Dsv A/S Unsp/Adr

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.

And then back to you, Jens. Yep. But as Michael said on the key takeaways, I think one of the things is when we take the Schenck integration, it's really all the experience that we have, all the support that we get from the various parts of the organization, they know what they need to do. It's really well done, you know, what is in there. But I think it's also a playbook that we've now done many times that everybody feels comfortable with and also to you investors that have supported us. Thank you for that. That's really, you know, what comes out of it. At the end of the day, there's momentum that we now see on the integration. It's really good to see. Then, of course, as an investor, at the end of the day, what you get is earnings per share. That's our focus. Right now, of course, we are driving the earnings per share up. And of course, at a certain point in time, when we've also delivered the company, we'll probably also use the normal tools under capital allocation to support that thing. This is our core focus that we drive the EPS up. And I think we are looking into a very interesting period when it comes to EPS development. Then, of course, the guidance, I think Michael talked enough about that. So we should perhaps quickly go to the Q&A session, because I hope that you have many good questions for it. So please go ahead with 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 a couple of questions. Anyone who has a question may press star and one at this time. The first question comes from the line of Dantore Jensen. Please go ahead.

Yes, hello, and congrats with this report here. Maybe if you can elaborate a bit on your expectations here for Q4, especially the low end of the guidance range of 19.5. I mean, you need to make 5.5 in the fourth quarter on my math, and you made 3.9 last year, so that's a bridge of $1.6 billion. Schenker contributed 1.3 in Q3. Probably this will be more in Q4. And then you have synergies on top, which you have just lifted. So in my mind, this alludes to a somewhat negative scenario. contribution from the organic business in Q4 for DSV. And bearing that in mind, I seem to remember you have quite easy comps, at least in the contract logistics and in the road business. So there must be something weighing significantly down in Q4 for you to maintain the 19.5, just to understand your thinking of the low end. Thanks.

It's basically volume, isn't it, on what can I say in particular within air and ocean that we are talking about. That is, you know, I think the yield will be okay. You've seen that we are a little bit down on volume. I don't see that trend really change. So compared to the original guidance, we probably had anticipated that we would have a growth in volume. Now we have a decline. I think that's the major concern. contributor, I would say, Dan. The other things that you're talking about, you know, that we're doing well on, yeah, of course, the FX side is big as well. I think that's important to mention. But on the CL, on road, we're doing okay. And I think basically, if you take volume and FX, that's sort of the main explanation when we look at it. Yeah.

Lastly, we also need to take the seasonality of the legacy Schenker into consideration.

Yeah, but shouldn't that pick up a bit in Q4, given the road business, where Q3 usually is?

That's one thing you have to remember on that. They have big groupings network. So there are many days where there's no production in December. And that's, I can tell you, we are also learning something new about fixed cost when it comes to that. So we're really trying to figure out how we can organize this in the best possible way and how many days we produce, etc. And what's the optimal outcome on that. We're putting significant effort into that. It's going to be less than what we've seen before, but probably take a couple of of quarters before we really get that structured in the right way. So it is on the road side, it's a hard one. I would say it's going to be good in road here in October and November, really good. And then we're going to get a tough December. But, you know, the range is the range then. It's from 19.5 to 20.5. So if you are a little bit more optimistic than the people that are, there's a middle of the range as well, if you know what I mean. And I think I won't say more than that.

Understood. And if I'm allowed, just maybe another question here. Digging into the verticals, could you maybe elaborate a bit which are the strong verticals for you here? Is it firm, the growth you see, for instance, in technology, in pharma, maybe aerospace defense, and are yields holding up in these verticals?

I would say that yields are definitely holding up and the verticals you're talking about is probably also some of these verticals that do the best. You would perhaps have more, what can I say, we are a big player in Europe, so of course automotive is a tough one for us also, you know, knowing that Schenck was a German company as well. very involved with those companies as well. That's, of course, something that is a little bit tough these days and also some of the industrial areas, the capital goods also a little bit under pressure, I would say. But the verticals, of course, our tech vertical, very strong vertical out of Schenker. We had focus on it as well, but in the combination. We have the broadest service offering of all the players in the market. So, of course, we are making good progress there. And it's really good to see. It's helping us a lot when we then see troubles in other verticals.

