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Ladies and gentlemen, thank you for standing by. 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 wish to ask a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Instructions will also follow at the time of Q&A. I would now like to turn the conference over to Martin Ziegenbalg, head of investor relations. Please go ahead.

All right, thank you, and I welcome you all on the Q2 26 conference call of DHL Group. You've seen our full set of reporting out today. We've got with us here Group CEO, Tobias Meyer, Group CFO, Melanie Kreis. It's going to be the usual procedure. After your presentations, Tobias and Melanie, we go straight into Q&A. And then with that, over to you, Tobias.

Good morning, thank you, Martin. We had indeed a good second quarter as DHL Group, with group revenue accelerating to 13% year-on-year, as you see on page 2 of the presentation, and increasing by 30%. We had a good flow-through of the increased business through the bottom line due to The effects that we also spoke about in recent quarters, our fit for growth program, which we executed, but also continued good management of both yields as well as capacity and thereby our cost base, especially in express. The free cash flow reflects that we are in a growth situation with some build-up of working capital, as you would expect, but also one extraordinary item driven by the refunds of the AIPA tariff, which are currently reversed, as you will be aware of. So we had some temporary increases in cash flow, given that we received payments in the last days of June, which are currently in the process of being repaid to customers. We are very satisfied with the acceleration of our growth path throughout the first half of this year, with significant increases in the volume that we transported in our express network, but also and many more. Thank you very much. The continued uncertainty and volatility around us, the confidence to increase our guidance as we have communicated on July the 7th and also to increase our share buyback program which will extend until the end of next year and increase to a value of up to 6.5 billion as the cumulative amount. Going into some details on page three, you see the development of group revenue growth. We also showed here the organic development excluding FX, which is by far the bigger effect, and M&A. So we had talked about some headwinds going away already with the reporting on the first quarter. Those headwinds particularly relate to FX with the strong appreciation of the euro against other currencies, including the US dollars in February and March of 2025. That has now cycled out and we basically have no major effects as it relates to FX on revenue and earnings in the second quarter, but also the volume development with the initial waves of tariffs The second quarter has a lower baseline as it relates to volume. So those were headwinds that we anticipated going away. But as you see on the right side here highlighted on page three for the express network, the weight that we carried in that network. We had a quarter on quarter increase of about six percentage points of volume. That figure is relatively stable if you compare to 2019 or whether you compare it to 2024. So that gives you a sense how the underlying business has developed and the really positive momentum that has unfolded in the second quarter on a very broad base across business that we have increasing customer demand and also growth in the sectors that we targeted. As shown on page four, our strategy is 2030 is now in full execution with our focus on top line growth, but also profitability accelerators. So this is just a reminder on what we're working on. How that unfolds and what we're exactly targeting for Express is highlighted on page five. This is a longer term graph, the share of the integrator industry, the Express players relative to the total air freight market. We started collectively in the late 60s, early 70s. If you look at UPS, FedEx and us in particular, and others. At that time the business was very much focused on documents, so not much tonnage, not much kilos transported. That has changed over the years with the integrated industry taking a growing share of the general air freight market and we expect that to continue We had this post-COVID normalization that was strongly driven also by a shift of e-commerce shipments leaving the integrator networks for cheaper ways of transportation, bulk charters and injection into lower cost last mile networks. We now are strongly focused on growth in industrials, so B2B, and we believe that both our cost position relative to the general air freight market, but also our value proposition has improved and increased, and this gives us the opportunity for significant share gains and continuing the Thank you very much. Page six provides some examples on how we sell and what we sell based on. So it is the reliability is the speed and the predictability of the integrator model, which is superior on those dimensions to the general air freight product. And that is attractive not only for small spare parts, but also for bigger parts like turbines, be that for the use in aviation or for power generation, for the supply chain of complex high value products. What you see, especially in IT and data center logistics, especially we've played a significant role in the semiconductor industry now for about 20 years. It's a vertical that was added to the integrator focus area about 20 years ago. Now it is also Thank you very much. It is the most efficient air cargo fleet around and that is different than what we had in terms of scale and relative cost position 20 years ago. So that there is a natural and attractive play for us in those verticals. Beyond that, we continue to broaden our capability set to be an attractive provider to more industries in the space of new energy shown on page seven. That is particularly the handling of DG, of dangerous goods of different categories, but especially also batteries where there's a strong need to build up not only the supply chain for new goods, be that inbound to manufacturing or the distribution of such, but also increasingly spare parts, spare parts as it relates to full-scale batteries for EVs but also spare parts in areas like wind energy where remote places have to be reached at an increasing amount to keep those machines running and provide the needed parts for such installations. Data center logistics is something that is in full swing with significant building taking place, especially in the United States, where we also increased our business there. That is in two areas, mainly in the international transportation along that value chain, so inbound to the data center construction site, but also and increasingly so upstream. and then the staging of material and sequencing at or near the construction sites of those facilities. There's obviously high urgency to bring such sites into operation and that urgency then translates into goods that need interim storage and sequencing. to alleviate bottleneck capacities at the construction and us also taking over even certain installation services on site. So that's the two areas we also expect significant spare parts business to follow as those installations mature. That is an area where we are traditionally very strong with our service logistics business. The journey on life science and healthcare also continues. This is a longer term play for us where we systematically build out capacity, but also capabilities, especially on the express side to offer an end-to-end cold chain service in the express network. So this is something that did not have a significant impact on top line or bottom line in the quarter, but remains important for the mid to long-term growth of the group overall and supply chain global forward and express in particular. As relates to the profit accelerators on page eight, we continue to do professional yield management. In this case, we highlight the example of a parcel in Germany where you see the development of volume and revenue. and thereby I can conclude on the yield measures that we have taken. This remains obviously very important that we pass on inflationary effects, be that from labor or be that From fuel and other input components for fuel, we want a recovery mechanism and that is also for the group overall how it played out for the second quarter that we recovered the additional cost that we had through the elevated prices of fuel. Fit for Growth, we have successfully and ahead of time executed and achieved our objectives as it relates to the savings. We'll obviously continue to be very mindful about productivity and efficiency in the different parts of the business. We'll continue to deploy technology to leverage efficiency potentials and realize such. So it's not that we in any way lose focus on such opportunities, but as a structured program that was also meant to react to the changes we saw in the market post-COVID, we have achieved our objectives. and we will now have a more embedded approach again, which again does not mean that we lose focus on the absolute necessity to remain cost competitive. The same is true as it relates to our investments. We continue to spend diligently and enable new growth. So we are very mindful not to increase the capital intensity in our existing business, but we want to fuel growth Thank you very much for joining us. and also increasingly automate and deploy robotics in those solutions which means that the new businesses that we onboard there has a certain requirement to spend capex which we happily do since such business is creative not only to the top line but also to the bottom line of our business. On page nine is the outlook, which is unchanged since the publishing of the preliminary results on July the 7th. So we now expect to exceed 6.5 billion euros EBIT for the full year of 2026, with a split that you see below the increase coming from the DHL divisions whilst PNP and group functions stay unchanged. Also, free cash flow and gross capex guidance remains unchanged as the midterm outlook, which is also unchanged. With that, I'll hand over to Melanie for some more details on the divisional developments.

