Deutsche Post Ag S/Adr

Thank you and good morning and a warm welcome from my side to our Q121 call as announced with Melanie Kress, our Group CFO. I understand it's a busy schedule for you, particularly in the sector, so let's see that we get this done within the full hour. And therefore, right over to you, Melanie.

Yes, thank you, Martin, and good morning and welcome to all of you also from my side. Thank you for joining us this morning. So as you know, the first quarter of 2021 has delivered record numbers for us along many dimensions, and I have the pleasure that there are a lot of great things to talk about, but I will, as usual, try to keep it short and lead you through the main highlights only in order to leave ample time for your questions. So Q1, in a nutshell, was the continuation of the fourth quarter 2020 with regards to the ongoing B2C volume growth strong margins and significantly higher cash generation. The first strengthening of the economic recovery on the B2B side coming on top of it. So we really had a quarter with very strong B2C growth and a very good recovery on the B2B side. Going forward, our base assumptions are confirmed. We continue to expect that B2C growth will normalize in the course of 2021. and that the B2B activities will see a further gradual recovery. Based on these assumptions and on the record Q1 figures, including the good B2B recovery, we have today further upgraded our 2021 and 2023 guidance for EBIT and free cash flow. I'll obviously come to that later in the presentation. But before we jump into the financial details, Let me briefly remind you of one other major highlight of our first quarter. We have launched our updated sustainability roadmap on March 22nd, and for me that's a very important part of our strategy 2025, where we have now laid out our priorities on the various ESG fields. We have set ourselves what I think are challenging but achievable and very important targets – important not only for us as a company, but also in the greater scheme of things. I'll not go into any of the details. You can see the summary of our targets on page two, and we have a full separate deck with more details from our investor call on it, which you can find on our investor relations website. But it is important for us that we have these topics and the related KPIs now fully embedded into our Strategy 2025 framework, and that you also know what very concrete targets you will be working on in the area of ESG. So now turning to the numbers, starting with the revenue summary on page four, you can see that the growth rates have even further accelerated from Q4. We had an organic growth for the group of 26%, fall growth across all divisions, On the B2C side, we have indeed seen that volumes have stayed very elevated coming out of the Q4 peak season. Overall, for the group, the revenue in the first quarter is pretty much on a Q4 level. And at the same time, apart from the good continued B2C growth, we see the benefit of the broader economic recovery across our B2B activities. We saw express volumes accelerating, and ocean volumes are now also back in growth territories. And supply chain posted the second consecutive quarter of return to top line growth. So overall, a very pleasant picture. And that leads me to the EBIT development on page five. Here again, you can see that all five operating divisions have contributed to the significant improvement in EBIT. Everyone has contributed to the group reaching a record Q1 number of 1.9 billion euros in EBIT. Again, leveraging growth momentum from B2C and B2B on the top line, but alongside with that comes ongoing yield and cost measures. We had another quarter of a very good and efficient network utilization that has led to the strong margin performance. Now looking at the divisional details, starting with DHL Express on page six, you can see on the right side of the slide how both continued strong B2C growth, as well as now also double digit growth in the B2B volumes, have been driving the overall 26% TDI volume growth. I will later on talk about our guidance assumptions in the broader group context, but I think the development over the last quarters, which you can see here, is already showing the balance that our combined B2B and B2C exposure is providing, and which will also be attractive going forward. Growth numbers of our DHL e-commerce solutions division on page 7 also show how strong B2C activity levels have been. This 51.8% growth e-commerce solutions was our fastest growing division. Good growth across all regions as well as in the deferred cross-border volumes. And that also combined with a very good utilization level in the network. We have now reached an EBIT margin of 8% in Q1. That's obviously much better than what we had expected from DHL e-commerce solutions, so a very pleasant development here as well. Our German Pulse and Parcel business has shown the usual structural trends of parcel growth versus mail decline, but as you can see on page eight, both trends remained on higher than usual rates in the first quarter. It will now be interesting to see in the second quarter, we are entering a period where we are obviously comparing against the baseline under pandemic circumstances. Last April, we already had very strong parcel growth and very accelerated mail volume declines. So it will be interesting to see how that now develops. The B2C development, putting it all together across the major e-commerce businesses in Express, in e-commerce solutions in parcel Germany, in Q1, has been very much a continuation of the accelerated structural growth of 2020. No signs of normalization yet, but we obviously expect in the course of the year that there will be a normalization on the B2C growth rates. but that this structural acceleration of penetration is there to last. Turning now to the more B2B-driven divisions, starting with global forwarding freight on page nine. We can see how the B2B volumes are reversing the downward movement seen in 2020, and ocean and freight volume are back to year-over-year growth. And as you all know, markets are still tight, both on the air and on the ocean side, and that led to very good GP development for both air and ocean. Overall, GP was up at 27% for air, 45% for ocean, of course, a very solid development. Based on our ongoing efficiency programs, we are now able to really leverage this volume recovery without really adding a lot on the fixed labor cost side, and therefore divisional EBIT was up 190% as we were able to convert GP into EBIT with a more than doubled conversion rate. Talking about the conversion rate, clearly those strong GP margins are also supporting the conversion, but you also see the progress on our internal efficiency agenda, and those elements are clearly sustainable and even speeding up. Why am I saying that? Well, I think we reached another very important milestone in QMAN 2021. For those of you who still remember the length of our IT renewal journey, you will be pleased to hear that the TMS rollout is now fully accomplished in both air and ocean freight. And that's, of course, a basis for further progress going forward. Similar strong business trend can be observed in DHL supply chain. The lower 2020 base effects are still to