Dsv A/S Unsp/Adr

Ladies and gentlemen, welcome to the DSV H1 2025 Investor Conference Call. I am Hili, 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, pressing star and 1 on your telephone. For operator assistance, please press star and 0. 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 have your results call. We are here in Hedehusen, Michael Ebenl and I. We will be hosting the call and taking your questions. And let's jump right into it. We have an hour, so let's make the most of it. The forward-looking statements, please have a look at them and take care that you read them. If we move on to the next slide, you can see our agenda. It's basically the usual agenda. So I guess you're familiar with the format. We've added one thing that we haven't really had before. It's since we've got this IR team, they invent new things all the time and they would really want the highlights to be very clear. And I think it's a solid performance we've delivered, if we move on to the slide number four. In the quarter, we've basically grown our GEP and In spite of a market that has been a little bit challenging, I think that's fair to say, we've navigated that well and I think we can be very satisfied with the result. Of course, we missed the guidance a little bit, but that was basically due to FX fluctuations. So all in all, we're very happy. michael will probably speak a little bit about the cash flow so i'll not steal all his thunder but of course it's always good in a situation where you make an integration and where the market is volatile that we deliver on the cash flow and i also think on the eps right now we are at the influx of shink and now i think we're going to see the benefit quarter on quarter how it will drive the Ips growth in our company. When we look at the outlook, we've kept the outlook unchanged. I guess you would also have been surprised if we had changed it because we just recently sort of confirmed where we were. I think also that we can confirm the expected Schengen synergies and in general on the Schengen integration. We really feel that we are off to a a very good start. I don't really think that we could have hoped to be in a better position than where we are. I think it's also fair to say that many people have performed extremely well in the company, and I think we are very satisfied with that. So we will soon start the first countries actually tomorrow. We will go live in the first countries. And that means that the real sort of integration in the business, it really kicks off now. And that's also, of course, when we then start to deliver on synergies as well. So moving on to the next slide, I'll say a little bit more about this. We expect the synergies that we've already announced, I think, We will deliver perhaps 500 million of them this year. Some of you might look at the little chart to the right and say, well, 15% of 9 billion, that's not 500 million. But it's because we don't get the full year impact of the initiatives that we're taking now. As I just mentioned, we start now the first countries here. Of course, there's been a little bit of management that already have left, but it's not significant numbers. It's getting significant when we integrate sort of the operation. And then as we go along, you can see how we expect the synergies to be phased in on the right. And then, of course, they will have full impact the year after or actually start to have impact the month after that we have realized them. So looking at the integration, we had some aspirations when we started. There are really two things that are top of mind when we buy a company. One is to get the uncertainty clarified for employees. The other one is to get it clarified also for our customers. Because their questions as key stakeholders will always be, what does it mean for me? What does the integration mean for me? And I think we've appointed management already on closing with appointed top 250 and very soon with appointed, what can I say, all the management in the top. top 500 plus and then basically it goes out into the structure and we've appointed much more than that of people and staff now in the various roles this means that now we can then focus on the customer and we've spent significant resources also because it's an area where we could improve if we looked at previous transactions so that we basically hold on to more volume And we've had such a positive reception from the customers. They really appreciate the consolidation in our industry. As many of you know, in combination with Schenker, we will have 7.5% market share. So the market is basically still very fragmented. But for many customers, it means a lot to be able to reduce the number of logistics service providers, LSPs, as we call it. So I think that's been very good. Also, we have managed to get a result or create a result together with the German team, the German Works Council that represents the employees on the Schenker side. I think it's been, of course, tough negotiations as could be expected, but it's also been constructive in the way that both parties wanted to eliminate the uncertainty for the employees. So we've managed to find each other and create a deal. And I would really like to thank all the basically people involved on both sides. So kudos to you for paving the way forward for the integration in Germany to really take place. It will still take some months on the operational side before we are there, but we can already now start to integrate the headquarters and the regional headquarters Germany and I think that's very positive indeed. So I think we'd already mentioned that we are on track with integration and we will definitely focus on delivering those synergies. There's been one message also that we have to bring to the market as well. And it's the message that Jochen Tewis, unfortunately, or I guess fortunately for him, has decided to pursue an active career within our industry. And this means that He cannot accept the nomination to our board because he'll be probably conflicted. So it's been a pleasure to work with Jochen. He's really helped a lot in the transition, you know, and been a great support both for the employees of Schenker, but certainly also for the customers of Schenker. So from the management team, we really wish Jochen all the best of luck in his future endeavors. I think he's been a great support in this transition. When we come to the transaction costs, it's going to cost a little bit more than what we achieve. And Michael will talk a little bit about the phasing in, but this year we will Spend a little bit more than 2 billion, we think. So to deliver on the synergies, of course, comes with the cost. Yep. So that was a little bit on Schenker. And also now to the financial highlights. As you can see, basically now the GP, of course, it increases quite a bit now that we get Schenker on top. It's only two months we have in here when you look at the numbers. But of course, you can see