Deutsche Post Ag S/Adr

Hello and a warm welcome from my side to our Q221 conference call. As flagged, we have with us today Groups CEO Frank Ethel, Groups CFO Melanie Christ. It aims to be done within 60 minutes and therefore right over to you, Frank. Good morning as well from my side. Yes, we are definitely in a very good spot, seeing a very strong recovery of the B2B markets driven by the overall recovery of the economy and B2C is still continuing to grow at a lower pace than in Q4 or Q1, not surprisingly, and of course that also will continue, both trends will continue to the second year. What we intend to do and have announced already that we will let our employees participate in the tremendous success the company has at the moment. We believe in a service company. The difference is coming from our colleagues around the world. And we are very happy to have already announced that they will get this year and deserve it, I think, as well, another €300 COVID bonus, which we will pay in Q4. We also have already, early July, upgraded our guidance now to above $7 billion EBIT and of course that's driven by the strong trading we have seen in the first two quarters. The utilization is great and the improvement is driven by all five divisions. So overall I think we are in very good shape. Today we would like to focus more on volume development because, of course, that's important to understand as well. So what happened? If I go to page four, in the last quarters we have seen a recovery of B2B. In the second quarter, B2B growth was even stronger than B2C growth. On page five, starting with e-commerce, you can see here the B2C growth in P&P. So overall, good shape, we are happy with the growth, but of course the growth rate will not continue at the same pace as we had before. On page 6 you see similar pictures of, you know, that development in Europe and the US. Here you see that Netherlands is still very strong, Eastern Europe strong growth, UK parcel had already some months where it was slightly negative. This is fully in alignment with our expectations. The U.S. probably were earlier out of lockdowns, and that had impact as well. We believe that we will see a normalization in the other markets as well, but we also expect in the markets where we have seen no growth, we should see, sooner or later, again, growth, because the fundamental trend with moving to e-commerce is still intact. Balance between B2B and B2C shows as well in Express that we have seen a good growth in Express from the quarter, 20%, more driven by B2B. So it's really great to see we have all this good balance. And if you had seen, you know, the same growth in B2C in the second quarter as You can see that across the regions. I think it's great to see this is really a great model for us in our global footprint that we are benefiting from all these underlying trends. On page 8, starting with Express again, there's one element interesting as well, and that's a reflection of what I've just said. So we fly more heavy weight, which of course is good for the revenue line somehow, and therefore we expect that shipment growth will be slower than revenue growth in the coming months. But overall, as I said already before, Express Steel will benefit from very healthy growth on both. On all five divisions, I will show you now some examples of our digitalization agenda, which is in full swing. Here we have, for instance, Vista is our new tool. Leo helps us to recruit faster colleagues to getting on board and we actually added a significant amount of people in the last year. Anyway, if you compare end of June with last year, we probably have around 25,000 people more on board. So we are in the market and recruit not only in Express but in all divisions new people. Customers classification with artificial intelligence is important. A good example is that we lost the de minimis in Europe and of course that It's a challenging number, but I think these kind of things helped us that we haven't heard anything about that. I guess that this was a problem because we were well prepared and have managed that very well, despite us operation quite a challenge. So overall, expressed in good shape, very good digitalization agenda. Global forwarding phrase. You know, we show here as well that we are now ahead of even 2019 before the pandemic. look into the detail, we have added significant volume without adding people. That shows that the systems really help us to gain productivity. And on top of that, we have, of course, very high yield, as all the players have. So I think in Africa, we are really in great shape, and we have grown our GDP in ocean freight as well, and we are now back to the level we had before. The second element of digitalization on the right side is myTHRI. markets as well as we speak. Supply chain, very strong recovery. We are now significantly ahead of the margins we had in 2019 before the pandemic and also the ups of profit, excluding even in 2019-20 where we had one-offs. So this is really now these three years, one-offs in 2021-20. This is mainly a B2B business. Yes, we have e-commerce quite sizable as well, but as we believe that e-commerce will continue to grow, we should benefit in that area as well. We have a lot of digitalization and a quite busy digitalization agenda here as well. Just to name the collaborative robots, which of course are giving us productivity gains that should help us to improve all of