Thank you very much, Tobias, and good morning and welcome also from my side. I will start with the key takeaways of the quarter for the divisions, which you can see on page 10. For DHL Express, I'm happy to simply underscore the key observations shared by Tobias just now and already disclosed in our pre-release on July 7th. The strong EBIT performance mainly reflects the operating leverage from weight per day being back into growth mode in combination with our effective cost and yield actions. Yes, we had some benefits from the tighter air freight market conditions as reported in our pre-release and fuel price volatility is inflating both revenue and costs. But the key driver of the strong Express Q2 financials is simply the core operating performance where the Express team is finding the right growth at the right price and serving it with the best cost efficient and flexible network. I'll come back to that in a minute. DHL Global Forwarding also delivered a good second quarter. While we still have more structural work to do, our Q2 performance shows above market growth of 7% for both ocean and air freight volumes, with ocean freight GP holding up well and air freight yield and GP increasing strongly. Volatile markets are part of the new normal as it seems, so we should definitely not call this a one-off, but we still thought it's worth sharing that we think we had some more temporary benefit from the air market disruptions in Q2, as also mentioned in our pre-release already. With the phasing out of FX effects year over year, the full DHL supply chain growth momentum is now again visible also in the top-line development, with a 13% reported and 10% organic growth. and considering last year's positive one-off, EBIT is also further up year over year with a good margin of 6.5%. It's worth mentioning that this is actually the first quarter where DHL supply chain delivered more than 300 million in EBIT, excluding special effects like in Q2 of last year. DHL e-commerce numbers continue to reflect deconsolidation of the business in the UK and Iberia now in the second quarter as a new effect, while the organic growth of 9.5% shows the continued strong underlying e-commerce growth momentum, which is the reason we keep investing into the expansion of our network, as you see reflected, for example, in higher depreciation holding back EBIT growth. and last but not least, PNP has delivered a quarter pretty much in line with expectations based on the known business drivers as the PNP team continues to work hard to counter the structural mail decline and stepwise wage inflation with continued parcel growth and effective cost actions. Let me briefly step back from Q2 and take a broader look at the express performance drivers on page 11. As we frequently get questions on what is explaining the strong express development and what KPI can be best used to forecast or track that development. So looking at what John and his team successfully do and at our internal discussions on financial performance and the daily decisions that lead to that financial performance, I think the key observation from my side is that there is not the one single KPI that ultimately determines our express performance. Quite to the contrary, given the fixed asset nature of that business and the span across more than 220 countries and territories, The key to success lies in the aligned and successfully steered interaction between where and how we grow, how we calibrate pricing accordingly, and all that in alignment with the capacity and cost flex of our network. So beyond the improvement in a lot of single KPIs, which we currently see, the Express team has improved tools and enhanced visibility to execute this delicate steering better than ever before. And that gives me a lot of confidence also for our future development. In that context, please take note of the invite we sent out earlier this week for a capital market briefing to be hosted by John Pearson, our DHL Express CEO. It will take place in London on September 17th and John will provide some more details on how we manage profitable growth in the DHL Express division. So after that short advertisement, let me get back into the depth of our Q2 numbers with a few observations on our Q2 P&L on page 12 and the cash flow statement on page 13. On the P&L, the 13% top line growth includes a roughly 5% point contribution from the pass-through of higher fuel prices, but no relevant FX effects different to the previous quarters. Organic revenue growth, excluding the fuel contribution, accelerated to 8%, reflecting the improvement in business momentum as well as our continued yield management. Higher activity levels and fuel pricing are equally visible in the higher purchased goods and services line. Bottom line, we see a 30% increase in EBIT, reflecting accelerating volume-slash-weight growth, active yield management, and continued cost focus. And the ongoing share-by-back program is, of course, supporting earnings per share growth even further. The same drivers are essentially visible in the cash flow statement, with business growth as well as higher freight rates and fuel costs driving a to-be-expected expansion of related working capital in Q2. Included in the working capital number is also a temporary positive effect from the AIIPA tariff reimbursement procedure, where we receive reimbursements and then pass them on as quickly as possible back to our customers. So at the end, this will have no impact on our free cash flow generation, but in the second quarter cash flow, there was a positive effect of €416 million of reimbursements received and not yet paid out to customers. We really saw a significant inflow, particularly in the last days of the quarter, and we are now of course working on reimbursing the received funds as quickly as possible. So much for the technical aspects. What fundamentally counts for me when I look at this cash flow statement is that you see EBIT growth very nicely flowing through to OCF before changes in working capital. And that confirms for me the very strong and healthy operating profit growth and that we invest into our organic growth ambitions with continued high discipline. This all is the basis for the very good free cash flow development in the first half of the year, which you can see on page 14. The H1 performance puts us well on track to deliver on our full year free cash flow target. And I think it also confirms once more our structurally improved free cash flow generation, which allows us to balance the four quadrants of our finance strategy. Continued targeted investments in organic growth, attractive dividend, complementary inorganic growth in accordance with our strategy 2030 growth priorities, and share-by-backs as an additional shareholder return instrument. Therefore, also in addition to extend our current share buyback program and increase the overall size once again, as shown on page 15, this gives us up to 1.5 billion of remaining share buyback firepower until the end of 2027. As a conclusion, I think the numbers pretty much say it all. We are accelerating growth, driven by improving business activity as well as our strategic actions. And we are certainly watchful to ensure that this accelerated growth is sustainable for our shareholders in terms of value accretion through higher return on invested capital, as well as continued pre-cash flow generation. And with that, let's get into your questions. Martin or operator?

