Deutsche Post Ag S/Adr

Ladies and gentlemen, thank you for standing by. I'm Moritz, your call's call operator. Welcome and thank you for joining the DHL group conference call. Please note that the call will be recorded. You can find the privacy notice on dhl.com. Throughout today's presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press star key followed by zero for operator assistance. I would now like to turn the conference over to Martin Siegenberg, Head of IR. Please go ahead, sir.

Thank you and good morning and welcome to everyone out there for our Q3 24 call. Following last week's release, we are today looking at the full set of Q3 figures, which I take it you have in front of you. I have here with me our Group CEO, Tobias Mayer, and Group CFO, Melanie Kreist. and we will follow the usual procedure, and that means we're kicking off with the presentation. Over to you, Tobias.

Thank you, Martin, and good morning to everyone joining from Bonn. Start with page two, the highlights for the group for the third quarter. What we observe globally is still a very heterogeneous development of B2B trade. We have some trades and some modes that have been growing more and quite pronounced in the third quarter, but we also still see markets with contraction, particularly also the freight markets in Europe have been rather disappointing given also the macro environment is falling short of the expectations that others as well as us had for this year. What is positive, we do see the e-commerce trend affecting our B2C parcel business being fully intact. We see good volume growth in the different markets where we're present with last mile delivery services and also the peak season looking quite positively from today's point of view. We had to adjust guidance slightly last week to now above 5.8 billion EBIT for the year from what was the lower end of 6.0 to 6.6 before. This still implies an at least 8% increase in EBIT for the last quarter, which we're confident to deliver. We have a great focus on yield management across the different divisions, particularly also Express, where we have a demand surcharge for the first time in place, as have many of our competitors. Similarly, for the parcel business in Germany, as well as some of the other domestic business we are present in, we have such a surcharge for the fourth quarter or slightly longer. So this is providing us with confidence that we'll see progress on yield. And we also are generally positive about the cost measures that we've put into place, productivity shaping up quite nicely. There are definitely areas where we could also seen a bit more positive development. That's particularly true for the GP and air freight, which we're going to talk about in more detail later. The strong free cash flow generation is the basis to provide attractive shareholder returns, so we remain committed to that. The fourth quarter is traditionally a very strong quarter when it comes to cash, but that is important as we stay committed particularly to our dividend policy. On the following page, you see a chart that we have shown for previous quarters as well, the progress in the economic cycle when it comes to the B2B freight markets. We do see a lift in air freight and ocean freight volumes, particularly out of Asia. China playing a strong role, especially when it comes to ocean freight. We've seen quite tight air freight markets out of Taiwan, out of Vietnam, for instance. But we also do see that the TDI market, our premium Express product on the B2B side, remains quite subdued. So here it is particularly our yield measures that contribute to the earnings. On page four, you see the overview for the different divisions, starting with Express, a slight increase in EBIT year-on-year. That, again, on relatively subdued volume and weight development. We have stabilized the EBIT at a solid margin of 11%. Obviously, we expect a seasonal impact in the fourth quarter to the positive, but generally trading in line with our expectations. Global forwarding freight, we saw volume growth again that also provided a positive revenue momentum for the group. We have some structural effects. We have, for instance, more exposure to beer, wine, and spirits, which traditionally trades more on backhaul trades, which have been less dynamic as it relates to rate development, but also some work to be done, particularly on air freight. We still had some contracts on the buying side that were quite elevated. On the other hand, we had some contracts that we still carried with us last year that now cycled out. And particularly out of Asia, some imbalances in our buying and selling that was not as advantageous as we would have liked to see that developing. So not satisfied as it relates to the quarter in air freight. But overall, also, if we look at the productivity development in global forwarding, I think that is developing on a very continuous and positive trend. Supply chain, very steady positive development despite some lower economic activity that we do see with existing customers. So a lot of the growth both in revenue as well as in EBIT is based on new business wins. The pipeline there continues to be strong also in the right sectors with the right GP. So again, a good quarter for supply chain. E-commerce, 7% organic growth, similar volume growth. So we do see still some yield pressure. We have some very strong markets, the Netherlands and the US included. We have some other markets where we still have a lot of competitive pressure. And us building out a B2C network where we still have some scale effects to overcome, so that will continue for a while, but the volume growth in e-commerce again shows that the trends there are fully intact. On post and parcel Germany, we had another very good quarter as it relates to parcel. It has generally been a success story in the last years, as many of you are familiar with. On the other hand, we had quite some shortfall of mail volumes. Some of that accelerated decline was expected. This is also why last year we applied for an early increase in the tariff and the stamp price. So net of one-offs and earning of around 100 in the quarter. which is not satisfying and we are obviously still in the process for the stem price increase in 25-26. So that is something which is still ongoing. If we go to page 5, the factors influencing our guidance, you have those