that Schenker converts quite a bit less of the GP to EBIT. And I mean, that's the whole idea, of course, that we improve that ratio with the transaction. I think, you know, looking at it, we see that we've done very well in the Anocean. We've done a little bit less well in road and contract logistics. Many of these areas, of course, I'll come a little bit back to it, but it's something that we can do something about it. So I think we are basically comfortable on that. You can also see that we reiterate our guidance. Schenker contributed from the operational side 925 million for the two months. And this is more or less in line with our expectations to Schenker. So let's skip to the next slide. Here we see the ANC results. And I think as you can see, we have a growing GP in ANC and also a solid development on the EBIT side. So all in all, of course, we really look forward now to get all the monthly figures in from and we're going to see a tremendous development on the ANSI side in general in the remaining part of the year. If you look a little bit at the verticals, I think it's fair to say that a vertical like automotive is probably facing a bit of headwind these days. On the retail side, it's also so-so. Whereas, for example, in tech, we see significant progress. It was a very strong area of Schenker actually, and it's also a focus area or had been for DSV. So in combination, we've really delivered something solid in the quarter. I think also that if we look at the ocean freight, I think actually that also here we've seen a significant contribution to what we're doing. A little bit on the products here on the air freight, you can see the volume, how it's evolved. I think there's a few things to pay attention to on that slide here. One of them is that on the GSV side, we've also mentioned before that we'd lost some volume, both certain retail volume that didn't really yield a lot, and also some perishable volume as well. On the perishable side, I don't think we ever made more than, let's say, 300 to 350 kroners in GP per ton in the time I've looked at perishables. So it's not something that makes a big difference for us, unless you want to be, what can I say, on top of some kind of an IATA list or whatever. But it doesn't produce a lot of income or GP for us, the Percivals. And it doesn't really mix with our network business either. So that's kind of driving our yield a little bit up. If you sit and look at it, where you look at the numbers now, you can see Schenker there in here for a couple of months. You can see it takes our yield a little bit down combined. It will also now have an impact in the next quarter because it will probably now with three months of Schenker in the numbers, take the yield a little bit further down. The whole idea is, of course, that we bring the Schenker volume up to the DSV yield at the end of the day and that we keep as much of the volume as we possibly can. So I think that was a little bit about volume and yields on the air freight. On the ocean freight, I actually think we are more or less in line with the market from a volume perspective. I also think on the yield side that it's holding up pretty well what we're doing right now on ocean freight. And there's been many concerns over the years about whether it's sustainable the levels that we have. And I can already say now that it's been a very stable quarter of how much value add is basically included in our yield. And it fluctuates around the two thirds, sometimes a little bit more. So the markup or what can I say, the impact of us being a consolidator is actually fairly limited. On the air freight, of course, there's a little bit more freight markup. It's probably around 50-50. Sometimes it goes a little bit down to 40-60. But right now, I think it's at the 50-50 level. So also these numbers just for your consideration. And just when you look at the numbers, please remember that Schenker is in there for two months when you make your calculations. If we move on to road, of course, it's a little bit sad to see that we've actually produced less income than we did last year. Then if we look at it, there are some clear explanations why it is like this. Schenker has an operation in the US that is delivering significant losses as we go along right now. Actually, ever since it's been acquired, it's been delivering, what can I say, a financial outcome that was a deficit. So it's something that we are now establishing a plan and dealing with. On the Schenker side, I think it's also fair to say that in particular the German market has been a significant issue as well. Plus a couple of markets, UK and Norway as well, have been struggling. On the DSV side, the German automotive and the German market is also struggling. I should say, so these issues actually we're working on resolving. I don't think it changes anything in sort of the perspective for the division at all. These are things we can consolidate our way out of the situation in Germany when we make the integration. And I think the losses in Norway and the UK we can also eliminate and the situation in the US we can also deal with. We probably have to right size the business in order to get there. And that's what we're looking into right now together with the management team on this one. So I think on the integration side, we will also soon commence on road. They will actually also start here on the 1st of August, where we will start to integrate. So also here we expect to see significant synergies in the network. If we take contract logistics, it's also been a quarter where we cannot be 100% satisfied with the outcome, not least on the DSV side. We've unfortunately had a few cases where it seems as if we've somehow underperformed on a couple of accounts significantly. One being in the US and then there's a couple of other places where we've you know, continue to have certain issues. So the thing in the US, I can say, is at least reported to be resolved, but it's cost us a significant number in the last quarter. So impacting the results. But here it's been very positive to get acquainted to the Schenker business. They're very strong in the Asia Pacific and also in the Americas. And of course, they also have focus in Europe like we have. But here they run very solid operations. And you can see that in the numbers that actually they are contributing in a very positive way. Actually, also in the contract logistics division, when we've done the integration, we have a 50-50 on the management. So it means a lot of Schenker culture in there, and I think that's going to do the division really well, I should say. So all in all, we feel that the problems that we have can figure out how to solve them. And I think actually we look quite positively at our capabilities and also the way we can serve our customers in CL. So that was a little bit from my side. And now Michael, he will go through the numbers and give you some extra detail on that. So over to you, Michael.