Yeah, Luke, this would be a good time to start the Q&A process.

Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise 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. When you see a pop up on your Zoom screen, please accept. Once your name has been announced, please unmute and ask your question. If you want to withdraw your question, please lower your hand using the raise hand function. Our first question comes from Alexia Degani with JP Morgan. Please unmute your line and ask your question.

Yeah, good morning. Thanks for taking my questions. I have three, if possible, please. Just firstly, on the weight per day growth you showed in Q2, can you talk a little bit more in detail about the regional trends you're seeing? Obviously, Americas and the Middle East, showed a very strong acceleration maybe kind of base effects explain that but you know kind of fundamentally what are you seeing by region would be quite helpful then secondly you've again helpfully singled out the benefit in the quarter from the middle east disruption when you look at the outlook over the coming quarters do you think some of that Thank you so much for joining us. In the future, is that how we should see the Middle East benefit or do you think other factors will help you keep driving growth? And then finally, the market is focusing a lot on AI, CapEx. I think it's been only a couple of quarters where we've been hearing from you and peers that you see the benefits of this data center rollout. Where would you say we are on the Are we still at the beginning? Are we in the middle? Does it follow closely the AI capex numbers we hear from the big hyperscalers? Just give us a sense of how quickly you benefit from those trends. Thank you.

Thank you, Alexa, for your questions as it relates to the first, that being weight per day growth. That's really pretty broad-based. Some of that, obviously, especially as it relates to the Americas, the United States, also has to be seen in the year-on-year comparison that the second quarter last year was a bit weaker. But also, if we look out Asia-Pacific, which is obviously from an export perspective very important, We see good growth there. You already highlighted the Middle East and Africa. Again, for us, relatively strong in the quarter despite the disruptions. I think we strengthened our market position there due to the excellent performance that the colleagues really delivered under difficult circumstances. Europe, weaker, as you would expect, given the macroeconomic situation. So overall, The benefits or the situation around the Middle East is not so easy to isolate. It is not the primary effect of the disruption in the Middle East that is positive. Within the Middle East, as we talked also in the context of the Q1 reporting, we also had significant extra cost, those being operational, those being insurance related. It is more the overshadowing on the overall demand supply situation on Asia Europe, which is also why we called that out with 150 million effect. Now, whether that is going to settle down entirely and will back fully back to normal in 2027 for us is hard to say. We specified the amount relative to the situation Robert R. Reilly, Ph.D.: Prior to that disruption that major surge of or escalation as relates to Iran, so that is what it constitutes whether we are fully back to normal in 2027 and would not have any other disruptions that Thank you very much.

