DSV A/S

Ladies and gentlemen, welcome to the annual Report 2024 conference call. I'm Sergin, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and then one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jens Lund, Group CEO. Please go ahead.

Thank you very much and welcome everybody to our conference call on the full year 2024 results. We will do it as we normally do. Michael and I basically go through the presentation and then we will go to the Q&A session afterwards. So if we go quickly to slide number two, you can see the agenda for this day's call and also the forward-looking statement as well. Please ensure that you read that carefully. And while you do so, I suggest that we quickly move on to slide three, where we can talk about some of the highlights from 2024. So we saw basically solid performance in our company for the year. We've now for the third quarter in a row outgrown last year when it comes to GP. And also results wise, I think it's a solid performance we have seen in that. I think the commercial approach that we have put in place has ensured that we have growth in all the business areas. And I think it's also going well when we talk about the Schenker transaction and how we're doing on the regulatory approvals. We've guided also for next year a number between 15.5 billion and 17.5 billion. So all in all, we think that we are off to a solid start here in 2025 and we base it on solid results for 2024. I will come a little bit back to productivity when we come to the notion here, if we skip to the next slide, slide number four. where you can see that we've actually managed to grow the GDP as well as the EBIT, the marginal conversion rate to a little bit higher than the average conversion rate, which is also something we've seen in the past. I think still we see some pressure when it comes to inflationary pressure on the wages and the cost base. I think that's tapering off. Now we come into a more normal scenario. But of course, as you can all remember, when we had the higher inflation, there was increases in wages. And that's sort of also been the case in 2024. If we look at the productivity, we now handle 16% more jobs per FTE. And if we look at also then that we managed to grow our GDP, I think our largest division being more than 70% of our EBIT, it is rock solid what we're producing here. And we are very confident that we can continue this development also in 2025. If we move to the next slide, slide number five, you can see the numbers for air freight. Here we have grown our GDP compared to the same quarter last year, and we've also grown our volume. We believe that we've outgrown our addressable market on volume, and if you look at the yields, I think they've been fairly stable throughout the year, but of course, comparing to The same quarter last year they are a little bit lower. We expect that the volumes that we can achieve in GSV for the next year is also going to be outgoing the market. And we have solid pipelines with our customers that indicates that we don't know it for the full year, but of course we know it for the beginning of the year. that we are on a good path to continue to drive volumes forward. If we move to the next slide, slide number six, we can also have a look at the ocean freight and here of course we can see a significant development in the gross profit. Some of that comes from volume growth. Here it's also estimation that we've outgrown the market. We have at least certain market data available, plus peers as well that have reported, and they've been more in the 3-4% range. The numbers that we have available here saw also significant outperformance. But as you can also see, the yield is affected by the Red Sea situation. The last couple of quarters, we have had a yield of approximately 4,900, where we earlier on had a yield more in the 4,500 range. So that has had an impact on the GPE. I think we will see a higher yield level at least going into the year and then we will see how the whole situation globally depends and what the container rates they will do as well. So I think that was the comments to the ocean freight. Then we come to road. Here in Rødt in the quarter we've had a weak result. I think that's fair to say. There's been basically a couple of explanations for that. There's kind of a one-off adjustment in the US where we had to provision for some owner stuff. We had to take care of that. So that's been the one adjustment. The other adjustment is kind of a little bit more structural, where we of course are working in a European market where the economy doesn't grow. There's a lot of extra complexity being added with various types of reporting etc. that also drags the energy out of the many companies in Europe because they have to focus on that. So that puts a lot of pressure on the transportation market in Europe. And since the volumes, they are not really growing a lot, there's pressure on the transport and logistics companies. And I think we're going to see that pressure for some quarters until the market sort of adjusts to the new norm, if we can put it like this. Some of the sectors that are particularly affected is sectors like automotive, but also other industrial companies are affected as well, and then of course the low consumption on the retail side doesn't help us in Europe either. So I think there's nothing wrong with our road company or activity, but we need to right-size to the market and the market needs to adjust as well. And then we will probably see a situation where we go back to the normal levels. We already expect that in the first quarter we will see some progress because some of the things we have adjusted will not be there here in the next quarter. So all in all a little bit different outlook on the roadside this time and we are confident that we will drive the productivity up again and the results will come back to what we've seen before. Then on solutions. I think we've grown solutions a lot in the year. Here in the last quarter, we've had more flat development. I think it's also a little bit connected to what goes on in Europe in general. And then we have focus, if we look at the pipeline, we are in a solid position where we get new volume in. So we're going to see growth also in 2025. But there's been a pause here in the fourth quarter. And then, of course, we've added extra capacity and we've had some idle capacity as well. I think that is visible in the numbers. It's not falling off a cliff. But of course, we have to ensure that the capacity we have available and the volumes we produce, they match. Otherwise, it will be visible in the numbers immediately. And that's also a little bit what you can see when it comes to the solutions division. But overall, I will say one thing more. We are very focused now on the ROIC debate because we have allocated too much resource to solutions so that the ROIC has been declining and it's a serious matter we need to address. I'll just say on solutions, it's vital that we have these activities, in particular for many of our larger accounts, because they basically ensure that we can deliver more end-to-end service to many of our larger customers. But still, we need to look after how we consume capital, and you can rest assured that this is very high on the agenda. Then if you go to slide number nine, We have the Neom JV. I think it's fair to say that it's evolved significantly slower than we'd expected. And there is some activity, but it's taking a lot of time. There's a lot of red tape in many aspects on Neom. So I think going forward, we will probably not necessarily have it as a specific item sort of quarterly updates or until it has a relevance or significance sort of that that makes it relevant for these calls we can say that we follow all what can i say the code of conduct and and whatever it is we need to do in order to stay compliant and then we will we will reduce the resource we have available in NEOM, so that we are certain that the capacity we have in place matches the demand at the NEOM project. So I think that's what we can say on NEOM for now. Then I can rest my voice a little bit and hand over to Michael. He will go through some of the details when it comes to financials, etc. So please go ahead, Michael.