Thank you, Jens. And of course, I agree that we are in a very good place in our company. We have delivered solid financial results in the quarter, where we have been able to grow GP on a total in absolute numbers, mainly due to our R&C and then of course the positive contribution from Schenker as well. This quarter we started to incur the cost of special items. This is a transaction and integration cost. reference back to what we have said all along, 11 billion, and we expect 2 to 2.5 billion for this year to be held as special items. Then another thing that you should be aware of is, of course, the net interest cost. Now we have paid for the Schenker business, meaning that we have, you can say, the interest cost for that in for two months. So the proceeds from our share capital increase is now used for paying off the Schenker. So I think if we look at the Q3, then you will see the run rate on our interest cost. It's also a quarter where we have had some some headwind, mainly the US dollar and in the NRC. So we have been impacted by that. Another thing that is worth mentioning or at least need to be aware of is that the tax rate Whenever we do integrations, if you have seen previous integrations, there will be some cost which is not deductible from tax purposes. So our tax rate will be higher during the integration. So this year and next year, we will see higher tax rate long term. We, of course, expect that we can come back to the 24% as we have had prior to acquisitions. Then Jens, you already touched upon the EPS and it has been declining due to the share increase we had last year. And like Jens says, we are on track to deliver the EPS growth when we get, of course, the earnings into our numbers. I skip to the next page, and I'm happy again, Jens, that you mentioned the cash flow. We are very happy about the cash flow, nearly 4 billion DKK in a quarter. It's a pleasure to see. Of course, we also work for it. There's also, you can say, an impact of the freight rate that has been declining if you compare to some of the previous quarters. Also, our net working capital is also trending in the right direction. We've been able to reduce it, so it's stabilized. We say here that the net working capital compared to revenue ratio is 2.4%. I think we said last time around 3%, so we are, of course, pleased to have it at 2.4%, and we work hard and work every day to maintain that. It can be that they will come back to Hoover around the 3% until we get completely in control of all the processes around our collection and so forth. Then I forgot to say something, which is most likely the most important part in this cash flow statement, that is that we have paid for the Schenker business. 76 billion DKK. So it's also something that is remarkable to see in this cash flow statement here. NIBD around 93 billion an hour. gearing ratio which is also what we said in the beginning before this transaction this should be around three also here we're a little bit ahead of what we have said before as also with the net worth and capital so to conclude also from the cash flow side and the financial ratios i think we are in a good place right now Then outlook, you already mentioned that we keep the outlook and we will do that for the full year, obviously. And it is based on what we see right now in the current, you could say, economic surroundings. And of course, there are uncertainties globally. We are fully aware of that. And that's also what we have embedded into our ratio. Sometimes we narrow down the ratio, but here, given the increased uncertainty, we have kept our ratio. And then special items, I touched upon that as well as the tax rate. So I think that's in short. I guess that there are many of you who have a lot of questions and look forward to get those answered. So I will let Jens... I'll round this one off. The key takeaways, what we really are happy for here is, of course, that we are on track for the IP growth. That's what it's all about. And then the Schenker integration, we are in a very strong place. I think I've said before to some of the ones I had the call with, I think we have never been better prepared. And I think we are in a very good place. You also touched on it earlier today, Jens. So we are really in a good place. And of course, we need to start the integration of the countries. You also mentioned that we have a couple of countries kicking off already here in August. And then you can say there is more or less like pearls on a string that goes all the way to we get all the countries onboarded. And we reiterate our full year EBIT guidance between 9.5 and 21.5 billion. I think that's what we would like you to take away from this presentation and then we look forward to get all your good questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. The first question comes from the line of James Hollins from BNP Paribas. Please go ahead.

