DSV A/S

Ladies and gentlemen, welcome to the DSV Q1 2026 conference call. I'm Matilde, the chorus call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 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 the quarterly announcement of our Q1 results for 2026. We will quickly go to the first page where you can see our agenda. I forgot to say I'm joined here by Michael Neber, so we're like the usual team from DSV. And there's a statement to the right about forward-looking statements that I just want to point your attention to so that we all are aware of the forward-looking statements. And then we will quickly go into the highlights for Q1. We have basically continued the progress on the Schenker integration. We will dive a little bit more into that. I think one of the things that is very positive is that we've basically now been through a significant part of the tender season and we can see that the customers they are very happy about the integration and Basically, we maintain the volume that we have with many of these customers and also increase our footprint with them. So that is definitely something that is very important. The financial performance, we are satisfied with the financial performance. Of course, it's been a challenging market, as you also saw from one of our peers reporting recently. It's been a quarter where you had even more geopolitical uncertainties on top of many of the issues that we've been dealing with. And we've managed also to limit the impact of the situation in the Middle East to something that is moderate in our numbers. We are continuing to repay debt. Michael will come into this, but we follow the normal seasonality on our cash flow generation. And then, of course, one of the things that is really important that we also had stated last year is that we will soon see that we will have a higher IBS than we had the year beforehand. So we look very much forward to present that. And then of course we reiterate our guidance and also reiterate the synergies on the Schenker transaction. So I think progressing according to the plans that we had announced a couple of months ago. So all in all, we are in good shape, but of course have to work hard to deliver the outcomes. One of the things on the Schengen integration is the progress that we are making on this. Of course, we're very happy with the situation where we are now alive in more than 50 countries. There's one thing that you should note when we go live in a country. It probably takes on average three to six months before we get the synergies in a country because there's a significant procedure where you have to respect local work councils, labour regulation, etc. So it takes some time from when we go live in a country till the integration is actually completed. This is also visible in the chart to the right where you can see that actually having done so much of the integration that you can see in our text, actually the synergies, they're always lagging a little bit behind. So let's say we've finished the integration all in all in 26, then a significant part of the impact will come fully impact in 2027. So the last sort of major countries that we will do in the integration will be done in from a country go live perspective in July, August. And then, as I said, it takes three to six months before we see the synergies on countries like that. So I think this is just very important. And I'm sure we're going to expand on that as well during the call. But apart from that, I think... The slide basically explains itself. We've reported some impact here in Q1 based on the 2025 situation. And then, of course, we expect even more impact as we harvest the cylinders during the year. We are now 7,000 white collar employees less than when we started the transaction. Basically, we have a situation where we can see how the plants are evolving. We can see that we continue at the same pace in the coming quarter as we've been working so far. If we look at the financial numbers, our GDP up with almost 80%, very pleased with that. But of course, then the EBIT impact that we are looking for, it of course depends on us then harvesting the synergies so that it's converted into EBIT. But I just explained the situation on the synergies on the other one. We can see the productivity when we measured, for example in ANC, that the number of transactions per person is in fact higher per Q01 this year than it was last year. So we are in a good situation, but of course we have to drive the productivity further up and harvest the benefit of this. On the EPS, yes, it's getting close now to a situation where we make higher EPS this year than we did last year. And this is something that we are all looking for because EPS growth at the end of the day is very important for all of us. If we take the ANC division, I would say we are very pleased, not least with the development on the air freight GP. The ocean freight has been a little bit more under pressure. I think this is the market conditions as we all have seen them, where there's been in particular in March some disruptions that also drive what can say a little bit lower GP. And if we look at the numbers, then this should be the quarter where we will have typically in an integration the lowest conversion ratio and the lowest operating margin. This is because next quarter we will actually have two months where Schenker was already integrated and one month where it's only DSV standalone. So I think we can with confidence say that the conversion ratio will be somewhat higher in the next quarter. And of course, our operating margins should also be higher. So we've, in other words, hit the trough. And it's all based on the explanation that I just gave when it came to the synergies. I just have to go to the next slide here. If we then look at the air freight, if we look at the sort of gross profit, we are also facing some headwind on the FX side when we look at that. But we still managed to grow these 44% on the yields. Actually, one of the reasons why we have a higher yield is because there are certain customers that had very low yields that are not part of the volume we produce anymore. Apart from that, I think the yield has developed fairly stable during the quarter. So also we are very pleased with that. Of course, he also mentioned the FX impact on the yield. And I think volume wise adjusting for these customers, then actually we are satisfied with the development that we have and it's sort of within our expectations. for the outcome on the air freight side. If we look at ocean freight, here also of course we see significant FX impact, but still the yields or the GP is a little bit lower than what we'd expected. Basically also comes a little bit down to our volume development. Our yield is actually fairly flat, stabilizing around the 3,900. Last year you have to remember that there was a significant activity in Q1 because there was expectations up to the liberation day where a lot of volumes had to be moved and there was some front loading there as well. So also just take that into the equation or take that into account when you evaluate the numbers for Q1. And I would say also here on the ocean freight, this is probably an area where we do see the opportunity to drive productivity also somewhat up so that we get a higher conversion rate on that. So I think that was the ocean freight. If we take road. Here we have a situation where we almost make a billion in a quarter. The gross margin is somewhat higher. This is also due to the fact that we've gotten Schenker in. They have more what they call system freight, we call it groupage, that drives a little bit higher margin because there's a lot of infrastructure connected to that. Conversion ratio slowly moving towards the 20%. And when we integrate the companies, we should also be able to get above on that. And then, of course, a margin on 4.3%. You can say that's in the low end, but we have to remember that if I look at the numbers for Schenker's Road last year in Q1, I believe they were around 1.5% in EBIT. So actually already significant progress has been made on that side because also the Schenker business was somewhat larger than the DSV business. So I think this is important to remember when we look at the numbers. So all in all, we are happy with road. We have had an integration in the Netherlands and Germany where we had some service issues in January, partly because of the integration, but also because we had some weather conditions that were a little bit extraordinary. So it basically also disrupted our services to a certain extent. We are in normal production with normal service levels and all that, so it's all gone. But that's also part of what we see in road. And here I would just also like to call out that we have some very large countries that go live here in the next quarter. So there may be a service issue or two also into Q2. We plan for that there shouldn't be, but it is very large operations that we combine. So just cautioning on that. Then on contract logistics, I think when you look at contract logistics, it's a very positive development. We have, though, to say that our Q1 last year, which is a comparable figure, we were probably not 100% happy about how we performed in Q1 last year. So sometimes that number also looks very nice if you've got a baseline that is, let's say, 50 or 100 million too low. But still, Combining DSV and Schenker and actually growing the way we've done, driving the business forward, it deserves a lot of credit. And one of the things that I'm particularly fond of is that we've set a number of initiatives in motion where we wanted to increase the return on the invested capital. because it simply had become too low. And now we are at 10.7%, which is still a pre-tax ROEG, so it's in the low end, but it's somewhat higher than it was last year and it's trending in the right direction. Let's see how the number evolves in the next quarter and hopefully we can continue that drive where we get a higher return on the capital that we deploy because this is something that we are all in full agreement of that this is what we need to achieve. It's vital for us. So with that said, I'll hand over to Michael and he will take you through the numbers.