our consumer goods. Good activities here and I'm very happy about that development. It was an excellent quarter and I think there are more to come because the agenda of Stanford employees is really working well. E-commerce solutions. I talked already about the growth and the pattern we see. Overall, there is strong growth and are significantly above the margin of what can be anticipated for 2025. It's a consequence of significant lift in volumes, and you see that in these kinds of businesses. If you get more volume into the network and you draw up a certain threshold, you should see a very good development of the market, as you can see here. So that's very positive. An example where we are working on digitalization is our cross-European product, which will definitely grow faster also in the coming years than the underlying market. for our customers. Finally P&P Germany, you can see here that revenue and volume grew nicely but in line, different from the last quarters but that is all reflected continue to be on that. We have the same effect in mail. You can see that here. We have, you know, dialogue marketing has grown much faster than the first class mail. That leads to significantly bigger volume increase than revenue. And that, of course, leads of the short end always to some challenges with regard to, you know, how much profitability improvement you see. But overall, of course, We are happy to see that volumes in the dialogue marketing are coming back and that revenue is growing. Long-term trends are still the same. We expect a decline year-over-year by minus 2-3% but of course we are pretty pleased that we predicted what is happening now and it is slightly better and I think we are in good shape here as well. development year over year. Digitalization and other activities, I think we talked about some of them already before. I think we don't have to stick to that. They have a very busy agenda in digitalization to make our operations more productive and more customer-friendly. Finally, our ESG highlights of the first half. As you know, we have launched our roadmap in March. We are making good headwinds there and I'm very happy that we now announced two days ago our first purchase of electric cargo planes. I know that they are carrying only a ton, around a ton, but they are nice replacements of our old feeder flights starting in the US. And we are also progressing with our to sustain the maritime fuel, as you can see here. A great place to work, of course, is important for us anyway. The second bonus, I think, sends a very strong signal. We have just in Germany vaccinated about 40,000 people in Germany, and I think that is showing as well that we are taking our responsibility for that service. So overall, also on the SSG agenda, I think good progress base of our strategy. So overall, all five divisions are in very good shape business as well after the pandemic has hindered them less to do good business. Thank you for listening.

Thank you very much Frank and good morning to all of you also from my side. So turning to the condensed financial part of the presentation, when we look at our revenue development, I think Frank already explained all relevant trends and on page 15 you can see how that adds up to the Revenue growth of, in absolute terms, €3.5 billion in Q2, 22%. All DHL divisions was on an organic basis, growing with more than 20%, and Post and Basel still growing with 7%. So it was a very good quarter on the top line, and that was the foundation for then, based on very good network utilization, translating that into a very strong EBIT development. On page 16, You can see that with 2 billion, 83 million, we actually had our best quarter ever. I mean, the interesting thing is when you look at the half-year EBIT number, adding to 1, 2, 2, we're close to 4 billion. A couple of years ago, that would have been a great result for a full year. Now we have achieved that after six months. So that's, of course, a pleasing development. contributing to those great numbers. Of course, Express is standing out with more than 1.1 billion euros EBIT in a single quarter. But when you look at the margins, it's a very strong performance for all divisions. Express, a 20% EBIT margin. DTFF and supply chain both, a 6% and DHL e-commerce solutions at 8%, so very strong performance across all divisions. the DHL division, and also good performance on the P&P side. Turning to page 17 and the full P&L, yeah, I think the one consequence of good performance is that we had to pay more taxes, and that in combination with an increase in the tax rate leads to significant increase in the taxes line. I think that's the only thing to point out in addition on page 17. Overall, when you then add it all up, you can see that compensated net profit and earnings per share are up more than 140%. So we are able to translate the top line development into good EBIT progression, and then ultimately, despite the increase in taxes, into a very pleasing progress on the net profit development. So that's the accounting side. Now turning to the ultimate real thing, cash flow. page 18. So first of all, I want to point out that after six months, in terms of free cash flow, we are at more than $2 billion. So that, again, would have been a couple of years ago a number we would have been happy with for a full year, but obviously the expiration levels have gone up. When you look at the quarter in itself, I think there