structural factors that I already talked about as well as the cyclical factors. I think we can conclude and you also see this in the small graph on the bottom right hand of this page that we are progressing in the economic cycle. We have seen stronger revenue growth already in Q3 after five quarters of reducing revenue, a slight growth in Q2, a 6% growth on the top line in Q3, and also on the EBIT side, we are basically flat for Q3 year on year. but do expect in excess of 8% increase for the fourth quarter. And based on the trading we see in October, we are confident to deliver that. On page six, the guidance as we have now adjusted to with the announcement last week, greater than 5.8 billion EBIT for the group with a split of greater 5.5 for DHL and P&P now around 800 million, as well as this being reflected in the free cash flow. On the mid-term, we adjusted that to bigger than seven, mainly for two reasons, one being the slower economic recovery, especially in some of the B2B freight markets, which we obviously have a significant exposure to, not only in Express, but that is obviously an important factor. in our overall earnings situation, but also the preliminary decision of the network agency that is falling short of what we should be granted as margin in P&P by law. So that is still to be seen whether that now fully materializes, but that is a factor that we came to know end of September, which now is reflected in this updated guidance. Looking a bit further into the future with the strategy 2030 on page 7, you have again the summary of our assumptions as it relates to that time horizon. So we assume that we return to normal GDP growth of around 2.5% to 3% in real terms, which then translates into underlying volume growth that is shown on the right-hand side of this graph. In terms of our development relative to the market, our aspirations are summarized on page 8. We want to further but gradually increase market share in Express. We do see that also in the last three months we have delivered really good quality above our internal thresholds and that is a key driver of customer loyalty in this segment. So that is going to continue to be our strategy that we focus on the premium end of the market and do not compromise on quality and combine this excellent service offering with the yield discipline that I think we've shown in recent quarters. On DGF, we need to still prove that we are able to outgrow the market. We are very much aware of that. We have done, as you know, work on the system and process side. We are well underway as it relates to productivity development, but we still need to show that we can outgrow the market also in terms of yields and the measures that we're going to present, how we're going to do that. Supply chain can build on a strong track record already with different combinations of levers ranging from supporting real estate development to the extensive deployment of robotics and automation. So we'll continue that strategy with a focus on specific sectors, which we see as particularly attractive. E-commerce, again, as you know, a heterogeneous portfolio of last mile activities, some of them performing very well. others work to be done and also patient to be applied as we grow our market position. And then with P&P, with stable market shares to continue the transformation into the leading parcel player in the German market. We are roughly three times the size of our next competitor. in the parcel delivery market which obviously is critical as economies of scale matter in this game and we have through our legacy in this market a structural factor cost disadvantage so the relative scale has actually improved in recent years due to the stronger fragmentation of volume onto our competitors with the entry of Amazon logistics. Page 9. summarizes what our short-term focus is. You will have seen that the capex flexibility continues to work out well. We flex down capex in those areas where we do not grow. We are very mindful of not increasing capital intensity further. We think we're at a healthy state. We did good investments in the fleet of Express, for instance, which are paying off. But especially on the real estate side, we need to focus on purely owning strategically important assets and we'll do that. Cost management I think is well underway. We do this with a steady hand and we're not in favor of abrupt changes. But also if you look in the stat book on the development of staff in areas like DGF, despite consolidation of the Dubai activity, the development is down year on year. So I think we're showing good development on productivity. And obviously the peak season is on everybody's mind now. It's critical, especially in those areas where we do charge a surcharge, be that a peak season or a demand surcharge, that we deliver quality and we see ourselves well underway to do so. As it relates to Strategy 2030, the focus for the division and the common denominator remains quality. driving customer loyalty and also the ability to charge premium yields. We would want to further accelerate growth. We've shown 6% top line growth in the quarter, but that obviously needs to be broader, less dependent on rate developments, and we want to achieve that by continued focus on e-commerce, but also markets that are fast growing from a geographic perspective, and some specific sector, life science and healthcare, and renewable energy being two of them. Decarbonization continues to matter. We continue to buy, even in this economically more demanding situation, sustainable aviation fuel and to continue to invest in carbon neutral assets, be that electric vehicles or alternative heating systems. We do see a gradual pickup of customer demand and willingness to pay for such low-carbon or no-carbon services, but we're obviously still investing ahead of the curve, also to ensure that we have sufficient supply, especially as it relates to sustainable aviation fuel. We'll further, and you see that on page 10, deep dive on the divisional plans and developments in a capital markets day in April, early April of next year, where we'll then give a granular overview of what Strategy 2030 means for each of the divisions and particularly how we're going to accelerate growth in those different businesses. With that, I would hand it over to Melanie for some more details on the developments of the different divisions.