Thank you very much, Jens. As usual, I'll just go through some of the highlights. You can go through the entire page yourself or also the quarterly report. Clearly, our numbers are impacted by Schenker. As you can see, our revenue increased more, 75%, and also, like you Talked about contract logistics with the underlying growth as well, which we are pleased to see in contract logistics. EBIT rose more than 30% to 4.9 billion. Again, Schenker, and then offset by some of the challenging markets, primarily in E&C, as we have seen. Conversion ratio, you touched upon that earlier as well, Jens. close to 26% and also something that we expect that will, you can say, change for the next couple of quarters in line with the impact of the integration and the synergies. This is predominantly in ANC as well. Our cost, interest costs, close to one billion. You have to bear in mind last year, same period of time, we had not paid for Schenker. So it's not really comparable figures here as well. And then you mentioned as well that we are on track on Ips, which is something that we look very much forward to see. Finally, the tax rate is also higher than the normal. And I think I've spoken about that some of the earlier calls as well, it is due to the integration of Schenker. So that's how we see it. Then on the cash flow, 1.5 billion in Q1, cash conversion ratio of close to 70%. You have to bear in mind when you assess the cash flow for the quarter, that Q1 is always our lowest quarter for the cash flow. And then you can say this year, apart from the normal seasonality, we have had a temporary impact from some of the integrations in some of the large countries. It's clear when we go live in such large countries, which we go, there will be, you can say, a period of time until we get, you can say, back in full control and use all systems as they are supposed to be used. So there will be some kind of a lack before we can do that. So it is temporary. We see no alerts in our overdue percentages and so forth. But of course, it's something that we monitor closely because we need to get those money back. It's clear. That's it. Of course, I've said earlier as well that we do expect long term net working capital ratio of two to three percent. So we are close to to be in line with that. But of course, I would not have hoped that we were there already right now. Since we started the Schenker integration, I think we've paid off close to 8 billion DKK of debt. And then decreased our net interest on debt by around 700 million from the beginning of the year. So I do believe that we are on track on that one as well. Then guidance. Overall, we have maintained our guidance. Of course, you also wrote the forward-looking statements. Of course, looking, you can say, out of the window, I think everybody can agree to that the uncertainties and things that are developing is a little bit more, you can say, cumbersome than we have normally seen. We've decided and of course we will maintain our guidance. We still believe that there will be slightly positive growth in GDP based on what we see from OECD and IMF and so forth. So in line with GDP is still what we expect. Of course, it's difficult again to foresee what will happen if the situation in the Middle East continues. But our base case is as we write here. So and then on the yield side for RNC, slightly higher average compared to Q4. Also, as we said, in connection with our full year. And then low to single digit growth in the road market. And then we, of course, expect that Contract Logistics will continue to deliver as they have done here in the latest quarter, but also in Q4. basically. And then again, I must highlight the uncertainties that we have to deal with. So we will keep the same range as we have had. And then lastly, of course, the exchange rates also is important that they stay as they is.

