Deutsche Post Ag S/Adr

Thank you, and good morning to everyone out there. We're going to do this in a straightforward fashion. I've got here with me, as announced, Tobias Meyer, Group CEO, and Group CFO, Melanie Kreis, both going to take you through the presentation. I take the F in front of you, and then we're going to deal with Q&A. And with that, over to you, Tobias, please.

Good morning, everybody. Thanks for joining us today for our full year 2023 update, especially with a focus also on the fourth quarter, starting with the headlines on page three of the presentation. We finished the year within our guidance range and particularly on cash flow. I think we delivered very well also because we spent less capex in those areas where growth was a bit weak. I think we can say that the Q4 period was characterized by still a relatively soft environment, both on the macroeconomic level, but also as it relates to global trade, which obviously for us is even more relevant. GDP is an important indicator, but trade is what really matters for us, and especially on the B2B side, we see continued softness. But we can also say that the structural e-commerce trend is clearly re-established after the short normalization phase after the pandemic, and we also make good use of technology to drive yield management, better efficiencies, and also sustainability, and provide some more details on this during this presentation. So the self-help journey in some of our divisions is still very well underway, but we are lacking a bit the support of a re- invigorated global economy. This is also what you see on page four, where we take a look at our B2V volumes. You see that across express air freight and ocean freight, we are still below 2019 levels, especially also in express. And we haven't really seen a recovery in Q4. We were flat on average or across the express network in terms of shipments. Now, if we look at it a bit deeper, you will see that there was quite some weakness in Europe, whereas that also had an impact on our network and the flow through. Air freight is very much, I think, reflecting the market. And in ocean freight, we basically see a bottoming out and into this year, maybe a little bit of growth, which is not yet the case for express and air freight. So we also see that this year of 2024 is up to a relatively slow start. So that is what we're currently seeing. But we also clearly still expect that we have a better second half where also the comparables become much easier for us, given that the second half of 2023 was already quite softened. On page five, you see the B2C picture that we here kept a lot of this enormous upswing during the pandemic. B2C shipments in express, for instance, up 45%. So that is something that continues to provide growth. We've also in Q4 seen a peak, mainly out of China, which for us is a lane that isn't as profitable and accretive as other parts of the network. So that peak we would have liked to see a little bit broader, but again, that wasn't happening due to the overall macro picture. In e-commerce, we continue to trade up. It's also the case for our business in Germany. Again, that trend towards a higher share of online is fully reestablished and intact. for P&P post and parcel Germany. We have to keep in mind if we look at this four-year graph that we had also the Amazon insourcing which created that stronger dip post pandemic that is entirely absorbed and we are back there on a trajectory of growth. Page six lays out some of those measures and tools that we use to manage yields that is very well established in Express but also in parcel Germany and increasingly so in our e-commerce division. It is also increasingly relevant for our B2B business where we apply methods like this as well and in supply chain we can really say that the investments in technology in the quality that that technology also helps us produce is translating into higher GP and more flow through. So that is a journey that we feel very confident about. There's always some phasing topics in supply chain from quarter to quarter, but the underlying positive development of that division is fully underway. We also see that on page 7 as it relates to structural efficiency improvements, the flexing especially of the intercontinent network, but also its optimization as it relates to fuel and block hours is one of those programs that we continue to drive. The deployment of robotics in the supply chain division especially is really reaching scale. So it's not only gimmick projects. that look nice but don't deliver value at scale. But we clearly now make it into the scalable phase that makes a difference to the business overall. And that's the case definitely also on those technologies that help us interact with our customers better. Here an example in the presentation of global forwarding. That's a journey that we continue to push. Obviously a lot of things happening, also what we can do with AI. in those areas, so that is going to remain an area of focus. Page 8 has the highlights as it relates to our ESG targets. We basically made the target on realized decarbonization effects spot on. Employee engagement is calibrated through the annual employee opinion survey that we already did in September. And on cybersecurity, we really had a good year. We used that bit-sized metric, which provides us some input on certain areas, and we have really made very good progress on that. So that score took a substantial increase. So that brings me already to a wrap up before I hand over to Melanie to deepen some of the financials and the outlook. So overall, I think we are satisfied with our performance in 2023, given the weak environment and that lack of macroeconomic tailwinds, which again, we do also see cautiously for the first half of 2024. So we'll remain in a cautious mode also as it relates to cost management. We will invest where it makes sense, where we make our business better. We will, I think, remain very much focused on value creation when it comes to the deployment of capital. And we have good opportunities organically. and by doing smaller and mid-sized acquisitions that really create an opportunity for us, a unique position to drive value. So that's the journey we are on. And we see a clear opportunity that the second half of 2024 is going to be better year on year because of the easier comparables, but also because we do see that we are progressing in the cyclical development of the economy and that the hike in interest rates, which took a long time to be absorbed by the broader economy, that that is coming into the next phase. With that, I hand over to Melanie to give you some more details.