Thanks very much. If I could just start with your very positive comments on the customer relations, etc., Perhaps just give a broader update on any indication of customer attrition, or would your initial discussions mean there's any reason to change or reduce your soft guidance of losing up to 5% post-integration? And my second question would be on FX. You know, 116 million impact in Q2. Perhaps just give us a bit of a helping hand on as hedges roll off and if we have to mark to market today on how h2 might play out whether those losses those quarterly losses would increase as we go through the half thanks very much

Thank you for that. I will kick off with the FX, and then of course Jens will come back to the customer relations. I think we do have policy in place to hedge, and we hedge up to six months' time, then we roll on, you can say, every month. So we roll on. So of course we will see some impact, but it's not... We don't see this accelerating right now. We have good policies in place for the hedging part. We also have in many of our contracts what we call a CAF, currency adjustment factor, so we will be able to catch up for some of it. So I don't foresee this to accelerate, but of course you never know how fast drastic potential FX currency adjustments can be. But right now, we don't see any increasing impact on this one.

So basically more or less the same if the rate stays the same. I think that's basically the conclusion on that one. On the customers, I think what we've tried to do, you know that we changed our commercial approach a little bit last year so that we tried to have, what can I say, an intensified dialogue with our customers. I think we've also applied this approach when we then consolidated Schenker into our structure and we've continued this dialogue. Many customers we knew beforehand, but of course there are also new relations where we use the same methodology. I think it's been very positive received from the customers. Actually, many think that it's a great advantage that we consolidate our industry and many want to also to try to consolidate the number of logistics service providers. So I think that dialogue has been going well. Of course, we've in the beginning started on the larger customers. This was also where we probably on previous transactions had most significant attrition. And now we also have to focus on the next sort of layers in our segmentation that are basically handled by the countries. So they're really on the ball now to get in contact with the customers and all that. You have to remember on country sales, we have five and a half thousand people. So let's say they go and see three visits every week, then we meet more than 15,000 customers a week. I know that we have several hundred thousand customers, but of course we can engage and have that dialogue. And here the appointments, they are really important so that we know Person A deals with this customer, individual B deals with this customer and so on. So that the customer, they see we set the team and we come as one company when we see them. I think then we can explain to the customer what does the integration mean for you. And why is it that we have risks, but why is it also that we can have benefits together? Right now we've guided the 5%. I actually think it's probably a wrong way to look at it, to look at 5% in volume. I'm much more interested in what we keep in GP. And I'm fairly confident that we will be able, what can I say, to have very solid outcome on the GP level. But let's see once we go one quarter or two quarters down the line, how that all pans out. But as you can hear, we've spent significant resource on this. And I'll be a little bit depressed if it doesn't have an impact, I can tell you that.

The next question comes from the line of Alex Irving by Bernstein. Please go ahead.

Good morning, gentlemen. Two from me, please. First of all, good to see that you've got the frame agreement with the German Works Council already. Could you please share some of the broad outline of the main terms? And then second, related to that, Since you've got the frame agreement, why do you expect to only have 75% of the synergies achieved by the end of 2027? What prevents us from being faster, and what do you think will still be outstanding by that point? Thank you.

I think if we sit and look at the GM works council, I think in Germany it's a normal situation that you have a certain factor on the number of... You get one month for every year you've been employed. And then the compensation for the employee is basically that you get a certain factor on that. I think we've managed to negotiate a factor that is satisfactory for both parties. We would, of course, as a company, have liked to see it a little bit lower. And I'm quite sure that the employees, even if we think they got an attractive deal, would have liked to see it a little bit higher. But we managed to find each other to the benefit of the German employees. Right now, what we can do right now is we can work on the headquarter and we can work on the regional headquarter. And then we need to make a fully granular plan for the operation so that we optimize the operation in Germany so that it fits the market and the volume that we are producing there. So right now we are making that plan and this integration will probably commence on the 1st of January on the operational side. So it takes a little bit of time because it also involves, what can I say, significant infrastructure to get that ready. So that's a little bit on the German situation. Then you ask, why is it that we can't deliver synergies faster? I think right now there's still some uncertainty, in particular about the tail of some of the things that we have in the plan. It involves significant infrastructure where we have to consolidate things, etc. We may or we are definitely working on trying to improve that situation. So we've now come to the market with something that we're very certain we can deliver on. But you can rest assured, for the ones that know us, that we are not satisfied with where we are with status quo. We're working hard to see if we can improve the situation. And then there might be some positive information in the pipeline for the coming quarters. Let's hope that we can deliver on that.

We now have a question from the line of from DNB Carnaby. Please go ahead.

Yes, thank you. Maybe just look here on the operational side and looking into the second half. It seems like that the lower end of the guidance range is impacting or reflecting a year-to-year decline organically. Can you explain or give some scenarios where you see that unfolding? What should suggest that EBIT second half below and EBIT second half 24? I mean, there is a few factors working in your way. No real front-loading this year. You have had a very weak road Q4, 24. You have the warehouse improvement happening sequentially. And hopefully we can see a bit of volume growth. So what scenarios should trigger, so to say, a year-over-year decline in EBITDA? That would be the first question. And the second question, can you give some flavor on the road business in Q2? How do you see things developing through Q2 and heading into Q3? Any flavor here would be appreciated. Thanks.