Okay, thank you, Michael. Then I'll just, you know, reiterate the takeaways. I mean, We are quite pleased with where we stand right now with our financial performance. Of course, there's a big ask for the next quarters. I think we are in a solid position for that. I think on the Schengen integration, we continue with the pace we've had. And I can only really say thank you to everybody involved for all the hard work, support and dedication, but also to our counterparties. that we're working with, I think is also a huge thing to them and to have the willingness to collaborate with us to deliver on the dates. And of course, our guidance, Michael just talked about it. So I won't really dwell too much about that. So now we've spent 20 minutes, so we got 40 minutes now for the Q&A session. So really looking forward to that.

We will not 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 one question. Anyone who has a question may press star and one at this time. The first question comes from the line of Christian Nedelku from UBS. Please go ahead.

Hi, thank you very much for taking my question. It's on the R&C cost base. In Q1, the cost base was a bit higher than I thought. And it doesn't seem that sequentially versus Q4, we are not really seeing the benefits of the synergies or of higher synergies. Could you elaborate a little bit Are there one-offs in your Q1 cost base in R&C? And conceptually, how should it evolve from here? You made, Jens, some reference to a trust in the conversion ratio in Q1. But could you please help us a bit, based on the synergies that you have in your budget, how does the R&C conversion ratio look like in Q2 and then in the second half of the year? Paul Park, could you help us a bit there? Thank you very much. Yes.

