DSV A/S

Ladies and gentlemen, welcome to the DSVAS Q3 2025 Interim Financial Report Conference Call. I am Hili, the conference 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 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.

Good morning, everybody, and welcome to our Q3 results call. We look forward to a good session where we go through the presentation. The format will be the same as usual. Michael and I will say something in the beginning, and then we will do the Q&A session afterwards. We will quickly go to the forward-looking statements. Please take your time to read it. It gets longer and longer. We will soon need two slides for that one we've been discussing. But I'll skip that one and move on to the agenda, which is the same agenda as we normally use. and also therefore I will quickly move on to the next slide and talk a little bit about the highlights of the quarter. So I think it's very clear that we are basically Seeing good momentum on the Schenker integration is of course the most important topic that we have right now. It is to ensure that the integration continues to gain momentum and I think that's also what we see. I'm particularly fond of the fact that we've done really well in relation to the customers. I think the feedback that we've received on the integration is very positive and we've seen that there's been very little attrition. So that's definitely an outcome that we're very pleased with. On the financial performance, I think the numbers they speak for themselves. Of course, it's now with a full quarter of Schenker numbers in there as well. There's still a lot of ground to cover, but I think we're off to a really good start when it comes to the combination of the company and the financial performance. On the deleveraging, yes, I think we've now started to reduce our debt and just shows, you know, that we generate cash flow and that means that there's substance in what we're doing. And then, of course, our guidance. We now have narrowed our guidance. Michael will talk a little bit more about it. But I think it's... it's basically good to see that we stay within the range that we guided at the beginning of the year and then lastly I'll just say on the execution of the synergies I'll come on to that in on the next slide but of course at the end of Q1 we saw that You know, we had a plan and we presented also a timeline. We had a lot of uncertainties in this plan. We've managed to reduce the number of uncertainties and also basically then been able to update the plan so that you can see their new timelines. And I think I would just like to mention that we said we would be done with 15% at the last call. Now we say we will have 30% done before the end of the year. And also the next column is increased from 50% to 70%. Not all plans are finalized yet. So as a consequence, this is what we know. This is what we have confidence in. We, of course, are working on, you know, doing it faster. And that might be the case. But this is what we know for now. So we're very comfortable showing you this as well. I think if we look at the integration itself, I talked about that, which said the organization is very, very stable. The organization, we are pleased with that. I think, as I said, the customer dialogue, it's something that is really rewarding because it's something that we put extra effort into this integration. I think if we measure the previous integrations, we saw that we needed extra focus on this. And then I think the country-go-lives, they're progressing really well. We are live now in 13 countries. This is where we physically move the people in together. that we both in the offices, but also in the operational side. So it's a lot of work that needs to get done. It's actually steered by Michael, who is doing a wonderful job on this together with the team. And then of course, I think the back office functions here, we also consolidate the functions. It's going really well. And then of course, we can see that On the white-collar side, we've reduced more than 3,000 head counts as a result of the combination as well. I'd just also like to mention that we expect to go live in Germany on the 1st of January, as we stated also the last time. And I'm really proud about the work that is being done by the team there, both on the GSV side, but also the Schenker side and the constructive approach from the employee representatives, where we basically have an ongoing, of course, what can I say, open dialogue, but still in a constructive way so that we find results. Yeah, I think the finance figures you could probably read yourself and the transaction costs and the expected surges, they remain unchanged. I think if we look at the financial highlights here, we see the GDP is up. I mean, at the end of the day, this is really what it's all about, that we produce some more GDP. We see that the EBITDA is down and it is because the productivity, what can I say, needs to increase as well. There's one thing that I would like to say, and I'll also point that out when I come to some of the divisions. The transaction size that we're handling, it gets smaller when the economy has a difficult time. So the volumes that are shrinking a little bit when we are down trading, it doesn't necessarily mean that there's fewer shipments. So we need more shipments to flow through the system. And we have a certain number of transactions per person per day. So on the productivity side, we're actually doing fairly OK, I would say. So it's just a little bit complex to see through some of those numbers here. But when we look at it from the management side, it's under control. We're doing a great job. And I'm very confident that we will see when the synergies start to kick in that we will also see progress on the EBIT side. If we move to the next slide, we come to the ANC division. Here, I think, you know, we've always said it's GDP that matters. We need to produce some gross profit here. And that's also what our focus has been in this quarter. If we look at it, we can see that the GDP is up, the EBIT is down, and here, if I look at both air freight and ocean freight, We produce more shipments than we did last year, even if the volumes have evolved as they have. And of course, it puts a little bit of pressure on the conversion ratio, as well as the lower productivity we see out of the Schenker organization. Not that we're not going to get the Schenker productivity up, but it's just when you combine it takes a little bit of time before we get there. And that of course has a consequence for the operating margin as well. But once then the conversion gets up, the productivity gets up, of course the margin will adjust itself. If we look at the air freight, I think we are actually pretty pleased with the developments in the GEP. It's really been solid for us. It's the last quarter where we can separate the DSV and the Schenker volumes, because as I said, we are now live in 13 countries and it means that we cannot separate the hot and the cold water anymore. when we do the reporting. So we give you these numbers and you can see we've had the yield discussion many times and it's actually holding up pretty well. One of the reasons why it's also holding up is of course as I mentioned and let's say you do more shipments in order to achieve what can I say the tonnage that we are talking about here. And we all have to remember that let's say you do an air freight shipment of 400 kilos or one of 800 kilos It's the same work that the full water needs to do. So really on the productivity side, I think actually if we measure on the KPIs, We can then have aspirations that we need to drive to productivity even higher, which we also have. But I'm very satisfied with the productivity measures that we have. And we're monitoring these all the time. If the market develops differently, of course, we will need to react on it. On the ocean freight, of course, that's the toughest market that we're in right now. It's crunch time. We see that basically GP is down. Of course, there's some FX impact in that as well, which goes for all our numbers. Michael will come back to that, but there's quite a bit of headwind on that. Also here, we've had the yield discussion many times. We've been discussing the value added services that we produce on a shipment. And I think it speaks for itself that now we do more transactions per TEU. We've also had a lot of focus on the LCL market now for years as well in order to protect our GDP and have a value proposition where we are in control of the infrastructure. So I think this is very clear in the numbers as well when you look at it that this is now what is playing out as well. Then we come to road and of course it's nice to see that in absolute figures we are making progress. Schenker's road organization is a really good road organization. Strong footprint in the Asia-Pacific and also a solid footprint are very strong. footprint in Europe here, we are the market leader. So if we sit and look at this, then of course there's a lot more to come, but we are on the right way. If you look at these numbers, they include both July and August, which if you have a large groupage network means that you will have a lot of fixed costs and not as much income generated in these months. So delivering a result of, I dare to round it up to 800, it's actually, you know, quite an achievement from the road organization that I'm very happy about as well. On the shipment side, also here, we are flat, it's flat neutral, what we are seeing here as well. So it's really also well done, I would say. Then we come to CL and here we have produced almost 1.1 billion. So definitely quite a bit up compared to, you know, what we'd seen before. Here we see that the Schenker contribution is impressive as well. Actually, we've been doing fairly well on the EBIT side on the DSV anyway, previously, as you can also see from the comparable figure, which only includes DSV. But the Schenker is definitely also contributing with both footprint, with skills, with competence and in combination we have a really solid value proposition. And then we have the problem that, which is something that we have a ton of focus on, we need to increase the return on the capital that we deploy. Because of course it benefits the other divisions that we hold cargo that is being moved in our air freight network, our ocean freight network, our road network. But we need to generate, what can I say, a higher return. We simply, it's unacceptable where we are right now. But the division is really taking this into consideration when doing the integration. And I feel very confident that they are doing something about it that soon also will be visible in the numbers. So with that said, I would really like to hand over to you, Michael, so you can give a little bit of details to some of the numbers as well.