Yeah, I think if you sit and look at the guidance, I think we gave the guidance, you know, a little bit a quarter ago or something like this for the year. Right now, we're still in this very turbulent time, of course. feel also a little bit uncertain. If it's stable, then I think what you are alluding to is then it's very hard for us to create a scenario where we hit the bottom. I think that's kind of what you're saying. We also feel that ourselves. But honestly, the whole geopolitical part and just start of an integration, I think for us, we said, let's keep the guidance for now. And then we will come back on it in the next quarter. So it's basically the uncertainty. And if there's something that should drive it down, it's probably the volume. We have seen stop and go, whether we like it or not. Actually, you talked about road and... Yeah, it's correct, you know, that the baseline is definitely somewhat easier in Q4, where you saw that it deteriorated quite a bit. So that's definitely also something that makes it a little bit easier for us, if you look at the baseline. And I'll also say that it seems as if the volumes have gotten a little bit better in June and probably also sort of kind of into the second half. So it's not like it's very positive, but it's getting a little bit better. It's been a very, very tough period for road. And I've been here for many years, as you know. And I can't say that we in the Cerros didn't have a situation that was similar to this, but I can't really remember such a long period where we've been sort of seeing a market declining. But I guess it relates to the European economy and... You all know how that is going, and it's definitely in a difficult spot right now. We hope that some of the programs that the governments, they are initiating, they will drive volumes in a positive direction.

Yep.

Of course, it's not a target to get to the bottom of the range. No.

The next question comes from the line of Alexia Dugani from JP Morgan. Please go ahead.

Yeah, good morning. Thank you for taking my question. Just firstly, Jens, if you can confirm a little bit your points on customer attrition. Is it fair to say that the contribution that Schenker is bringing in Q2 does not, it does not incur any customer attrition? And then kind of subsequent to that, given your experience on other integrations, When do you potentially lose the GP? Is it two quarters out? Is it within the first 12 months? It's kind of a bit of a gauge there. That's the first question. And then, secondly, we now have, hopefully, you know, how you have translated the Schenker account into the DSV account. So, you know, the GP split seems a little bit kind of different. I guess, can you discuss, when you look at your $9 billion... synergy number, how much of that could potentially come from below GP kind of cost improvements? And do you still assume that conversion ratios essentially get raised to existing DSV levels, or are you assuming that you go beyond that? Thanks.

I think if we look at the customer attrition, what typically happens in a transaction is that when you get into renewals and things like that, this is really where you see the changes. Of course, there's also been renewals in the time between signing and closing. But I think on the Schenker side, mostly what we've seen, unfortunately, is that they have quite a significant exposure to the German automotive sector. So there's been quite a bit of down trading for them. Of course, there's also been some losses, but nothing out of the sort of ordinary course of the business, I would say, right now. And I think that's also partially due to we've really also spent significant resources on talking to the customers here. But it will be in the coming quarters, I would say that you really should look out the next three, four quarters. I would pay close attention to that. If we then look at the GP, I think it's fair to say that Michael and his team, they're trying to align the accounting. It's not spot on right now. I think Michael is doing a very good job together with the team, but you have to remember that it's in substance that we have to adjust all the things. So how do they handle their terminal handling charges? How do they do their blue collar employees on the terminals and all kind of stuff? that they're doing at Schenker, they have to get that above the GP line when we compare to DSV. And perhaps not all of it is moved up there now. That actually drives the conversion ratio up to a certain extent. But we still believe that we also on the GP level can. We don't see the Schenker business as significantly different to the DSV business. It's actually fairly similar what we're doing. So we should be able to deliver on the same KPIs as you are familiar with. And normally, of course, we have not put that into the plan. We put into the plan that we come to a level where we are today. Historically, you can then look at the numbers and you can say you've always done a little bit better. But let's just deliver on what we can do now. And then let's say the next three, four quarters down the line, if we got a better idea. then you can rest assured that we are keen to tell you as well. One of the things where I personally have an aspiration that we should do better is we should lose less volume than we've done on previous transactions. And basically that should then yield, what can I say, a better outcome on the GP level than you have seen before. So this is one of sort of my own personal goals for this. And I shared with the whole management team, they're really eager. And Michael does a fantastic job together with his team to create the visibility that allows us to really tackle that issue.

Yeah. Thank you.

The next question comes from the line of Jakob Lax from Wolf Research. Please go ahead.