If we sit and look at the conversion ratio, it would always in the last quarter of the integration where you get the Schenker income in that is lower. So that would be, we would have some impact on our conversion ratio in Q2 last year because that's where we started integration. Then it would be more impact in Q3 and Q4. And then the last quarter where you don't have both DSV and Schenker in the comparison, then you will have a lower conversion ratio. So that is what the trough refers to. It's not a Q1 thing. It's something that is a product of mathematics because Schenker had a lower conversion ratio than we had in DSV. Then holiday accruals is something that is very important when we look at numbers. They will drive the cost down. This is how you do the IFRS accounting. So in Q4 you will have, what can I say, a little bit lower cost base and then in Q1 you will have the normal run rate because you don't really have to release any of the accruals there to the same extent as you've done in Q4. This is normal seasonality. And you know, this is how you do accounting. So what we watch at is what is the productivity? What is the number of shipments per person per day? And what is the reduction of headcount in the division? and here we can see in ANC that we have reduced the headcount just shy of a thousand FTEs in Q1 and we expect a similar run rate in Q2 and then of course we work on driving the productivity up So then this will lead to a situation where the conversion rate is higher. This is also why I said that now in the next quarter, for the first time, the conversion rate should be higher than it was in the previous quarter, both as a product of mathematics, but also a product of the synergies they kick in, and there's a little delay in them. This was also what I said, it takes, let's say we go live in Germany on the 1st of January or 1st of February actually in ANC. We went live in Germany on road and contract logistics on the 1st of Jan and ANC on the 1st of Feb. Then it takes three to six months before the integration is there. So it's very important. This is the reason why it's a little bit back and loaded. So we will definitely see some impact in Q2 of that. And probably also then even in a situation like this in Germany. This is the only Germany I'm talking about now. Then, for example, we've just gotten live in France recently. It will have the same lack. Or we went live in Italy, I believe it was, for example, on the 1st of December. Then it takes three to six months before we can see it in the numbers. And I think that is perhaps something that is very important that we emphasize and explain very well so that you understand when you can expect the synergies. We are quite calm about it.

Thank you very much. Just a small follow-up on the synergies. Out of the 800 million run rate, how much is in RNC? And roughly out of the 5 billion targeted for this year, how much is RNC? Could you help us a bit? What proportion is RNC?

I have to speak to the IR team because I probably have some of those numbers, but it's a little bit too detailed for the call. Thank you very much.

Thank you. The next question comes from the line of Alexia Dogani from JP Morgan. Please go ahead. Yeah, good morning.

Thanks for taking my question. Again, I guess there's a little bit of frustration in terms of kind of how much of that cost movement you talked about on holiday accruals would have been known already versus kind of unexpected. So I guess, can you give some confidence that, you know, cost control is visible and you're willing to commit to a kind of a Q2 evolution that will see a material progress and whether kind of current consensus is at the right ballpark? Because I think everyone trusts that you will deliver the set plan, but the proof points are not fully visible yet. So what can you tell us to give us confidence that, yes, indeed, the Q2 number will be a material increase to get close to the EPS growth we all are waiting for.

Yes, as I said, basically what we are monitoring is that we take the headcount out and that we have, what can I say, the pipeline for what is happening in the countries. This is a very important thing because that's the most material cost driver you have below the GP line before you convert the GP into EBIT. It's the staff cost, so I think this is a very important metrics force. Then the product of that will also be another thing that we monitor, is how many shipments per person per day. Because one thing is that you take FTEs out, but you also have to make sure that size of the operation that you cater for, it fits the volume you're producing. So I think these two metrics, these are the ones we look at and the focus that we have on driving them up is relentless and I've met with the division. in ANC and there's nothing that tells me that we're not moving in that direction. So, of course, we are also monitoring this very closely because we all have the same aspiration that we get the right cost structure, we deliver on the synergies. And of course, at the end of the day, that the outcome is that we deliver some ebbs and cash flow. So I think we are fully aligned on that and this is how we govern it.

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

Thanks very much. Just on this moderate financial impact from the Middle East, I guess following from Alexis' question about the disappointment in the market today, perhaps you could quantify the Middle East conflict and maybe what EBIT might have been without it. And, you know, the question within the question, if you could Perhaps run us through your best guess of what the impact might be in Q2 if the situation were to persist through to the end of June. Just trying to get the puts and takes of how this conflict is impacting you. Any quantification would be lovely. Thank you.

