Deutsche Post Ag S/Adr

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the DHL group conference call. Please note this 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 wish to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. If you have dialed in, please select star nine to raise your hand and star six to unmute. Instructions will also follow at the time of the Q&A. I would now like to turn the call over to Martin Ziegenbolg, Head of Investor Relations. Please go ahead.

Thank you and a warm welcome from my side to our Q2 call to everyone out there. I take it you have the material that we released this morning in front of you. We see that we can make this a straightforward exercise today with the presentation by Melanie Kreisauer, CFO, and afterwards the Q&A. And with that, over to you, Melanie.

Thank you very much, Martin, and good morning. A very warm welcome to all of you out there also from my side. Thank you for joining our Q2 2025 investor call. I will, as usual, provide a short review of the key numbers and observations for the quarter, and I look forward to addressing your questions afterwards. So starting with page two, page two summarizes our key observations for the second quarter of 2025. we indeed saw an impact of lower volumes in global trade. However, we have managed this volatility effectively, driving a strong performance in our logistics portfolio with an increase in Q2 EBIT and sustained strong cash generation. This outcome shows the effectiveness of our cost actions, both in terms of adjusting capacities to cyclical fluctuations and in implementing structural cost measures under our Fit for Growth program. And this allows us to continue investing into attractive structural growth opportunities lined with the priorities outlined in our strategy 2030. More details on both inorganic and organic investments will follow at the end of my presentation. Let me start on page three with some observations on global trade as I know that this is on everybody's mind these days. The graph on the left illustrates the diversification of global trade. By destination, the US remains the largest destination market, and as expected, this is the area where we have seen the most significant impact on trade flows in Q2. Nevertheless, it is the essence of global trade that it finds its way to keep flowing, as we will also see in the express regional development later on. Our ambition as the most diversified global logistics company is to support our customers in keeping their businesses going and in enabling them to continue leveraging the opportunities from the diversification of global trade also under the current circumstances. So, blows have been extremely volatile throughout the second quarter from week to week and across trade lanes. Page four summarizes what this means for our Q2 volumes. When we filter out the weekly noise, B2B volumes were eventually slightly lower across modes, however, there was no massive decline, nor did we see a fundamental mode shift. E-commerce was a structural trend and continues to drive better momentum in B2C generally, with China-US de minimis being the only market segment where we see a significant impact on trading volumes. Page five highlights how we translated these external conditions into a 6% year-over-year increase in Q2 EBIT for our group portfolio. Express has really excelled in cost flexibility and yield management, delivering the fourth consecutive quarter of EBIT increase despite an underlying volume decline. And I will come back to the drivers of this performance in more detail in a minute. As shown in the line at the bottom of the page, we have also started to book first one-off costs related to our Fit for Growth program in the second quarter, impacting Express, DGFF, and eCommerce. And this is one reason why DGFF has seen lower EBIT conversion in the quarter with the extreme volatility and overall weaker demand also dampening GP generation and productivity in the sector. Supply chain continues to demonstrate a resilient performance with EBIT margin at 7%, and that is after adjusting for the positive net M&A one-off we had in the quarter. E-commerce booked 8 million euros cost of change, so we're slightly down year over year, also excluding these costs, but in line with expectations, reflecting, as you know, continued investments into the structural e-commerce trend. And last but certainly not least, in P&P, we are very pleased to see our targeted cost actions based on structural network changes providing the necessary benefits to manage the ongoing structural volume shift from mail to parcel, which we saw as expected continue in the second quarter. The mentioned cost of change and supply chain one-off benefit are summarized in the EBIT bridge on page six, with positive and negative non-recurring effects roughly balancing out for a positive 4 million Euro net effect in the quarter. The positive one-offs relate to M&A with a small disposal in corporate functions and a larger €54 million net positive M&A effect in supply chain, where the positive contribution comes from the first time full consolidation of our ASMO joint venture in Saudi Arabia. We also had a positive free cash flow effect of roughly €100 million in net cash from M&A from ASMO in this quarter. And now it gets technical. This will reverse out, becoming cash flow neutral eventually with no impact on our overall free cash flow generation. However, the current accounting assumption is that the outflow will go through different lines in the cash flow statement. And that technically will lead to a net negative impact of 100 million euro on the free cash flow, excluding M&A view. We will flag that transparently as it unfolds in the remainder of the year. The cost of change of €58 million relate to structural cost measures in the three