That's good. Thank you.

The next question comes from the line of Brexit Crescent from Goldman Sachs. Please go ahead.

Hi, Jens, Michael. Congrats on the strong point, also for me. Just a couple of questions. The first, just some synergies. I mean, it seems like you are harvesting the $9 billion ahead of schedule. Perhaps can you talk a little bit about some other sources of opportunity, let's say, that you see within the DBS business? I mean, updated thoughts on procurement synergies, for example. and also the latest thinking on Star and Tango IT system rollouts. And then, Michael, you mentioned the strong cash flow, leverage reducing. I think you previously talked about bringing the buyback back perhaps in H127 and appreciate it's early to talk about it, but any thoughts there, updated thoughts on timeline on when you might be in a position to return capital again, depending on how you continue to progress?

Good. I think I'll take the first couple of questions. Michael, he will talk a little bit about the buyback as well. So I think if we look at the synergies right now, I think what you are alluding to, Patrick, is basically when we do an integration, Then we make an initial plan like we're doing now. Then we combine the companies. Then once you have it combined, and I think this is what you're thinking about, then you're thinking there's actually a little bit of things we should adjust on top of that. These are not sort of in the plan, but they will come sort of once we've done the other work. I think it's a little bit too early days to say something about that but let's say two quarters down the road we should have a much better view on how the combined DSV will look because then we will have done As you can also see from the plan, quite a bit of the work combining the countries as well. So I think that's what we can say on that. But of course, we are really, you know, working hard just to obtain the synergies we get right now. And then there's going to be a next step. If we take the Star or the Tango cargo-wise one debate, I think the plan is that we now, to harvest the synergies, roll a lot of countries onto the cargo-wise one, but also keep some volume on Tango. Basically, we can backfill both systems with data from each other, so we're not necessarily losing a lot of productivity on that. Then, of course, we have then to have a debate which direction are we going in. And I think, you know, we will have to come to a conclusion on that as we go along. But so far we're producing the volume and we are shifting. We have a data platform where we can exchange data between the platforms seamlessly. So it's not a lot of productivity that we're losing. It also helps us a lot on the customer integrations actually, that we can do them, what can I say, in a more, what can I, planable way, I would call it. Yep.

Then, Michael, it's your turn. Thank you, Vince. And, Patrick, also thank you for the question from my side. Of course, the cash flow and how we can return into Shabba back area is something that we follow up very, very closely. Believe me, I also want to go there as soon as I can. We have to look at the next couple of quarters. And, of course, if we continue the strong cash flow as well, then we will, of course, like we always do, take a look at it quarter and quarter and then see how is our gearing ratio, how is the rating agencies consider it. And then we will have to take a relook, hopefully, within a couple of quarters.

Thanks very much.

We have now a question from the line of James Holland from BNP Paribas. Please go ahead.

Yeah, thanks very much. Michael, if I could start with you, if I could just get some, if possible, clarity on synergies within 2026. I know a lot of investors are crying out for it. If we do some basic maths on 30% integration end of this year, 70% end of next year, if we took the midpoint, that would be something like 4.5 billion of the 9. I was wondering if you could just give us your thoughts on synergies within 2026 that will impact for the year 2026 EBIT. And secondly, Jens, you talked about very little attrition in your customer base. Well, basically, customer retention is strong. Is it sort of better than expected? Is it as thought? And I know you talked previously about you've done the top 275 customers. Maybe it runs through how it's going with the, I guess, smaller sort of customs in terms of attrition. And if I may, are you planning a capital markets day anytime soon? Thanks a lot.

Yeah, I will take the first one and then Jens will take the second one. In terms of the synergies, what I think that you can expect is that, like we also have written for the phasing, if you do some math and try to predict it, you would see that 2026 should be around 4 billion, you can say, in synergies that will have an impact on that one.