come, starting with the second quarter. We can now see that in the first quarter of 21, supply chain revenue growth is again around 5%, similar to what we had in Q4 2020. And on the margin side, the division is also back to the 5% target margin levels for the second consecutive quarter. To sum it up, the P&L on page 11 has hardly ever been so easy to read. Strong 22% top line growth based on the global exposure to both structural B2C growth and now recovering B2B activities has been translated in even stronger EBIT growth based on network utilization, yield management, and ongoing efficiency improvements. So obviously with the $1.9 billion, pretty close to Q4 EBIT numbers, we've had a fantastic start into the year. When you look at the tax line, yeah, obviously higher EBIT and increased tax rate has led to an increase in taxes, but still when you look at the EPS development, we have been able to to always quadruple EPS despite the significant step up in taxes. As we indicated already in our pre-release in early April, the operating performance is even more pleasant when looking at the cash flow, as you can see on page 12. When we gave our initial indication in the pre-release, we were a bit on the cautious side. In the end, Q1 free cash flow even turned out stronger than the 1 billion we had indicated at almost 1.2 billion euros, up 1.6 billion euros year over year. That's, of course, a very pleasant development, particularly when bearing in mind that traditionally we always had a negative free cash flow in the first quarter. So what are the key elements here on the cash flow side from my perspective? I think the first observation is that the operating EBIT growth is absolutely healthy and fully flowing through into cash flow. And that's, of course, also something we anticipate to maintain going forward. Secondly, I think what is now really bearing fruit is that over the last years, we have changed the cultural mindset with regard to cash flow in the company. I've always said that this is not a finance-only topic, but that this is really everybody's responsibility, and I think that message has now really become part of our new changed DNA and is really paying off. And certainly, maybe on one detail line here, when you look at the changes in working capital, that's, of course, a massive improvement year over year, almost $700 million better on the changes in working capital line than what we had in Q1 2020. I think what you can see here is this cultural dimension of a very strong focus on working capital. You can also see the benefits of a more balanced cash flow steering also across the year-ends. We are overall in a very solid position with regard to the relevant working capital KPIs. We, of course, have the intention to keep it this way. At the same time, we have to be realistic over time with the growing business and quite optimized working capital KPIs. We will see some outflow here, but I'm very pleased with the overall state of affairs on the working capital line. And maybe the last important information is when you look at the CapEx line, we have increased our investments into further profitable and cash-generative growth by nearly 100 million year-over-year. And I think that's also a good example of how we really want to balance improvement in free cash flow with continued investment into the future growth of the business. which is a nice lead over to page 13, where you can see those strong growth rates, which also necessitate some further investment into the networks. So you can see on page 13, in the upper part, the B2C growth lines, which have shown a steady upward trend for five quarters. As already mentioned, that will not continue forever, and we know that, and we have, of course, included that also in our guidance considerations. We do expect that there will be a normalization in the growth rates. It will now begin to happen in terms of growth rates this second quarter when we saw the first lockdown-induced boost to B2C growth. However, fundamentally... we expect e-commerce usage to remain well ahead of what it was before the pandemic, driven by the acceleration of penetration both on the consumer and on the seller side. And that means, as I said before, that we assume for B2C businesses a progressively lower growth rate, but continued elevated absolute levels of volume and therefore well-utilized networks. Talking about the lower part of the graph, the B2B curves, they also show a very common pattern. And it's now pleasing to see that with the first quarter of 2021, all lines are back in positive territory. Obviously Q2 2020 was the low point as you can see on the graph here. So we expect that After this very unusual lockdown and downturn circumstances in 2020, we now really expect a recovery and one what we have now seen in the first quarter that seems to be taking a strong and solid shape. For us, sitting on both of these positive long-term developments, that means that we will be able to leverage the growth from whatever angle of the world it will be coming from. And again, small comment on Express. We have split the Express development into the B2B and the B2C part. And you can see that Express has this perfect balance even within the one division. So having talked about those curves, that was of course an important consideration for us when putting together our guidance update on page 14. Of course, like nobody else, we don't know exactly how things are going to play out on the timeline, but I think we have some decent understanding on each of our business long-term growth drivers, how the business development also tends to balance out across the group, and what utilization and efficiency our networks have achieved for good over the last years. So on that basis, we feel quite comfortable with increasing our guidance for EBIT in 2021 by 1.1 billion to now about 6.7 billion euros. And for the 2023 EBIT, we have improved our outlook by 1 billion from more than 6 billion to more than 7 billion euros. As mentioned earlier, investing in the right assets today is the basis for the profitable growth of tomorrow. So our capex budget moves up in line with our expectation to see further growth from the higher 2020 base. The good news is that even factoring in these growth investments as well as unavoidable tax increase, our free cash flow guidance moves up to about three billion for 2021 and to around nine billion on our cumulative three year horizon. That takes me to the conclusion on page 15. I think that shouldn't come as a surprise, based on what we have now also seen in the first quarter, we have a unique footprint across our global logistics operations. We have a strong balance. We see an improvement in mix in profitability and returns. And we have reached a sustainably higher cash flow generation level. We expect all of this to continue because it's built on a very consistent strategic focus. Yeah, on a medical basis, our more than 550,000 highly engaged and motivated and skilled colleagues at DHL and Deutsche Post, and that makes me confident for the year 2021 and beyond. And with that, over to you, Martin, for the Q&A.

Thanks, Melanie. And, operator, if you initiate the Q&A round, please. I see we have a number of callers already queuing up.