solutions, firstly, it had a strong growth last year, but it remains quite small. What is needed for this segment to be much larger, and are there any focus countries that you would look at? Secondly, just on the competitive environment in Express, UPS has recently said that they would be focusing on the international business. How do you see competition playing out there in the medium term? And thirdly, if I may, on air freight, you talked about normalization of capacity. But how do you think about this kind of in the medium term, do you think that air freight capacity coming out of this crisis could be structurally lowered given the retirement of wide-body passenger planes?

Thank you. Yeah, so maybe I start with, you know, I'd answer all three. The e-commerce solutions, I think, you know, we will see a continuation of growth, you know, The e-commerce boom in the U.S. nor in Europe nor in Asia is over, so we should see a quite high growth. We are in most markets not the incumbent and have grown faster in the last quarters, faster than the incumbents, and that should continue. You know, there is very little you can buy in Europe, for instance, so we will not see an organic movement, but we will see definitely a higher growth rate than we see in others by gaining market share. And, you know, we definitely will also see a further improvement of the margin. In Express, I think the three players are the key players. FedEx still has not finished their integration with TNT. Being in the fifth year of that is quite an interesting journey for them. UPS has announced, you know, maybe their focus on international, but equally their focus on yield and profitable, not become bigger but better, if I read the minutes right. So, you know, given that and our best global footprint, I think we are well positioned to continue to gain market share in that industry. We are the service leader in the industry. If, you know, one is still not integrated fully and the other goes for higher yields, I think that gives us sufficient, you know, muscle and activity that we can continue our above-the-market growth rate we have seen in the last decade. And air freight capacity? Air freight capacity, yeah, so, you know, I think the best predictor of air freight capacity is behavior of individuals. I said that already last year, then people said, what might happen? I said, you know, what will happen is people probably will take less urban transportation or travel. They might even buy some more cars. As you have seen, you know, the automotive industry has come up much faster than people predicted. Guess what? You know, people are buying cars because if they want to go somewhere, they don't want to take public transportation but private cars. The same is here. If it's not 100% sure that you don't have trouble at the destination with the government's regulations, or you don't feel safe on a long-distance travel, people will not jump on a long-term flight. Why should I go as a CEO on a long-distance flight if I can see my investors also online? So that's the reason why our prediction is that we will see slow progress of intercontinental travel. Regional travel probably will recover much faster, but intercontinental travel will take longer. So this year we will not see a rebound, massive rebounds of belly space capacity. Maybe next year more, but that will only normalize, I think, over a couple of quarters and not just very fast. And that is not driven by missing demand from business. There's enough demand already to fly more. but it's mainly driven because consumers or citizens will not change their minds so rapidly to travel long distance again.

So do you think that there would be less belly space capacity like in 2004?

Yeah, you know, I think this is now pure speculation because, you know, as I said, you know, it will mainly depend on what we will do as human beings. You know, I have read last year the new normal. You know, the new normal will be very similar to the old normal. We are still human beings. We have not changed. We want to see our friends. We want to go on vacation. You know, of course, we have to play a role as well in our company to see the people on the ground and say hello and give them a hug once in a while. So it is, you know, that has not changed. Our fundamental needs as human beings have not changed due to COVID-19. So that's the reason why I believe we will go back. Is that in the same capacity in 2024 or even more or less? I think that's a little bit, you know, looking into the glass wall now. I'll talk more about the trends and the speed of recovery and what drives that. But I can't tell you if we are all back to normal in 2024 or even see higher volumes. because we have an extension middle class in the emerging markets, we want to travel as well then, which could be also in the scenario. So I would abstain from speculating what might be in 2024.

Okay, understood. Thank you.

You're welcome. Thanks, Kiba. And, Operator, I think we've got one more caller at the line, right?

Yep, the final question from today is from the line of Andrei Muda with Treble Shavuot. Please go ahead.

Yeah, good morning. Three questions, if I may. The first one on the excess liquidity, you said it was 2 billion. Did you already take some of 21 into account? Secondly, on CapEx guidance, it's now, let's say, a mix of underlying CapEx and the aircraft. Can you give us a bit more guidance on how the underlying CapEx is developing, also in relation to sales? And last one on ECS. a few years ago, Ken started to focus more on profitability rather than on expansion. Would you say that you will now be ready again to expand that significance?

May I take first and second? First, I think we have seen both, you know, the measures we have taken in e-commerce solutions definitely have helped to make us more agile, more focused, and we have seen tremendous growth and both have added the margin. Actually, we have seen the same in Express. You know, the mantra of all our divisions is now quality first based on high motivated people. That makes me sure that we will see a very good 2021. The morale of our organization has never been higher. The service quality has never been higher, and that enables us to grow in improved margins at the same time. So, and that we have, you know, very nicely proven last year. That was the plan already before, and I have no doubt that this will continue in the same way.

Yeah, then on the first question, access liquidity, so the payout amount that was really based on the access liquidity we have generated to date. But, of course, psychologically, this is also a sign that we expect things to now be on a sustainable, good level with regard to excess liquidity generation. In terms of CapEx guidance, the detail we have given is with regard to the 777 CapEx, where we had the peak in 2019 with $1.1 billion. So what we now assume for 2021 is that we will have 400 million in CAPEX for the 777 program, and that will come down to 100 million in 2022. But, of course, there is also additional aviation CAPEX in there, for example, for the regional fleet, but that is on a continuous level with no spikes and abnormal developments.

Thank you. All right, so it looks like we've got no further caller in the line, so I want to thank you all for conducting this in such a concise and focused manner. We're on a close now. I'm going to hand over to Frank for a wrap-up and wish you the rest of the day.

Yeah, thank you for joining us this early today. As I said already twice, the company is in much better shape than ever before. I think we see now the benefits of having a portfolio which benefits from B2B growth, and we will see that this year in parts, but also have great exposure across the divisions to the e-commerce growth since we believe that B2B will continue to grow over the next years and B2B will come back and globalization will continue facing no internal challenges. I think we are really on the right journey to improve our performance as we outlined in our guidance. That makes us very confident. The team is very collaborative more than ever before and the quality of my senior team is the best ever. That makes me very confident going forward. And with that, I would like to say thank you very much for joining us and have a great day.