Yeah, then I can talk a little bit about what can I say the customers. I would say that, yeah, it's correct that, let's say, on the last call after Q2, we sort of initially focused on the larger customers. Of course, that's cascaded down now into the organization so that there's basically a focus, what can I say, on what we call the A, B, C, and D customers. where we go and basically have a conversation with all those customers, depending on their size and service requirements, etc. I explain to the customers what this means for us. Do we get new rates? Do we need a new contract? Do we need a new integration? Who's my new contact person? What does the team look like? Where's the office? All these questions we have to answer for the customer. If you are proactive and do this, then very soon we can start to explain them what is it that the combined company can do for them. And this is, of course, where we are much stronger than we were before, being now the global market leader. Of course, we have a strong offering to present to them. And actually, we've seen that they've responded very well on that, that we have a very structured approach on this. And I think it's also visible in our numbers that you see that in reality, we've managed to keep the customers, yes, We are down trading because the shipment size, what can I say, on volume in TEUs or tons, because the shipment size has decreased. But apart from that, I think we've really stood our ground on this integration. And I think it's thanks to the efforts, what can I say, of a whole organization that wanted to prove to the market that we could up our game a little bit on this one. So I think that's all been very good. If we look at the capital markets today, Yes, there is going to be a capital market today. We need to come out and explain better what it is that we're doing, what's our strategy, what's our plan, what's our thinking, both on generative AI, for example, which is a big topic, what's our thinking on the integration, on the strategies for the divisions. So we're really looking forward to that. And I know that our IR team, they are already working hard on planning it so that we will have a very good agenda for you.

Thanks a lot.

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

Good morning. Two from me, please, both on road. First of all, you pointed out the implementation of the uniform digital platform. What is it specifically that Star can do for you that Roadway Forward could not? Second, you suggested at one point, might have been last quarter, that if you really excel in road, a double-digit EBIT margin might be achievable. Is that still achievable? And if so, what would be the path that, we're talking just structural cost reduction, does it require a change in the business mix, say, more groupage? Thanks. Thanks.

If we take road and star, I think when you have to create a system like this, it's not a technical problem, it's a governance problem. How do you want to operate your business? Schenker has been on that journey on the groupage side and also managed to divide their business perhaps sooner than we did where they said system freight groupage as we also call it in Europe but let's say shipments between 30 kilos and two and a half ton or two tons or something like this so larger than a parcel but not this is let's say a real LTL shipment where you go direct to the customer you then also have the FTL business which is like the full truck load we call that direct Schenker had separated that harder than we had in DSV. So we tried to solve both products in the same structure where Schenker really focused on the groupers. And that's really how Star came about. And then they've done a lot of change management in the countries where they're rolling it out. because there's a lot of local habits that we have to weed out so that we basically work on one platform. Then you will have what we call, it's like for ANC, you will have a single file system where you don't have, what can I say, different systems with different types of data at both ends, different conventions for data, and then you need human intervention. And then all of a sudden, what can I say, you produce fewer shipments per person per day. It also gets harder to plan. And there are many things that are very difficult in a more complex system landscape you have. So this drives lower productivity. We replicate the same process over and over again. So we have also to say that Schenker they have done better that you know separating these two things. Actually we can also do the other stuff on the Star platform as well the direct business but it's perhaps supported a little bit less than on DSV but it's still workable compared to what we have. And of course, if you have these things, then you can actually go to the next stage as well, where you start to consolidate some of the efforts so that you go to a more domain driven approach where you will say, listen, there's a quoting domain, there's a booking area where we handle this kind of could be called customer service. You could also then go to the Westmark Cargo or events, whatever you want to call it, also customer service at the end of the day, because now you'll have all this data in one system. And then, of course, on top of this, with a new technology, which was not what I was sort of factoring in at that stage. But of course, here that will drive a ton of productivity to go into domains. But on top of that, you can probably put more agents in than we're using today. So that can drive the productivity even further up. So it's really The technology is there. It's how much change can we impose on the company. This is the limitation. So it's a governance issue. Like it always is, there's nobody within our industry that has access basically to technology that the other people don't have. So it's how you run your company that decides what the financial outcome will be.

We now have a question from the line of Alexia Dugani from JP Morgan. Please go ahead.