Thank you very much Jens. And then if we look at the page number 12, which are some highlights of our P&L, like Jens mentioned, we have a stable performance in the quarter. And of course, Schenker contribution positively. It's also, if you look at the net result, it's of course impacted by our special items of 1.1 billion. This is as we've announced, also related to the Schenker integration. Then I know that we have been talking with some of you guys at earlier occasions. We have, you could say, moved our road activities, legacy Schenker, that we have acquired that both move to discontinued operations for the ones that are really into details and spreadsheets. Another thing that Jens mentioned, and I will also touch upon that in the next couple of pages maybe, it's the FX headwind, which is, of course, impacting predominantly in our RNC business. Next is also worth mentioning is our tax rate is very high these days, which is due to the integration of Schenker. It's a little bit higher than what we have anticipated previously. It's because as we can see with the synergies and so forth, we move a little bit faster than what we did last time. So we are really picking up in pace and that's reflected in the tax rate. Our diluted IBS is stable as compared to last year. If you look at compared to last quarter, it's actually kind of picking up. And if you then even dare to see if you can adjust for the tax rate, then we would actually already be in a positive mode on that one. It's clear that the ratios, like Jens also mentioned, it's impacted by the dilution impact of the acquisition of Schenker, but we're working on getting that improved. Once again, on the next page, on the cash flow, once again, we have actually a strong cash flow, more than 4 billion DKK, cash conversion ratio of 96%. We're very pleased to see that. Our network capital has improved quite a bit as well. It's below 2%. I cannot promise you guys, of course, I will do whatever I can to maintain that low level. But as we said earlier, it might be, you can say, to calculate around 2% in the same. We've also been able to reduce the debt by the strong cash flow that we have. So we have reduced our debt with four billion. So that's also seems to be nice. It is nice and that we are on the right track as you can see. So that is great as well. Then the next page, 14, is on the guidance. We are very happy that we are able to keep guidance and, of course, lowering the upper range of our guidance. So now we will expect that we will land in 19.5 to 20.5 for the full year. Jens started out by saying that in this number, of course, we have to bear in mind that we have tail headwind, sorry, for the FX of around 500 million DKK, 500 million DKK as headwind on that one. We also increase our expected synergies for the full year to around 800 million from previous five to 600. That's a change in there as well. And also giving the pace that we have also means that we increase our expectations of special item cost in our P&L. And again, reflecting the pace on integration, the tax rate will be a little bit higher. It's because there are tax consequences when we do these kind of integrations. So long term for the tax rate, we expect that we will be back in 24% area next year, hopefully. Then for the market outlook, it's still impacted by the macroeconomic and geopolitical landscape. So we still expect that uncertainty to persist for the next quarter. So we expect to see you can say growth below GDP for the next quarter that's what we have embedded into this guidance that we have but overall again we are very pleased that we are able to keep our guidance in the way that we have and then of course on the road and on the contract logistics, as Jens already said, it's a stable performance that we expect to continue for the remaining part of the year, and hopefully also the next couple of years, even better.