Thank you very much, Tobias, and good morning to all of you also from my side. I will now cover the main noteworthy points on the divisional numbers. I will talk about cash flow and our guidance, and then we will, of course, open the floor for your questions. So looking at Q4 on page 11, we have seen, as Tobias already explained, quite a good volume development on the e-commerce side in line with the usual seasonal trends. So there was a peak season, and this has been supportive to P&P and e-commerce EBIT. I know the big question this morning on your side is, why don't we see this volume development flow through to the express results? And in order to understand that, you have to look at how those volume flows are spread across the network. You can also see that in our stat book, where TDI volume growth was clearly coming out of Asia, out of China, whilst Europe volumes were still down by almost 5%. So those volume flows were very imbalanced in the network, still depressed, particularly in terms of profit, a very important European network, and so unbalanced about Asia outbound China that they actually came with a detrimental cost development on that lane. And that is the reason why in the fourth quarter... more encouraging overall volume in Express where we were back to positive growth in terms of shipments was not translating into EBIT yet. That maybe takes me to a bit of a sneak preview on what we expect for this very important division also in the start of the year. Peak season is over and we do not see a meaningful acceleration in B2B volumes so far, particularly not in Europe and on that basis we also expect a rather low run rate in express going into the year and that is reflected in our guidance assumptions. But even though we are still in winter at this point in time, spring will come eventually. And once the volumes return, which we currently assume more in the second half of the year, we will also see a return to operating leverage in express. So this is more of a temporary thing from our perspective and nothing to be fundamentally concerned about. Turning to global forwarding, I think here we have seen a development in line with market trends and also anticipated we saw a further normalization on the rate side and that in an environment with weak volumes that led to the expected GP and EBIT decline. One special topic to point out in the forwarding numbers is that in the fourth quarter, We had a one-time positive accounting benefit linked to the re-evaluation in connection with the acquisition of our long-term joint venture partner in global forwarding Dubai, which we are flagging transparently in the comments here. Supply chain continued to deliver good numbers. Yes, EBIT is just slightly down year over year, but it's really... driven by currency headwinds. So on an organic basis, we had another quarter of growth in DHL supply chain. And we continue to see a strong pipeline of new contract signings. So the structural growth trend is fully intact here and should also be visible in the first half of 24. In DHL e-commerce, volume development was good in the fourth quarter. But on the cost side, we do see the effects of our investments into future growth. One highlight in the fourth quarter to be pointed out for ECOM was the successful closure of the MNG cargo acquisition in Turkey. And with the first month of the new colleagues being on board, we're very, very happy with that acquisition. Last but not least, P&P. After a challenging year, it was a rather encouraging fourth quarter with solid parcel growth. I think that is also quite remarkable because unlike competition for the first time, we did apply the peak season surcharge in November and December. Nevertheless, we still had good parcel volume growth. And we also had a very good and solid cost management, and that allowed us to deliver on our guidance in P&P and to even invest a little bit into the future of this building, a small restructuring position, which will help us going forward. So that was what happened in the divisions. If you kind of like add it all up for the full year on page 12, you can see that in terms of Group EBIT23, we have delivered on our guidance, although in the lower half, and yeah, that was linked to the fact that the macro development was unfortunately also on the last stretches of 23 in line with our most cautious L-shaped scenario. So I think in this environment, let me repeat what Tobias already said, we are quite satisfied with the full year numbers I think you also have to bear in mind really that B2C B volumes are experiencing the longest period of declines since the great financial crisis, so for more than 15 years. And in that environment, our group EBIT remains significantly ahead of our pre-pandemic record levels. And why is that? I mean, Tobias has already explained how e-commerce growth and our disciplined work on efficiencies, on costs, and on yield management have driven that sustainable step up. I will come to our guidance in a minute, but I think we can already say that we stay cautious in the short term as volume development remains weak at the start of 24, but eventually, to reiterate that, we will end up benefiting from positive operating leverage once B2B volumes pick up again. Now turning to a slide which I think is very positive, page 13 and our cash flow development. So despite all the headwinds, despite the normalization on the EBIT side, we were able to deliver a free cash flow of around 3 billion. When you kind of look at it all in, 2.9 billion excluding M&A, 3.3 billion. So that is for me a very, very positive sign that the underlying substance is in good order and that we are also structurally more profitable than we were before. How did we achieve? this good results on the cash flow side. We talked about it also in the previous calls, have a flexibility to adjust our capex spending to the volume development. Lower volumes obviously require less capex and that serves as a strong counter cyclical protection for our free cash flow that has been visible in our