Yeah, good morning. Thank you for taking my questions. If we start just on the synergies, you talked about 300 million of impact in the third quarter. Can you just confirm it's all cost and there's not the synergies based on your customer attrition point? And then subsequent to that, At what point will you have more certainty that, you know, the synergies that are within the 9 billion are no longer valid and we could be looking kind of at a better outcome? And then if Michael could just clarify, you know, when we talk about 4 billion, you mentioned 4 billion of synergies in 2026. Is that right? Because before we've talked about the midpoint of the exit rate, 30% in 2025. 70% in 26, midpoint is 50%, of 9 is 4.5. So I don't know if you were thinking year over year or absolute. I think that's worth clarifying. And then my second question is on roads. Can you discuss a little bit more fundamentally of the operating leverage in this business? Clearly, you're taking a lot of costs out at the moment, as we have seen through the DNA reduction you've reported. How will that kind of improve operating leverage when volumes start to recover and pricing starts to go through. And, yeah, giving us a little bit of color of the actions you've actually taken to really reshape the cost base of that business, or I guess you're starting to make. That's it for me. Thank you.

I can start with the synergies. Maybe just to be clear, you said it's right that we say 30% for end of year. That means for the full year next year we'll have 3 billion. Then that's, you can say, that one. And then we have the synergies that we already have right now, which is 800-ish synergies. and that you could say 3.8 and then you're right about the mid-range. I though would say that the synergies that we harvest the first might be the easiest. So I don't think necessarily you can take a linear approach on that one. But I can't promise you that we will deliver at least the 4 billion and we will work whatever we can to make that faster and higher, of course.

Then we talked about the disc synergies. I think we will really know through the tender season how that is all playing out. Normally we'd seen actually quite some attrition right now in a normal integration, which we are not seeing. And then, of course, it's the tender season. It's the second test, if we want to call it like that. So I think, you know, if we look at it right now, we are off to a good start. And I actually think we have to have the inspiration that we also make it through the tender season and then we can really start to focus on the growth. So, of course, all the competition is focusing on us right now. We are the market leader. We also did that when we were chasing. So I think, you know, but I'm comfortable as you can hear. Then I think the operating leverage on road. If you look at, let's say, the road network, it's both a physical network, but also a back office thing that we're saying. And as an example, or... Schenker, they can produce basically all DSV volume in most countries in their network. So, of course, there was too much capacity available. There might even be areas where we still have too much capacity, even if we've combined entities. So we're right-sizing that right now. Then, of course, we are looking at whether we need to produce all 100% of the volume in our own network or whether there might be some areas, you know, very remote destinations where we could ask somebody else to do that. That would then limit the physical infrastructure quite a bit. In the offices, we also need to operate at, you know, plus index 90 on the capacity side. even if we are where we are right now and then when we get price increases i think there's only so much volume we will be able to produce we might then i need just to take some water you might need to what can i say We might need to say that we can grow a little bit less because we need to take some of those fluctuations out of it and then just, you know, increase the prices a bit more. Because today we've actually had way too much capacity so we could handle the peaks, but it's way too expensive in the troughs. So that's in reality what we're focusing on right now on the roadside.

The next question comes from the line of Ulrich Buck from Danske Bank. Please go ahead.

Yes, hello, Jens, Michael. Thank you for taking my questions. So in terms of the synergies and the integration process, what is it specifically that has progressed faster than planned? And have you identified other areas where we could potentially see a further acceleration of this synergy harvesting? And then also the 300 million in synergies in Q3, 800 for the full year. as well as 26, if you can provide some guidance on how this is split among divisions, that would be great. Thanks.

Yeah, I think if you look at the speed of the integrations, I think if you see what we have moved last time, we said 15% end of this year and you can say 50% end of next year. Now we have increased to 30% this year and 70% next year. I think it's not that unusual. Remember the size of Schenker that we have acquired. I don't think it's that unusual that you need to kind of get a little bit of a grip on what it is that you have acquired and how how you can plan for it. It's a complex thing to migrate 85,000 people on more than 80 countries into our infrastructure, legally as well and as organizational and IT as well. So it takes a little bit of a time. That's also maybe why you said last time that it was progressing slower than at least what some of you guys have anticipated. I think what we have found out now, we know what we are dealing with. We have identified all the different scenarios from a system perspective, organizational perspective. So now we have put that into a plan that we are executing on. And this is where we are doing fairly well in execution in DSV. So that is why we are moving faster than what we initially thought through, actually. And then in terms of finding, I think Jens already touched upon that in whether there are more synergies elsewhere to come. Right now, we stick to the plan that we have promised to deliver the 9 billion in yearly savings. And we are very committed to deliver that. And of course, to be there as fast as we can.

