DSV A/S

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.