But maybe if I could just add one thing here. So, I mean, obviously, there are many moving parts, year-over-year comparison, the Middle East impact, and there is still a lot of volatility and fuel and so on. But I think what you can really see in a lot of the numbers we presented today is that there is also an underlying healthiest trend and that the measures of our strategy 2030 are really working. I mean, just one number from supply chain, 4 billion in new contract value, one in H1. So yes, there's a lot of volatility. We have shown that we can deal with that volatility, but I think we also see increasing traction of our more structural long-term growth agenda.

Absolutely. And I think that's also visible in the absolute number. If you look at the 1.9 billion earnings in the quarter, relative to the 150, the great majority of the increase is driven by what Melanie rightly characterizes as what we see as clearly sustainable long-term orientated growth. AI and the CapEx spend, that impacts us in two ways. What has been particularly notable in the quarter is The warehousing and staging part, which we also highlighted, where we had significant increase in activity. We also had increase in activity in the international transport of parts and components for data centers. We expect that to continue well beyond 2026. It will also transition then into more spare parts logistics where we see an opportunity. So while for us it's hard to say whether the level of capex flow will continue, we'll definitely see that this is a lasting component of our business to then also supply spare parts components for the ongoing operation of those sites as we have done for many years. In other parts of that tech industry, if you think about telecommunication networks, if you think about the data networks, the routing facilities, but also general data centers where we have a pretty strong position in supplying those not only at the phase of the initial build, but also at continued operations.

Excellent. Luke, the next caller, please.

Thank you. Our next question comes from Jacob Lacks with Wolf Research. Please unmute your line and ask your question.

Hi, good morning. Thanks for your time. So is the weight per day improvement you're seeing, is that at all tied to the air freight capacity constraints you discussed, or is that more so related to pricing? And then, do you have any early expectations for how peak season is shaping up this year in Express? Given the improvement in weight per day, are you expecting a year of larger surcharges? Thanks.

So on the weight per day development, as I tried to highlight, this is mainly driven by the strategy that we have in Express to refocus on industrial growth, smart industrial growth. to highlight the specific value proposition of the integrator model of our DHL Express capability to industrial customers. And that is what we see working out very well. You see that we are very disciplined with pricing, so it's not that we have been in any way attracting higher volumes to lower prices. That's not the case. We specified the spillover on the Asia-Europe lane as it relates to the changed balance of demand and supply, but the great majority of the growth that we see and express in terms of weight per day is the execution of the smart industrial growth strategy. As it relates to peak, different than some of our competitors, we currently do not have a peak surcharge as we speak in the non-peak period. But if the season would unfold as per usual and we would then expect also an increase in the buying rates for air freight we would use a peak surcharge as per usual that's not decided yet how that exactly would play out but it's a regular instrument that is a cost recovery mechanism for higher air freight cost and as such is a normal instrument in the indicator industry which will also continue to use under normal circumstances.

It works for you, I hope. Luke, the next caller, please.

Thank you. Our next question comes from Muneeba Khayani with Bank of America. Please unmute your line and ask your question.

Yes, good morning. So first question around Express and the 150 million benefit that you've had because of the tight air freight market. Just to clarify, has that gone through kind of the 9% weight per day growth or is that coming through the ACS part of Express? and if it's in that 9%, can you help us understand how much of that 9% was this kind of spillover from the tight air freight market? That's my first question. Secondly, on forwarding, your air yields were super strong. Is there a mix shift happening in there? Can you help us understand kind of the moving parts in there? And then the third question around supply chain and the data centers and you've talked about the increased activity so can you kind of help us understand what the potential you see in your supply chain business from data center build out like how much has it contributed so far and what sort of growth should we be thinking about based on what you're seeing right now thank you

Thank you, Muniba. Let me start with the first question. So, I mean, first of all, this is not a mathematical formula where you really kind of like get the one single answer. I think the 150 million was our best attempt to quantify those more temporary impacts due to the tightness in the air freight market. and there we have indeed seen that also volume which normally would have gone with forwarders ended up in our core TDI product. So it had an impact on the weight per day growth in the 9% but it is by far not the dominant driver. So I think the real driver is that we really see the smart industrial growth taking place but there is a component now in Q2 which leads to the 150 million impact from the more temporary nature.

So on DGF, this is a variety of factors that ultimately stem from the disciplined execution of the plan that Oscar has laid out. Mixed shift is maybe a little part of that, but it's not particularly pronounced. We had a focus and applied usual measures to larger, not so profitable customers. but here it's really also fairly broad based that we have seen improvements in the business both on the margin side as well as on the volume side so both for air and ocean I can say I'm very satisfied with the trajectory that we are on and there are no extraordinary effects or particular things that we would highlight this is an organic development that we again are very pleased with but also not surprised by. You already saw this in the first quarter, so we are accelerating on a good path and I would not expect this to change in the quarters to come.

Ashley, for those of you who listened to Oscar's capital markets briefing in London a couple of weeks ago, I think you could really see how the products and the country and regional organizations are working together much better to hunt profitable growth. And I think this is what we now really see in the numbers. So clearly something which is not one-off driven or one special effect, but more the sustainable different way of working under Oscar.