Hey, thanks for your time. So, another one on yields. You discussed Shanker and CE yields being below legacy DSV levels. What do you think is the cause of that? Is there a pricing issue? Is it just less value-added services? Is there a mix in there? And is bringing yields up towards legacy DSV, is that in the $9 billion synergy figure, or is that all op-ex? And then you mentioned some contract logistics headwinds in the U.S. that were resolved at this point. Would it be possible to size those?

Yes. If we look at some of the things that we may do a little bit different, then, for example, let's take on the LCL on ocean freight. We probably have a higher focus on producing the volume in our own boxes and have had a plan for that for a very long time. So that could, for example, be an example where you don't have a party involved in it that then has to take profit out of the transaction. So that could be one case for example. You can then say the way you run the gateways is another thing on air freight and how you steer that. We can see that it's been a little bit more rigid the way that it's been produced for example on the Schenker side compared to on the DSV side. That can sometimes be an advantage if you are in a market that is very positive. You can also look back in the Schenker numbers and see when that pays off. And then sometimes it's perhaps not that advantageous. And we certainly can see that at this moment in time. So of course, we would then convert the way of operating to the way that we feel is the right one. So there are some changes going on in that area. So that could be, for example, something that will have a significant impact on the way we are operating. I would also say that Schengen generally have been longer on their contracting than we are. So they've been taking more risk. That's nice when the rates, they go up. And of course, then it has, what can I say, the opposite effect when the rates they go down, which they unfortunately are doing right now. So you can say they've been playing the market a little bit more than we are. We always had this that we can't really do that as much because it's difficult to predict the outcome. And being a listed company, I don't think that's really how you want us to allocate shareholder funds. And I think we have a good alignment with the market on that. I think on the US operation we're talking about, I think we lost probably in the region of $8 million in the last quarter on a single site. But it's not the only one. But we should single that one out. And that's definitely been eliminated. At least Brian Ising, who is the CEO, said in the board meeting yesterday that that is going to be between $1 and $2 million for the rest of the year, the deficit. he's fairly confident about the steps that have been taken to realign that business. But there are a couple of other ones we are looking into as well. Not of that magnitude, but this is basically what we're talking about.

Is this sites and it is manageable to adjust?

Helpful. Thanks for your time.

You're welcome. We now have a question from the line of Ulrich Bach from Danske Bank. Please go ahead.

Yes, hello, Jens and Michael. Just on the phasing of the Schenker synergies with 50% expected by N26 and 75 by N27, is that in line with your initial expectations and the basis for the Q1 communication about the reinitiation of the share buyback during 27? Or could we potentially see share buybacks earlier, also perhaps now driven by the agreement with the German Work Councils? And then second question is on the IT landscape. Now you've closed the deal. What are your thoughts about what transport management systems you intend to use and implement going forward in ANC and road, particularly for road in the report you mentioned, the star system? What is the potential for that system and the timing for such a rollout? Thank you.

If I start with the facing of the synergies, what we have laid out now here is what we anticipate. What Jens said in the beginning, if you have said six months ago, would you be pleased to be where we are right now? Then we would definitely say yes. So, of course, we hope that we can do this phasing faster. And of course, we do hope and work on getting us faster to the position where we can do share buybacks. And if you look at our network and capital ratio, if you look at our gearing ratio, I think we are, and also expected Ips, I think we are on a track to do that.

I think if we look at the IT infrastructure, I think it's... It's a complex undertaking that we are into. On the land side, Schenker, actually, us now have rolled the star system out in Poland. It's been a success. It's the largest rollout on the Schenker side. It's also a country where we in our rollout didn't really make it. It's on the rollout now in France. It takes a little bit of time also because we probably have to look a little bit about the methodology, how we can do it a little bit faster. The Schenker approach has been very risk averse and that's fairly good. But then it also comes at a slow speed. we might want to take a little bit more risk and then have a little bit more speed. So once we've done France, we are actually also looking into then rolling it in to other countries. On the Schengen side, the STAR platform is rolled out, I believe, almost 10 countries, but many of them, they are not that significant. So Poland was the first major one, and now France is also live on international volumes. They need the local volumes to be rolled on, and that's taking place right now. Then, of course, we will head on to some of the other areas as well and get them on the platform. So I feel We have the right system. Now it's basically to work our way through the countries. So that's really the journey on road. And then I think we're very pleased with, you know, getting such an asset in the acquisition. If we take on ANC, it's a little bit tricky road because right now we're running the Schenker platform and the DSV platform. We will run two platforms for quite a while and we are currently evaluating the Schenker platform, what we can do with that. It's actually a platform that handles all the Schenker volume today with similar size to us. And it's a platform that has a more modern architecture than the one we use. But of course, the one we use, we've used with great success for many years. So it's a fine balance we have to strike on that. And, you know, once we know the exact plan, we can work in both systems. We can share data between both systems. So it's not really a big deal right now. Of course, our platform, it comes with tremendous cost. It's much more expensive, the one we have, than the one Schenker has. So there will be a significant upside, of course, to make that happen. And then we'll be also in control over our own destiny. So that's what I can say on this.