divisions mentioned, but what is important to understand is that not all fit-for-growth measures do require cost of change. To the contrary, we initiated the first fit-for-growth measures last year without any cost of change, and we are seeing fit-for-growth benefits clearly supporting our EBIT performance, I would say, even better than initially expected, particularly in Express and CNP. On page seven, we present some examples of relevant cost KPIs, which we are actively steering and tracking for Express. And you can see here that across the network, we see really positive IE declines in all categories, which is a combination of efficient capacity management and structural changes under our Fit for Growth program. Next to the strong yield management, these cost measures are the primary driver of the increase in ExpressQ2 EBIT, despite the year-over-year volume decline. As we mentioned on page eight, we have significantly reduced our air capacity and related costs. Beyond the overall 7% reduction, which you can see highlighted on this page again, we have furthermore flexed capacity across the network to adapt to the volatile regional trade flows. As such, you see on the left side of the page the expected strongest decline in shipments into the US, to which we have responded with a significant reduction in airlift and in local pickup and delivery capacity. At the same time, the positive year-over-year developments in APAC and Middle East Africa are noteworthy. Though not sufficient to drive year-over-year growth for total global volume, They demonstrate the high diversification of global trade as discussed earlier, or simply put, there are still growth opportunities and growing trade lanes also in the current environment. Looking ahead, we expect this volatility to continue and we also expect a usual seasonal uplift for the peak season. And for that reason, we are currently preparing the demand surcharge 2025 with similar mechanics as last year, and we will announce the details in due course. I have now talked about what we see in terms of the global trade environment, what it means for our volumes, and how we cope with it. There is clearly still a lot of uncertainty and volatility, but based on what we know and see at the moment, we are reiterating our guidance today. We maintain a qualification around changes in tariffs on page 9, where we continue to monitor an escalation in tariffs and trade conflict not covered in our current assumptions. And one of the topics which we are watching here is the de minimis exemption for shipments from rest of world into the U.S., There have been several iterations on that topic in recent months. For example, the discontinuation of the de minimis exemption earlier in the year for four days, after which it was reinstated. Then, as you all know, we had at the beginning of May the abolishment of de minimis from China-Hong Kong into the U.S. And now there was a new executive order issued on July 30th, which brings the timeline for the rest of world phase-out forward to August 29th. compared to a phase-out in 27, which was foreseen in the tax bill passed just one month ago, so obviously also quite a dynamic environment with regard to de minimis. We will have to see whether the latest executive order from last Wednesday will be implemented as announced, and if yes, what substitution effects will occur. In a worst-case scenario, we would see a maximum risk of up to 200 million euros on our full year 25 EBIT. We decided not to include this risk into the guidance as we don't consider this worst-case scenario the likely path forward, but I want you to be aware of that topic as it is one of the many moving parts. Turning back to a more straightforward topic, I'm particularly pleased to conclude my review with a cash flow perspective on page 10. We see continued strong cash generation allowing us to invest in a balanced manner across all priorities of our finance strategy. While we remain in strong CapEx control mode given current volume developments, we also continue to invest in targeted opportunities that will drive our mid-term growth path, focusing on the growth topics identified by Strategy 2030. We have spent €3 billion on shareholder returns in the first half of the year through our dividend payment and ongoing share buyback program. And additionally, we have seized some good opportunities for targeted inorganic growth, leading to a temporary acceleration in M&A announcements and spending, fully aligned with our strategic ambitions. You find the full list of announced acquisitions on page 11, and you see the clear focus on the strategic topics of life science and healthcare, geographic tailwinds and e-commerce, as well as the confirmation on the right that we pursue M&A not for sheer size or volume, but as a complementary option to enhance our capabilities and market feeds. But to be clear, organic investment remains the primary driver of our midterm growth plans. On page 12, we showcase some examples of our ongoing targeted investments into organic growth opportunities, driven by the midterm structural growth topics laid out in our strategy 2030. To wrap it up on page 13, the key takeaways from our Q2 performance and current management priorities are, not surprisingly, we are effectively managing short-term volatility through cost and yield actions, and at the same time, we continue to invest into fundamentally attractive structural growth opportunities. Given the environment, we are addressing our cost base both from a shorter-term cyclical capacity angle and through structural cost reduction under our Fit for Growth program. And that is what you can quite clearly see in our Q2 numbers. So I rushed through the presentation to have enough time for your questions. And I now look forward to hearing your questions. Over to you.