And we continue to have a strong focus on great service quality, invest in capabilities. So whilst we are also cost conscious, we are not single minded about cost. You know, you heard me talking about that before, but I think it is important. We are a service organization and particularly in global forwarding is extremely important. to have great people and have great capabilities. So we see ourselves confirmed in having that balanced view and not being single-mindedly obsessed about cost. To your third question, Muneeba, on supply chain and data center logistics. So what we have there, particularly in the US, but not only in the US, are multi-year contracts. This comes from a relatively small base as it relates to this particular activity. Jens Stoltenberg Profit from the overall uplift and we continue and we expect that to continue this specific staging of components and having larger warehouses for this activity comes from a relatively small base.

All right, thank you Muneeba. Luke, we're ready for the next question.

Our next question comes from Alex Irving with Bernstein. Please unmute your line and ask your question.

Good morning, two from me please. First one is on Express. Now I note that the Gulf carriers have been progressively restoring their networks and of course with that comes the belly hole capacity between Asia and Europe. How does that shape your expectations for weight per day growth and revenue per kilogram growth into Q3 and can you maybe share how July was on those metrics please? Secondly, on DGF, great to see conversion improve to above 19%. But can you help us understand a little bit more what is temporary versus permanent? Note you talked about the low to mid double digit millions EBIT temporary effect. If I were to very crudely sort of roll forward the Q1 unit gross profit in air freight to mitigate the impact of disruption, that would be sort of a 55 million hit rather low to mid double digit millions. That would give me a 16 to 17% conversion ratio. What am I missing? How can you help us to separate the temporary versus permanent impacts on DGFF profit in the quarter, please? Thank you.

All right, I would start with Express and Melanie would comment on the second question. So we do not see that the activity level of the Gulf carriers would change our outlook on weight per day for Express in any meaningful way. We see a broad-based growth out of multiple origins implementing our smart industrial growth strategy and we would expect that to continue. How the yield effects play out also on the ACS product, which was mentioned, which for us as a cost offset is hard to forecast as freight rates are generally hard to forecast. But again, we would not see significant effects coming from that, also due to the sheer size of it. But on weight per day, I'm very confident that we'll continue a positive trajectory independent of the situation of the Middle East carriers.

Yeah, and on your DGF question, so probably three components to the answer from my side. I think the first one is, like with Express, we try to quantify to the best way possible the more temporary impact from The air freight market distortions. This is a relatively wide range because, again, it's not a mathematical formula. So there was a positive impact from the current market situation, but it is not the main driver for the progress we see. So we would have had year over year improvement also excluding that. Having said that, we are clearly not where we want to be on global forwarding. I already said that in my comments earlier, that we have further work to do. The encouraging thing is that we see the trend going in the right direction. But obviously, as you pointed out, the 19% conversion rate is not where we want to be. So there's more work to be done.

That was our answer, Alex.

Next caller, please. Our next question comes from Marco Lamitte with Barclays. Please unmute your line and ask your question.

Hi, good morning. I hope you can hear me, if you can confirm.

Yes, we can.

Thank you.

Marco, we lost you somehow.

Hello? Hi. Yes. Go ahead. Yes, we hear you. The first question is on the share buyback. So you have extended the share buyback until year 2027 at 500 million plus. But if we do the math, 500 million executed year to date plus 1.5 billion until year 2027 is 2 billion, which is 1 billion per annum. And let's say we were modeling 1.5 for 2026. So the run rate on a per year basis for now has come down. Can you just explain to us why, let's say, you have extended by one year but only increased by 500 million despite, let's say, the trading environment being quite strong, would be my first question. The second question is a bit more details on Express Revenues, where I've got actually two questions there. So the first one is, As you focus more on heavyweight cargo, shall we expect a negative price mix going forward as, let's say, the average price per kilo goes down as you focus on larger, more heavyweight sort of cargo? On my math, it looks like Q2 pricing was a bit below expectations. And then also within Express Revenues, I've noticed that if I compare volume growth versus revenue growth, for example, America revenue growth is quite below volume growth. So also wondering what is driving, let's say, pricing dilution in America. And then the third question is a follow-up to something that has been already asked but trying to be more explicit. So as we think about the 150 million and the road to meet double-digit benefits in Q2, to what extent shall we expect those numbers, let's say, to repeat in Q3? Any indication would be good.

Okay, Marco, let me start with the first question on the share buyback. Yeah, so indeed, year to date, we have executed 500 million and with the upping to 6.5 until the end of 27. We now have 1.5 left for one and a half years roughly. And I think that is also the run rate which we had at the beginning of the program for many years. We then upped it in between, but I think it is a healthy run rate and it clearly gives us quite a good firing power now for the next months to come.