Thank you, Jens. Don't rest it too long. Yes, if we go to slide number 10, there are some usual highlights of the P&L and just a few things that I will emphasize that is worth mentioning. Obviously, the strong growth that Jens talked about, especially on Air and Sea. We can see that in the revenue, where we have nearly 20%, you could say, growth on the revenue line impacted by the volume, but also, as particularly mentioned, the freight rates. Some have talked a little bit about 2024 compared to 2023 when it comes to the results, and we've talked about it before. It's also mentioned We're happy to see that we in the second part of 2024 actually saw increase in EBIT in fixed currencies compared to same period last year. So we are on a good track on that one. The cost base, Jens mentioned a little bit about it, is impacted of course by the inflationary pressure. Salary licenses also coming into this. So you can say the cost initiatives that we have implemented, you cannot see them in full on the cost base. You have to bear in mind that that also goes to the TP level and depreciation level and such. So if you're looking for specific numbers, you have to get back to Investor Relations as well on that one. Last thing on the cost base in the fourth quarter. Obviously, we are also looking ahead of the Schenker acquisitions as well. and integration, so it can be that we have not taken all costs due to that. Interest costs goes without saying, it's impacted by our successful share capital increase in autumn of last year. Share buybacks, we had share buybacks until September, where we stopped it due to Schenker acquisition. And obviously that has a positive impact, but then quite offset by the equity offering that we saw. tax rate continues to hover around 24%. So if we go to page number 11, I think what most of you have read already is that our working capital increases. It's a 4 billion increase. It corresponds actually to the 4 billion that we see in the RMC division. So that is clearly impacted. Volume growth is clearly clearly impacting the working capital at year end. Of course, we also worth mentioning again the cash flow that we received from the equity offering and also when we issued the bonds that we have issued in order for us to be ready to finance the single transaction when we get to closing. Networking capital again, as said, it's impacted, you can say, by the large increase in RMC and then the temporary, you can say, tied up a little bit more than what we have expected in the property, which hopefully will release here in in first quarter, part of it at least. Our ambition is still to reach 3% long-term net working capital, but also, of course, things need to stabilize a little bit and have, you say, constant volume as well. Gearing ratio, never seen that before. It's 0.0. Have to bear in mind that is due to the fact that we have done the share capital increase. So if you adjust for that, our gearing ratio will be around 1.7, which is more or less what we normally said that we will guide towards. And then on the next page, page number 12, you can see the allocation to the shareholders. As I said before, normally we do the share buybacks, decide them every quarter. Given the Schenker acquisition and integration, we have paused it. So that's how it is. And we have bought share buybacks in 2024 and then paused it. And then there's a proposed dividend for 7 DKK per share, which our board recommended yesterday as well. We still have, you can say, an unchanged capital allocation policy. So the stop and share buyback is due to the fact, again, that the acquisition of Schenker. And of course, when we get within our guided range, we will pick up that again. But first of all, we need to get Schenker in place for that one. Next slide is also on page number 13. Jens already mentioned a little bit. This is our guidance for 2025. Of course, we have to guide on the premises that we have right now, meaning that this is DSV standalone, excluding Schenker. We have guided the range between 15.5 to 17.5 billion EBIT before special items. We expect the global air and sea freight market to grow around 3% in 2025, in line with the forecasted GDP growth that we can see in different sources. Jens also talked a little bit about our yield. We assume slightly to lower yields in 2024 for both air and sea. Jens touched upon it before. Same goes a little bit for the road business. Predominantly in Europe, obviously, it's impacted by the market and the things that Jens talked about. So we expect a flat to single digit growth. And then, of course, we have a lot on that one. We have a range of 2 billion. It's reflecting, of course, the uncertainties, macroeconomic and geopolitical environments. It remains uncertain. Every day when we woke up, we can see new things coming, especially on the other side of the sea, the great sea. So I think that's about it. And again, that's how we see the outlook for 2025. Next slide on page 14. I can take that one as well. This is the Schenker acquisition. As said before, we have the financing in place. We've issued shares for 5 billion and issued bonds for 5 billion. We have commitment from our core banks for 3 billion. So we should be able to finance the total transaction when we get to the approvals. We are still working hard to get the last approvals. We are currently standing at 33 out of 36 approvals, but it ain't over till we get the last approval, obviously. expect still that that will happen in Q2 2025. And when we'll get to closing, we will of course give some further details about how we see the transaction and how 2025 can pan out, including some words about the synergies. So you will have to wait to the closing until we can get that. Yes, so I think this is the last slide from our side. What we would like you to bring along here is that we are happy to see that we have rebounded our earnings. You could say the strategy seems to work quite well with now three quarters in a row. above market growth, fantastic so far. We are on track for the Schenker closing. And then, as just mentioned, the guidance for next year stands at 15.5 to 17.5 with a tax rate of 24%. This is what we guide for the next year. Then I guess a lot of you guys have some questions, so let's go to the Q&A.