are a couple of points I wanted to comment on, because when you take a first look, you may say that, well, flow is only up 300 million. Why is that? There are four main drivers which are all fully in line with what we had expected. The first one is when you look at the changes in provisions line. In the second quarter of 2020, we actually built provisions, for example, for the street scooter repositioning. So the positive change in provisions number 13 was a bit of an unusual thing. with minus 87 is a more normal thing. That is a 200 million year-over-year swing. Like in the P&L, we, of course, also see impacts in terms of taxes paid. That's up 140 million year-over-year. And business is growing heavily. We saw that in the top line, and naturally that leads to a certain expanding on the working capital side. which is something we're monitoring very closely and overlying with increase in working capital in mind with our expectations. But on the cash flow statement also leads to a minus 229 million year-over-year increase. And the fourth point I want to comment on, obviously on the CapEx side, Given the continued very strong network utilization and volume growth, we keep investing in line with our CAPEX guidance, and you can see that in the increase in net CAPEX. So those four elements together explain why there's only $300 million in free cash flow improvement. But again, for the half year, it's a free cash flow of more than $2 billion. That's all fully aligned with our expectations. So much for Q2 and the past. Now turning to what is probably most relevant for you, what to expect going forward. And we have included three slides before I come to the guidance page to give you a bit of background to our thinking about the guidance. The first one is with regard to what we expect on the top line, and you can see that on page 19. That is basically putting together the individual slides Frank talked about. You can see here on the bottom pack of the line the B2B development. There you see this continued recovery. We obviously see the normalization in growth, like we had expected for quite some time now. So we expect that normalization to continue. It is probably going to be a little bit different country by country, and we have to really see how that then adds up. I think directionally it's very clear what we assume on the top line. The big discussion we then had is, okay, how do we prepare operations for the second half of the year and particularly for the peak season? And then you can turn, when you turn to page 20, you can see in the middle of the page our guidance principles that here we really want to make sure that we have the capacity needed in the peak and that we really want to focus on delivering great service quality for our customers. That means that we are going to plan for a dynamic peak, even though there is a certain risk that it could not be so dynamic, which would then, of course, lead to us having certain areas of overcapacity. That is one of the reasons why our guidance for the full year in terms of EBIT may look a little come the way we are expecting, that would lead to a certain cost overhang, but that is a conscious decision. And just to kind of like explain it very completely, so for example in post and parcel Germany, you saw in one of the slides Frank talked about that in the second quarter, in our parcel volumes, we were still at the same level like in Q4 2019. So we were still running in Q2 on a peak volume. Normally the summer is of course always lower and we tend to quite significantly reduce costs over the summer months. We have not done that as aggressively as in the past in anticipation for this strong peak. We already know that this will have an impact on the EBIT margin and PNP in Q3. We believe that this is the right approach to then be ready for the peak season in Q4. So that in terms of general philosophy, how we are preparing and managing the second half of the year. On page 21, I'm not going to go through all the words on the page. I think the basic message here is we, of course, understand that there is a lot of debate about inflation out there at the moment. I think for us running network businesses, where we have always seen cost inflation over the last years, we are not going to develop something fundamentally radically new to deal with inflation. We will use our well proven tools and the most important tool here is our standard price increase mechanism which we have been executing over the past years and which we will of course do again and where we are very clearly taking cost inflation into account to ultimately pass it on to the customers. So with that to the guidance page which is unchanged compared to That fully takes into account the second COVID bonus Frank talked about. We are taking that into consideration with growth of about 200 million. So underlying, it would be more than 7.2. When you look at the medium term guidance, we have increased that to more than 7.4. So we clearly expect a normalization in growth rates, but we believe that also medium term, we have a good base for further profitable growth, and that is what we're aiming for. I'm not going to go through all the details of the other guidance elements, because nothing has changed here, and we cannot talk better about that in the Q&A. And with that, thank you very much from my side, and Martin, over to you for the Q&A.

Right, over to you, operator, for exactly that.