On express revenue, I would say that The growth we are currently seeing is accretive, and you see this also obviously in the margin is very beneficial. There will always be mixed effects, but there are also differences in the cost structure. If you deliver a 200 gram flyer, Obviously, the variable air freight cost is much, much lower than the cost of the stop on the route. So heavier shipments have a different cost structure and thereby might have slightly lower revenue per kilo than what you see in a mix of lightweights that have a lot of flyers as well, documents, that means. So that's normal. What we manage is that it's accretive growth, and I think we're very successful with that. Also on backhaul lanes, which is the case, for instance, for the Americas, there are backhaul lanes out of the Americas where the headline revenue might be lower, but the cost structure is also much lower. We fill backhaul space that would elsewise be empty. So also that growth while it might look on the headline as being dilutive, can be very accretive. And that's exactly what we have seen in the second quarter. So we're not at all worried about yield dilution. We think the growth that we currently see in Express is very healthy and there has been a specific focus to also grow on backhaul lanes, which again might mean lower head haul or lower Yields but still very accretive growth as the cost structure for that volume is also much lower.

Just one very fundamental compliment to what Tobias just explained. So I think the foundation for the heavyweight product at Express was always that this is not a cheap forwarding product in our premium network, but this is a heavier shipment in an Express network with Express pricing, where then they of course take into consideration as Tobias just explained the cost to produce and stuff. But this is an Express priced heavyweight product and hence a pre-tiff also to the Express profitability. And then we had the question on kind of like those more temporary effects, the 150 in Express and the low to double digit in global forwarding. Yeah, so I think, I mean, we are at the start of the quarter still, just kind of like closing the accounts for July where I think we can say that was more of a continuation of what we saw in the second quarter. Now we have August, which is a very weak month due to the summer period. And then we really have to see how the whole thing develops forward into September and then in the transition to Q4. But I think for the beginning of the quarter, it was a bit more of the same.

Right, Marco, I think that was helpful. Thank you. Next caller, please.

Our next question comes from Christian Nadelcu with UBS. Please unmute your line and ask your question.

Hi, thank you very much for taking my questions. My first one on Express, can you give us a bit more color on the heavyweight campaign? And just for us to visualize, if we look in the first half, I think your weight per shipment is up high single digit year over year, double digit in Q2. How much of that is in your hands? How much of that is the heavyweight campaign versus the broader B2B market recovering and therefore the positive mix to weight per shipment? So if you can help us visualize a bit that. The second question, there's some press articles suggesting that Express may lower the fuel surcharges from August for the same jet fuel price or for fixed jet fuel price. I haven't seen this officially on your website. I was just curious if that indeed will be implemented and if yes, why? And the last one, if I may, gave us some helpful data points earlier on the call. I'm just thinking directionally at the Express EBIT in Q3. So you suggest that some of the 150 million benefits may still be there. You seem very confident on the volume growth year over year. I account also for a bit of negative seasonality from Q2 to Q3 EBIT, but I'm still getting EBIT in Express at 1.1 billion or something like that. Am I missing any other headwinds or any other tailwinds I should consider in this analysis? Directionally, can you provide us any color? Thank you.

All right. Thank you, Christian. For these three questions, I will take the first two and then Melanie will add and take the third. So on the heavyweight, I mean, all of what we do depends on the demand of customers and that demand obviously is attracted by a certain value proposition, which we, I think, successfully developed and enhanced over time as it relates to what Express can do for some industrial customers. But it's a match of a customer that is looking for a transport solution and us offering a great value proposition. It's not that we have taken on volume that we wouldn't have targeted, quite the opposite. We continue to hone our pricing also as it relates to B2C and we attract what we think is the right value proposition that is good for our customers and is accretive in the network. So that is something that you have seen very consistently and continuously unfolding over the last quarters. And I would not expect that to change. That's the strategy we are on. And we, with the results that we also discussed today, see ourselves confirmed that that works well for our customers. And for us, I gave a couple of examples, concrete examples of what type of products these are. We have some still less lower yielding B2C and that is what overall leads to those changes that you see broad based across the globe and reflected in the Q2 numbers. It relates to the surcharge mechanisms. The surcharges for us as it relates to fuel but also emergency surcharges are a cost recovery mechanism. And that cost recovery mechanism has undergone some stress because the volatility has been quite profound. We've also seen significant imbalances regionally in the prices of jet fuel, especially, which we're not used to. And this led to some normal adjustments through the established mechanism, but also other adjustments. And the fuel surcharge has been reduced by two percentage points. Again, reflecting our cost base and our promise to customers that this is a cost recovery mechanism, so we do not expect that to have significant impact On margins, again, we aim to recover the cost that we have through emergencies such as higher insurance costs for flights, aircrafts and the volatility in jet fuel, which in Q2 has had some anomalies and thereby a broader range of the usage of tools that are available to us.

With regard to Q3, I mean, we're not going to give a quarterly EBIT guidance in terms of the fundamental drivers. I said already that July was a bit more of a continuation of Q2, but now things are getting slower with the onset of the summer, August always being a very weak month. So we will really have to see where we end up also with September. I think the number to beat is Q3 reported last year for Express was about 700 million. We had some cost of change, so underlying was 750. So I think we should be able to deliver growth on that number. How strongly pronounced that will be, how many temporary effects we will have, that really remains to be seen.

Christian, thank you for your questions and we continue with the next caller, please.

Our next question comes from Mark Sek with Kepler Chevro. Please unmute your line and ask your question.