numbers. At the same time, given that we have this very strong balance sheet and that we are in such a financially healthy position, we are able to keep investing into future growth with a continued focus on organic growth, hence the CAPEC numbers. also on the M&A side as evidenced by the opportunities in Turkey in the Middle East. So we are continuing to do things in a balanced way, investing into future growth both organically and inorganically. And here, the most important thing for us is finding the right targets. And as you probably will have seen by now, we have today confirmed that we consciously decided not to participate in the Schenker process, as we did not see this as the right target along our well-known M&A criteria. Last comment on this slide, which you can tell obviously I enjoy talking about, is our cash conversion. This is one of the regularly used steering KPIs, but I think when you look at the graph on the right, it nicely illustrates how our improved operating performance also translates into sustainably improved cash flow. Yeah, that takes me to logical next topic, shareholder returns. I think the first important message is we fulfill our commitment to maintain a stable dividend despite the anticipated earnings decline in 23. You may recall that a year ago we had questions, oh, why didn't we increase dividend further on the back of the fantastic year 22? Well, we had obviously planned ahead and assumed that 2023 would be the year of normalization, and it was already then for us very, very important that we would put ourselves into a position where we could at least maintain the dividend at 1.5, and that is what we have now added. And the second important message on that page, which you will have seen by now as well, is that we announced an additional extension of our share buyback program by €1 billion to now the end of 2025, a total €4 billion program. And we are also executing on that program quite swiftly, actually. We have already spent more than €400 million in the current year. So 1.6 billion euros are still open for further execution. Yeah, page 15 summarizes what I have already kind of like touched upon. So thanks to our strong cash generation, thanks to the good balance sheet, we can execute a well-balanced capital allocation. We keep investing significantly into organic growth and selectively into inorganic growth. and we make sure that you as our shareholders participate in the form of reliable returns. And that is, of course, all in line with the principles set out in our finance policy. Now, turning to the future and our guidance, let me first explain a little bit our convictions and the guidance assumptions on page 16. First of all, when we look at the line structural factors, we believe that there are good growth opportunities for us going forward and that the relevant megatrends are in place. So structural growth from e-commerce, a good opportunity to pass cost inflation on to our customers through disciplined yield management, benefits increasingly from digitalization and of course also from our continued investments. And yes, global trade patterns are changing. but that also creates opportunities when you think about omnishoring, when you think about the greater complexity in our customer supply chains where they do need the support of a competent logistics partner, now probably more than ever. However, we also have to take into account external factors. And the main question here remains when B2B volumes will once again correspond with GDP growth. That's not yet the case, but eventually it will bottom out and we will see a return to growth also on the B2B volume side. So when we now look at our guidance assumptions and how that also will play out in our expectations over the course of the year, We are cautious with regard to the first half of 24. We are still going against higher comparison basis in Q1, Q2 compared to 23. And we will see, of course, continued cost inflation. For example, in P&P, we have the wage increase coming in on the 1st of April. And, yeah, as long as the B2B volume recovery is subdued, that will probably lead in balance to a decline year over year in P&P. EBIT in the first half of the year, but we then expect things to bottom out and to get into a growth territory again in the second half of the year. Putting all that together on page 17, so with regard to 24, the sum of the two halves and the different assumptions for H1 and H2 leads to a guidance range between 6.0 and 6.6 billion euros for the group in 2024. And over time, looking at the mid-term guidance with expected operating leverage to return, we are convinced that in a period of more normal economic growth conditions, we will get back to the around 8 billion euro earnings level which we have reflected in our 26 EBIT guidance with a range of 7.5 to 8.5 billion euros. And then on the CAPEX side, as already mentioned, we have CAPEX flexibility. We have consciously chosen quite a broad range for the CAPEX guidance in 2024 because, again, we will adjust CAPEX spending to the volume dynamic VC. And last but not least, when you look at the free cash flow guidance, both for 24 as well as for the cumulative midterm guidance, you can see that we expect a continued strong cash generation, which of course will then also be the basis for further balanced capital allocation decisions like we have shown today with regard to 23. So to conclude on page 18, In a not very dynamic, rather challenging macro environment, we have shown in 2023 the strength of our very diversified portfolio. We will stay agile as needed in the short term and we will benefit as soon as volumes pick up again. With CapEx flexing up and down accordingly, this drives a strong cash flow generation through the cycle as evidenced in 23, but also visible in our guidance. And with that and our rock-solid balance sheet and attractive shareholder returns, I hope that with the dividend and share buyback decisions, we have also been able to meet your expectations today. Yeah, with that, Martin, back to you for the Q&A.