The next question comes from the line of Muniba Kayani from Bank of America. Please go ahead.

Good morning. Thanks for taking my questions. Firstly, on yields, if I just look at your organic yields in 2Q, they held up a lot better than what we saw from your competitor who reported recently. You mentioned you don't take risk on rates. Just want to understand what your thinking is right now on your R&C yields into the second half and what's kind of baked into your guidance on EBIT for the full year. And then secondly, just wanted to understand what happened with Joachim. It looks like, as you said, he was very involved in all your customer discussions in the last couple of months. What changed for him to kind of, I guess, take the other opportunity? And how does that impact your thinking around the customer churn, if at all? Thank you.

I think I can answer Jochen and Michael. He will take the yields. Honestly, I thought we had a very good journey with Jochen on all the collaboration we had. I think also you can see on the post we sent out and all that, that we really collaborated really well. I think what Jochen discovered was probably You know, you have to be ready for a board career. I'm not that old, you know, I don't consider myself that old, but he's younger than I am. So, you know, I think he still was perhaps... I haven't really spoken to him because he just recently informed us. But I think he wanted an operational job and you could feel, you know, that he's really... very customer focused, likes the employees, likes to engage. And then to go perhaps into a board position if you feel you have more energy in the other role. I think he's had some time. You have to remember that he went home on the 1st of June. He's probably been thinking about it, been contacted by many. Jochen would be an attractive person to get as a CEO or in a senior position in a company. no doubt about that. So I think that's probably, at least there's no animosity. We wish him all the best. And as you say, I think he's done a brilliant job in handing over. I don't think, you know, that we haven't established the relations that we should in the transfer. That was the whole idea. And I've sort of probably met a hundred customers together with Jochen, either in joint sessions or in one-on-ones. And I must admit, you know, that he's done this in a way that we couldn't have expected more. So that's basically what I can say on that. And as I said, you know, wish him all the best in his new role. I don't hope he becomes too competitive to us when he's free of his non-compete. But I think it's going to be okay. We're comfortable.

Yeah, I think that's a good segue. I think we're also comfortable on the yield side. We are struggling every day, like Jens mentioned before, how we operate in order to maintain a higher yield. We have also some of the strategic initiatives which ties into us helping to maintain the higher yields. That said, in the forecast for H2 and also bearing in mind with the Schenker business coming in, then we have anticipated slightly lower yield. So we've said that before as well, but sometimes we have managed to hold on a little bit longer than what we have said. And of course, we hope that that could be the case here, but But in our scenario, we work with a slight decline in the yields.

The next question comes from the line of Christian Nadelku from UBS. Please go ahead.

Hi, thank you very much for taking my question. The first one, one of your competitors talked a bit more back and low the second half with the profits in Q4 stronger than Q3 in R&C. Do you subscribe to the similar trajectory here? And the second, and apologies, I'm coming back to previous questions. So if we take the synergies, 1.2 billion euros, how much of that is cost-cutting at Schenker versus how much of that is GP per unit improvement at Schenker? If I take their GP in line with yours, I get around 300 million euros of extra EBIT. Is that ballpark the right way to think about it? Thank you.

I think if we look at the results and back-end loaded, I think we would see, I don't necessarily see that, but you know, they might have certain contracting, et cetera, that makes it that. Of course, let's say you are in tech and you would serve certain companies that have product launches right now. Of course, that will impact our numbers a little bit, but that's probably more here in the third quarter, not in the fourth. Back-end loaded would be the fourth quarter, wouldn't it? So I don't necessarily see that on our contract portfolio. I think if we look at the synergies, normally what we put out in synergies is either that we perhaps can get a little bit cheaper procurement. That's normally less than 10% of the total synergies. And we then also would say that either infrastructure, so like buildings and IT or these kind of things, they are hard synergies as well, but they will go below the line. And so would, of course, the consolidation of headcount as well. And that would account for more than 90% of the 1.2 billion euros that we are talking about. So, of course, we've then seen that in the past, the upside on the yield would be, what can I say, countered by the loss of volume. So we've not seen a big GEP impact. The whole thing what we're trying to do now is to get the upside on the yield, which we've not factored in, and then to lose less volume than we've done before. That is sort of where we saw an opportunity to improve on previous transactions, where we've also believed that we've created a solid outcome, but where we can improve a little bit. So that's the journey we're on. And as I said, I'll be really sad if all the effort we've put in doesn't pay off somehow. Normally it does. But the coming months and quarters will tell. So every time there's reporting, I'll be standing outside Michael Ebbe's office to get the numbers so that we see what actually happens. And he'll probably be irritated. But, you know, we are all eager.