Good morning. I hope you can hear me. I also got three questions. First, on the fuel surcharge again, I guess I understand that over time Thank you very much. Thank you very much. negative growth for B2B versus B2C in Express, whether weight or shipment or weight per shipment. So any of these metrics would help. And then for everything, let's say that's not Express, we obviously had an end of de minimis in Europe or change in regulation for de minimis Europe for July. And could you quantify if you see any impact from that for, let's say, European parcels or German parcels that come from Asia has been, let's say, volume reduction has been some changes in the way the Asian marketplaces distribute their volume within Europe, have they set up own logistics centers. So any change really from the changes in the manure regulation in Europe that affected parcels in Europe or Germany would be helpful. That's my three question. Thank you.

Thank you very much. Let me start with the future charge question. So indeed, there is always a certain timing element. And when we look at the development in the first half of the year, it was actually negative at the end of Q1 March and then continued negative at the onset of the second quarter. And then in the course of the quarter, it turned. Now, of course, the third quarter already started totally different again. So I think for us it is what it is. I think we have shown that we get management. We don't complain in the challenging quarters and it's also not the big driver in the supportive quarters. So I think really coming back to what we said earlier repeatedly, the good express performance in the second quarter is really predominantly driven by rate per day growth returning into a cost optimized network with good yield action and that really gives us nice operating leverage. I think on the B2B, B2C development, so as Tobias already explained, we are now really focusing on what has always been the core of the express business on B2B growth. We still think that there will be after the normalization post-COVID growth also from e-comm in express, but it's not going to be this turbocharger growth driver, which it was for a couple of years. and that is why we're focusing on B2B. I think the important difference between B2B and B2C in Express is the average rate. The B2C shipments are significantly lighter, but coming also back to the earlier discussions, both for B2B and for B2C shipments in Express, there is a very strict pricing discipline. So neither do we transport heavy stuff, nor do we transport Ecom stuff at the wrong prices and hence the pricing discipline is the same.

Then on the third question, the end of the de minimis in Europe, which also was paired with some changes in terms of data requirements, which particularly for our more consumer facing business in the postal area had significant impact, but that's small overall. I can say that the impact overall was not as pronounced as we might have expected. So there was not much uptrend end of June as one might have expected, that there's a kind of rush to the gate. Thank you very much. Thank you very much. that the initial days of August are quite soft as many people are on vacation. So a relatively normal seasonal pattern. I do think there is some observable shift Thank you very much.

Right. Well, thank you, Mark. Still have a couple of callers left. Luke.

Our next question comes from Hugo Watkins with BNP Paribas. Please unmute your line and ask your question.

Yeah, thank you. Could you just talk through the moving parts on free cash letter more and why the three billion guide? wasn't moved along with the full year EBIT guidance, just particularly where you are after the first half of the year and the potential for positive movements in working capital in the second half. Thank you.

Okay, yeah, so thank you for that question. So I think what we have seen now in Q1 and Q2 is this very nice flow through of operating cash flow before changes in working capital. So we have kind of like the operating performance really arrive in the cash flow statement, which is good. And now depending on how the second half of the year develops, that should of course also be an important factor. We then have to see how working capital develops. We now have to see how is the revenue development in Q3. How do we work through the whole AIPA effect in the course of the second half of the year. And then of course we will also have to see how strong will be the revenue growth in the fourth quarter towards the year end and how much working capital cash out will we see there. I think what is very important, we have not been maybe a bit conservative on the free cash flow number because we foresee an avalanche of capex coming. So yes, we still have some capex projects in the pipeline, as you would expect for a growing business. But we are not in a backlog position where we now have to kind of do a crazy catch up on the capex side. So it's really a bit natural capex development in the second half of the year. It's what will happen on the working capital depending on the phasing of revenue growth in the second half of the year with a component of the AIPA stuff in there. And then it is the OCF before changes in working capital.

Great. Thanks, Hugo. And we continue, I think, with Harry from Deutsche.

Our next question comes from Harshankar Ramamurthy with Deutsche Bank. Please unmute your line by pressing star six and ask your question.

Harry, can't hear you.

Sorry, I don't mute. Good afternoon, everyone. Thanks for taking my questions. Maybe a quick couple of them. I believe some of your peers have been highlighting that the de minimis exemption impact on the Asia-US lanes is now back to normal, as in back to where it was before the exemption was removed. So it would be interesting to have your take on the same. and secondly, on the working capital front, was just wondering because the outflows in Q2 seem to be on the back of elevated rates and elevated activities, is it fair to assume that if rates remain elevated, you'll still see a normalization into Q3? All right.

Well, thank you for these questions. I take the first, Melanie the second. So obviously on the US, we have now the change cycling out on a year-on-year basis. We saw a significant drop in the China-US trade. and many others. Such goods are often not manufactured in the United States, so you will have seen growth on other trade lanes that have substituted that. but we are in a what I would call steady state situation as it relates to the US and it's also important to see that the de minimis in the United States was a true de minimis where you have a significant step up in cost on the European side. We always had an import VAT. We now have the minimum amount of three euros customs Thank you very much. Again, for us, the B2C play, especially for Express, not the strongest factor. What we currently see, also as it relates to the United States, is by and large B2B driven.