Take the Middle East situation. I think the result in the Middle East is a little bit lower here in the quarter because the volumes have declined quite a bit in the area. And we have, of course, we are probably one of the market leaders, if not the market leader from a size of our operation there. So we are impacted by it. Then one of the things that happens now with the Middle East is, of course, that it drives fuel prices up. It drives sometimes also certain freight rates up as well. And in particular, the fuel prices cause us a little bit of problems this time. Not that we can't, at the end of the day, make the customer, what can I say, they have to adhere to the BAF arrangements. We have bunker adjustment factors. It's a little bit unusual because now the fuel price is perhaps somewhat higher in Asia compared to how it's evolved in the US. So the customers, they are facing now a situation where the fuel surcharge is different from region to region, which is a new thing. that we have to cater for. So it takes perhaps a little bit, there is a little lag on this to get a situation where we get all the customers globally to accept these surcharges. So it's still in the making. We will definitely see that this will be completed in in Q2 because we cannot take responsibility for this in DSV or the industry as such. It has to be paid by the customer and lastly by the end consumer. The other thing is that we are doing is now we are stabilizing all the operations in the Middle East. Supply chains are flowing. I think things are normalizing. Let's hope that the situation from a geopolitical point of view evolves in a way so that we can maintain a situation where it becomes stable. And I could perhaps just say one thing more about the Middle East. We've definitely received significant feedback from our customers. They're very, very appreciative of the work that our teams have done down there. And I just think it's worthwhile mentioning because it is a rather unusual situation.

Thanks. Can I just clarify on those, basically the fuel parts where you said given the exceptional events of what's going on in the Middle East and different fuel prices, every single contract you have still allows that partial, but it might still be a lag effect in Q2, or at least early Q2.

If you said, for example, that you took the risk on the fuel, it's like a speculation. And it's prohibited to speculate in DSV. So we cannot have a contract if there's no fuel clause in it. Also, try to imagine, I'll just give you some numbers. On air freight, sort of on average, 40% of the price of air freight is... fuel or perhaps even a little bit more. And try to imagine that the fuel component all of a sudden, what can I say, increases so that it's 60%. Then if we had to take responsibility for that in DSV, then we would be in a very difficult situation if we would be here at all. So it is something that the industry, the freight forwarders, we cannot take that responsibility.

Okay, thank you.

The next question comes from the line of Patrick Cosette from Goldman Sachs. Please go ahead.

Hi, Jens, Michael. It's been a while since we've seen conversion margins around 30% and falling from DSV, and I get all the technical reasons for it you mentioned for Q1. As you look ahead, would you say it's likely you'll be back above a more normal 40% conversion? from Q2 onwards, basically getting back on track on the normal 40-50% conversion margin channel? Thank you.

I think there's nothing that tells us with the productivity that we have that we shouldn't get back to those levels. Otherwise, what can I say? I don't see anything in our infrastructure or the way that we produce where we cannot have that efficiency again. But of course right now we need to continue the integration and then to reduce the number of headcounts as per plan. In the countries where we have done the integration we are hitting our targets I have my colleague, Michael Ebel, standing next to me. He follows up on this every month and perhaps you can say a few words on that.

Patrick, thank you for the question. It's a clear yes from our side. Of course, we should go towards those as well. And as Jens alluded to, we do track it month on month that we follow the business case. So of course we do follow. And then what Jens also said that these three to six months, and it is quite a bit of big countries that went low. Now you talked about France, I think. and Germany, but they're not the only ones that went live in Q2. We have had a very busy Q1 in terms of go live. So certainly, yes, we do expect to see an increase in the conversion ratio from Q2 and onwards.

And also that we can deliver the historical. I think this is important. I mean, that's the whole idea.

I appreciate the clear yes, that applies to Q2 as well.

Yeah, but it has to come gradually, of course. But yes, it does. And then also fair to say that there also needs to be some GP to work with.

So under productivity, of course, now we are at the trough. Then now we get a situation where we harvest synergies and then of course we drive it up. We have to take the FTEs and reduce the headcount before we see the benefit. So if we look at every month we get number on FTEs that we've taken out. We have the pipeline. So there's nothing that tells us that this journey is not going to continue.