I will only be irritated if I cannot see the impact in the numbers when I get to it. No, but I think it's a good question also, but it also shows that what we have been working on for the last many months, ever since Jyn started, right? The commercial approach where we have done the segmentation and we reached out to the customers. Same time, we've also had a lot of strategic initiatives. So that works, you can say, both on the yield, but also on the customer attrition and should hopefully bring us in a better position than what we have ever been in before with previous acquisitions. That is the game plan.

Thank you very much. Can I have a follow-up, please? On more looking mid-term, leaving aside the short-term noise, if you look at your value-added services in air and ocean, do you think there is room to significantly improve that and bring growth in GDP per unit from that? Are there gaps? where you think you could definitely improve or you're pretty much already there in terms of the complementary services you're selling to your customers?

I think we can always improve. That's what we try to do every day. Working more efficiently, obviously. Another thing which also maybe can be put into this equation is the increased complexity with the tariffs and so forth. That will bring us additional work, of course. That's also something that we need to to have a dialogue with our customers about how we can be paid for that additional complexity and additional work that we have to do.

But I would say if we look at the customers, what are the customers looking for? This is what we try to look at all the time. The customers, they are looking for many of them one point of contact, so control towers. They're looking for visibility. So where's my cargo? And they're looking for also on the auto management more control than ever before, because they want to drive efficiency in their supply chain. So of course, being the largest player there is in the industry, of course, we have to follow those trends from the customers and deliver a service that basically enables their sort of business in a better way. So this is more value-added services. So it's not all about just moving a container. It's delivering this thing on top that we are talking about. And of course, the customs formalities, it's a big area. It's so unconsolidated today for many of our customers, and it's really cumbersome for them And it's also then sometimes something that becomes a compliance issue if you deal with a lot of service providers in this area. So we can actually perhaps do it cheaper. We can get a higher quality and be more compliant at the same time. And many customers, they really want to engage in a journey like this. So yes, we have to tap into those fields and add more value to our customers, no doubt about it. Now, because you had such a long question, I think even if we wanted to finish at 12, let's have one more question, and then we will make up the time somewhere else.

So the last question comes from the line of Lars Heindorf from Nordea. Please go ahead.

Yeah, hi guys. Thank you also for taking my last question here. On the synergies, Jens, you talked about it on one of the first slides that the 50%, which is equal to 4.5 billion, which will be reached or agreed upon by the end of 26. But you also talked about the difference between what you actually agree and what you execute and what will have actually financial impact for this year, which is the 1.3 and then the 5 to 600. Will we see a similar difference by the end of 26 in what you have agreed and what you actually see as a financial impact. That's the first one. And then the second one is on the network and capital. Very shortly, how much of that decline is caused by the higher share of growth in Schenker?

I think Michael will take the working capital. He can just think a little bit about that. Lars, if I had to make my model, you have to make some assumptions on that. The synergies, think about them linear. So of course, you will get a higher impact. You will get the full year of what you have now, the 15%. And then you will have to think about the discrepancy, the 35%. And then you will have to add them linearly, because we will harvest them as we go along the year. So if I should... give you some guidance, I would probably take the midpoint then of the 35%. We can also divide it for you if you want. But it will be then between 25% and 30% that will be harvested in the year. And then when we get a little bit closer, we'll be a little bit more detailed. And I'm trying, Michael, he actually wants to go live board. So I'm trying to say to Michael, can you not go a little bit faster? So let's try to see if we can't get it up to the 30% last. I think that would be wonderful. And then we would really see some impact both of Schenker income, but also then synergies facing in so that we drive that Ipsop and deliver the company so that we can send some money back to the shareholder. We all want that.

In terms of the network capitalized, I think we have actually seen a decrease also on the DSV standalone in all segments. I don't have the accurate split on it, but we can get back to you so you can get it right into your model.

Great. But thank you very much for your interest in the company. You can feel we are highly motivated, and we are so excited for the time that is coming now. And we feel very, very comfortable where we are. We wouldn't have been able to get here without the really hard work of many employees. We really appreciate your efforts. It's been tremendous, you know. So thank you very much for all your support and all your efforts. And thank you for your interest to the analysts and the investors that are listening in. And we look very much forward to continue to update you on the progress that we're making on this basically landmark transaction within our industry. Take care and speak to you next quarter.