With regard to working capital, what we have seen in Q2 is almost textbook what you would expect. Particularly in express and forwarding on the air freight side, we have payment terms with the airlines for fuel which are relatively short and then we have the standard payment So in terms with the customers, so in a growing business that structurally leads to a cash out in working capital. If revenue would now stabilize quarter over quarter, we shouldn't see a continuation of this build up because it begins to sink again more. Then we have to see what happens in Q4 when we probably get again also into the seasonal growth mode. What we are watching very closely is, is there anything which goes beyond the normal business growth working capital drain? So do we see strange things on the DSO, on the DPO side? And that is not the case, but that is obviously clearly something we are watching very closely, division by division. and I think ultimately if you grow and you have a working capital out due to the growth you should also see the benefits in the OCF before changes in working capital so that it's overall a healthy development and that is what we're focused on.

So good numbers attracting great questions but we've come down to only two callers remaining. Luke?

Our next question comes from Chloe at City. Please unmute your line and ask your question.

Hi, thank you for taking my question. My question is around Express. So if we assume volume continue to recover from here, how much have we utilized the current capacity? And I'm just wondering how much operational leverage do we have with the current capacity, if you can help quantify. And also second bit around Express is that we have seen a good margin expansion so far. with the fit for growth program and also the volume recovery. If we think about more longer term in terms of margin, is mid-teens still a reasonable target or are we able to see something higher? Thank you.

So on express utilization, this is a tricky question because we would aim going forward to achieve a higher healthy top utilization than in the past through also growth on backhaul lanes. And with that, there is some operational leverage left. We also have still capacity as it relates to most facilities in Europe, for instance, where we obviously have a very strong footprint. We've also recently just taken into operation a larger facility in Shenzhen so the ground infrastructure I think generally is in good shape there might be certain locations and certain weight bands where some expansion is needed but there's some operational leverage left as it relates both the air network as well as the ground but again especially as it relates to the air network we would also aim and many more. Thank you.

With regard to the express margins, first of all, let me say that we are quite pleased with the 16.8% express margin we had in the second quarter, also in comparison to the rest of the market. I think we have obviously shown the strength of the operating leverage flowing through. Having said that, as we said repeatedly before, I think the most important number for us on Express is the absolute number. And I think it's fantastic to see that very strong EBIT growth in absolute terms. So the 1.2 billion in the quarter is probably the even More important number, and we now focus on delivering good EBIT growth, which should give us also a healthy margin. But as we all know, the express margins are also impacted by elements like future charge and currency and so on. So we will keep measuring predominantly the absolute EBIT contribution.

Great. Thank you. Luke, looks like we're going to conclude the Q&A round with a call from Cedar.

Yes, our final question comes from Sida Ekblom with Morgan Stanley. Please unmute your line and ask your question.

Thanks very much. Hi guys. Two very simple questions on the weight campaign. Could you quantify the margin differential that you make on a heavyweight shipment versus the more traditional shipment? I take the point on sort of the revenue per kilogram being lower, but also the cost to serve being lower. It would be helpful to get a bit of guidance on that. and then could you quantify what percentage of your business today you would classify as your heavyweight offering and where you think that can go or if you're not going to give us that kind of a number maybe the growth in your heavyweight business relative to the growth of the overall express offering just so we can get a bit more feel for the mix improvement that the business is enjoying at a margin level. Thank you.

So I think on the first question, Sida, as I tried to say before, we look at the profitability of the network before and we make sure that whatever shipment goes into the network is priced in a right way so that the overall margin develops in the right way. And those pricing mechanisms also apply to the heavyweight shipments. And like we said before, it doesn't It makes sense for us to differentiate between an e-com profitability and B2B profitability. I think the same is true for the heavyweight stuff. It's really about optimizing the holistic profitability of the network. On the second question, more details on how many of those heavy things do we have, I would get back to my advertisement from earlier. I think John in September will give some more details on the role of heavyweight in the network. Of course, it makes a huge difference when you look at it in terms of number of shipments. It's a tiny fraction when you look at it in terms of contribution to the weight. It is a more noticeable impact, but I would really use that opportunity again to say mid-September, John in London, I think he will talk a lot more about heavyweight growth in Express.

Thank you, Melanie. What a wonderful announcement to close our Q&A round. I want to thank each and every one of you for your interest and your questions. And I want to close the call by passing over to Tobias for his closing remarks.

Thank you for your interest and your great questions. I would conclude by saying we are satisfied with the performance in the second quarter. Personally, I'm even more satisfied with the great progress on the strategic initiatives, the enhancement of the value proposition that we see with DHL Express, but also and especially with DHL Supply Chain and DHL Global Forwarding. There's more work for us to do, which is great because we have more Thank you very much. We are very focused on further enhancing performance so it's not only the volatile environment around us that keeps us busy but the continued execution on an ambitious plan on a strategy to further accelerate profitable growth. That's what we set out to do and we're obviously pleased that now with the second quarter we also see it in the reported numbers. and we are confident to continue on this successful path as the year goes by and we enter the mid-term horizon. With that, again, thank you for your interest and wish you a great day.

This concludes today's call. Thank you everyone for joining. You may now disconnect.