We now have a question from the line of Christian Goddiksen from SEB. Please go ahead.

Thank you. A couple of questions from myself as well. So first of all, maybe could you comment on the stabilization? You've seen a road that you comment on in terms of what to expect going forward, both in terms of margin progression and maybe also in terms of which kind of price increases you expect to view in the market to implement in this quarter. And then secondly, just a household question, wondering if you could comment a bit on why the legacy Schengen yields are down more, both in terms of CNF rate than the legacy DSV yields. Thank you.

If you take the yield question, I think Schenker had, what can I say, a tradition where they were a little bit longer on the procurement side. In certain markets, it had benefited them. And as you can remember last year, perhaps, you know, that was a situation like this. Now, if you're longer in this market, of course, then it's... when the rates are going the other direction, then it's perhaps a different scenario. So I think that would be the explanation to that. I think on the operational side, it's fairly similar volume than we are producing. Then I think if we look at the road side, I think We need to think. We don't want too much capacity. We want to have the capacity that is required in the market. This is a journey where you have a ton of infrastructure that you have to right-size so that you get there. It's part of also, or certainly it's also part of me having said that on groupers we need to make much more money. Then I think the price increases that we go out with. Today, perhaps, TSV stand alone, Schenker stand alone had an aspiration that we need more and more volume. Actually we got sufficient volume now to have a European network. So we can sit and learn and look at what's the service, what's the quality of our product. And then, of course, we can then go out to the customers and say, listen, this is a quality product. And, you know, this is the SLA that we can deliver to you. And it comes at this price. So we've been out now to our customers basically because also there's pressure from the subcontractors. They want more money. so that with the service catalog, this is the service you get, this is what the price is, and it's of course always market driven by the subcontractors at the end of the day. But this in combination then is what we present to the customer. Then I think on the smaller account, If we sit and look at it, of course, we can present that because we don't necessarily have a long-term agreement. But on the customers that we have a longer-term agreement with, it's going to come when we have, what can I say, the freight negotiations basically for the renewal of the contracts. And that's typically happening into the new year. So there's still some ground to cover. But we are off to a good start. And I can see Michael has something he would like to add.

I think also one thing that I don't think that you should underestimate when we talk about stabilization. Remember that Legacy Schenker has a huge road organization. And like we also touched upon last time, we have now set the management team, both globally, regionally, clusters in the countries, and the team has also worked, dedicated to find some of the recovery plans, as we call them. So I think that's where we can see that now we are getting hold and grip of these kind of things that also pays into the frame of why we can say that it is stabilized.

Okay, that makes good sense. Just very quick follow-up on the impact from the longer procurement of volumes from the legacy Schenker. When will we see that impact fade away?

I don't know. It's hard to quantify. I think basically that it's an ongoing exercise that we're talking about. So I don't necessarily, you know, I don't think we're going to move backwards on the profitability on the roadside. We're going to make progress, consolidate, and take idle capacity out that is not needed. On the procurement side, we're going to drive, of course, that very efficiently, as we've always done, and make sure, what can I say? We have haulier procurement. Let's say the terminology that was used in Schenker was haulier management. I mean, these two words, they are quite different, aren't they? Because it is a procurement exercise for us. We have to deliver the right cost to the customer as well.

And, of course, it will follow the normal, you can say, renewal of the contracts. Thanks, Christian.

Thanks a lot. I'll jump back.

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, I just wanted to ask around the yield mix at Schenker. So, Jens, in the past, you've kind of given us a breakdown of the value-add mix for DSV standalone ocean and air yields. How does that look like in Schenker? And kind of along the lines of the previous question on Schenker yields, kind of how do we think about that mix and movements with freight rates going forward. So that's the first one on yield. Secondly, around cost-cutting. So your competitor today announced a cost-cutting program. I think what you said is you're looking at it but haven't really kind of pushed that kind of on top of what you're already doing with the Schenker integration. So what do you need to see to do more of that and kind of how are you thinking about that And just a quick one on real estate sales. You've talked about that in the past. Where are you in that process? Can you give us a sense of the timeline and potential amount from Schenker Real Estate Sales? Thank you.

I think if we look at the Schenker yield, it was lower. I don't necessarily think that Schenker had the same focus on selling, what can I say, upselling, you know, the services than we had. They had perhaps more an approach where they were also a little bit long, short in the market, depending on their expectations. we have a clear way forward where we basically don't take positions as a company. And you've seen this play out in the industry as well. That also then leads to some companies then having, what can I say, to make certain decisions on capacity as well when you perhaps have some focus on the yield side that drives, what can I say, financial outcomes that are not desired. If we look at our company, we right-size the company all the time. There's natural attrition, and right now we can stick to that. We have our performance KPIs, as I talked about, when we run the company. So how many shipments, how many transactions per person per day, this is something that our organization, they look at all the time. And we can see what we do on the Schengen integration and with our expectations for the number of shipments we have to produce and the productivity expectations that we have. that we don't need to do anything else on top of this right now, which is great. Our staff, they know exactly what we're doing. We're focusing on the Schenker integration and then the normal course of business. We then, if there's an area here or there where we need more or less capacity, this is adjusted as a normal part of operation. Michael will talk a little bit perhaps also about this, but also about the real estate as well.

I think just a last comment on the cost cutting. You referred also to one of our competitors. You also maybe need to look at the starting point from a conversion ratio perspective and then see where it brings. And like you say, we are actually looking into that. Of course, the measures that we normally would take on that one. And for the Schenker real estate, it's correct that they have been a little bit more asset heavy than what we have. We are of course looking into getting that to fit into our asset light model and hence there will be some divestment of real estate. Remember, this is not something that we have, you can say, taken into our business case. So we're looking into that. And I think we have also mentioned out of the earlier case, it could be around 1.5 billion euro that we're looking into. And for timing and stuff like that, we need to go in and find a plan for that one before we can say more about it.

We now have a question from the line of Lars Heindorf from Nordea. Please go ahead.

Yes, thank you for taking my question. The first one is on the logistics part of the business. Very strong revenue growth in the third quarter. Apparently a sale of a terminal property. I don't know exactly where and the timing of that. So maybe you can just give a bit of detail how much impact that has on the top line and also on the cross-profit in the organic business. That's the first one. And then secondly, I'm sorry to come back on the yields questions here. I clearly understand your answer for some of the previous questions on the sequential decline in yields when rates go down in sea freight and how, depending on how Schenker has been sourcing their capacity. However, in air freight, where we've seen a very, very significant decline in Schenker on a standalone basis. We haven't seen a similar decline in rates, so it may be just an explanation why we see that both in sea and in air. And also, I don't know if you can go that far and maybe give us an indication where you think that yields will continue to decline combined into the fourth quarter compared to the third quarter. And then the last one is just a housekeeping question on USA Trucking. the Q2 EBIT impact now that you've taken it out as a discontinued business. Thank you.

Good. I think Michael will start, what can I say, by answering some of the questions.

Yes, if we go to the contract logistics side, it is as always Larsen and you are aware that we have had some property issues. projects which we also have talked about in connection with our network capital and so forth and we have realized one here and as always it doesn't really have an impact on our EBIT and our GEP to be honest with you guys so that's on that one for the USA truck it's also household like you said it's correct that we have now classified it as divestment, non-continued business. We set 90 million on a quarterly. That's the net result, as you most likely know and can see. I think for EBIT impact, it moved around 60 million DKK in a quarter.

And then you talked about the yields in ocean freight and air freight as well. I think if you look at the market, what can I say, rates, it's also very different for the two products, isn't it? Why it's been declining quite a bit on ocean freight and why it's quite stable, at least the way we see it on the air freight is of course declining, but not necessarily at the same pace. So I think this is what drives the difference in outcome, Lars. Yeah. Good. I think that was basically we at the end of the session. So I would like to thank you all for your interest and, you know, look forward to have some conversations bilaterally after this call. But most of all, I would actually like to thank our employees that are listening in on the call for all their hard work, all their efforts and their dedication. We would never, ever have been able to pull this off at this pace and with these results if it hadn't been for all your hard work and all your efforts. You have overachieved and just continue at that. It's really great fun to be at the company right now. Thank you very much. Bye-bye.