Yeah, thank you.

We now have a question from the line of Alex Irving from Bernstein. Please go ahead.

Hi, good morning. My question's on technology. What decisions and actions have you taken regarding your TMSes in air and sea and in road since your full year results a couple of months ago? And is this what's driving the reduction in the other external expenses line quarter on quarter in these divisions? If so, should we expect that reduction to continue?

Thank you. I think right now we are following the plan that we also had laid out when we announced our full year numbers, so that we are moving the majority of our volumes to cargo-wise in order to get the synergies, and then we will also be using Tango on the ANC side. So I don't think there's too much reduction on other external costs when it comes to that. That's probably more related to infrastructure that could be rent, could be many types of costs that you'll be having. Also, just that we downsized some of the head office functions that drive a lot of additional cost, regional functions, etc. Then I think on the road side, we are rolling out the production system called Star on Road that comes from Schenker. But it's not really driven a material decline in cost. We've then done something on the back end, on the data centers, where we have moved a lot of volume already to our data centers. That probably also is a significant driver of certain cost reductions in the IT area as well. So I think what you see in the numbers is a product of many initiatives that we are taking. I don't know if you have anything to add, Mike.

Just a very small comment, very, very quickly. I think one thing, we need a couple of quarters again to see the run rate of the other external costs. First of January, we changed the entire allocation model from Schenker to the DSV model. So we need to have a couple of quarters before we can conclude on the run rate.

Thank you.

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

Hello, Jens and Michael. Thank you for taking my question. It's on the yield trajectory quarter-on-quarter in Q1. Could you perhaps just elaborate a bit on this improvement in air and sea yields quarter-on-quarter? How much is, in your opinion, related to the market developments and the underlying trade rates and disruption from the Middle East situation? And how much is from a new customer contract mix, given that we are through the tender season right now. And also, if you could provide some guidance into Q2 for air and sea yields, it's great.

Thanks. I think if we look at the tender season, it's typically, what can I say, if you know the conference Trans-Pacific Maritime, this is in reality sort of based on the tender season and people used to meet up, what can I say, for the ocean freight tenders. And the air freight tenders is normally aligned with that. So then you'll then get the award and it takes some months to phase it in to do the change. So we will start to see now that sort of the volumes from the tender season, they're being phased in. It's not uncommon that this happens all the way until the first of July. So we haven't really seen a lot from the tender season in numbers. This is the reason why I explain this. Then another thing, of course, that has an impact is that we have some low margin business on the air freight. It's basically five specific things that we can point out every single one of them and follow. And these, they all taper off basically until the So that's definitely helped us to improve the yield. We didn't really make a lot of GEP on them. Some of the volumes were produced as low as 250 kroners per ton. So of course you can imagine having yield around 8,000 and it drives it up if you take some of that volume out because basically you don't produce a lot of GEP on it. So that's probably the main contributor to the DSV yield being where it is on the air freight. On the ocean freight, I think the yield had been declining. Our VAS has been fairly stable. We monitor this all the time, how much value added services that we have. And now the freight markup has stabilized around this area that we see right now. Typically, it's sort of like a 60-40 split on VAS and freight markup. And I think that we have had many discussions about how stable that was. Of course, there's some volatility now that stabilizes it a little bit. But it's not like we have dramatic markups on anything because of the situation in the Middle East right now. It is probably going to stay the way you see it into Q2.

It's also a matter of us working, you can say, with the yields. Like we have said all along, there will be a dilution impact. And then it will, again, a little bit like the conversion ratio, it should be higher afterwards.

Fair. If I just may ask a follow-up. So in your guidance, you assume flat C yields based on the Q4 level. We saw an increase in Q1. So I guess you're a bit in front of the curve in that respect. So should we expect some of the yield to decline again? Or just how should we think about that assumption that you have in your guidance versus Q1 realized yields?

Of course, we hope that we can maintain, but the uncertainty that we talked about is a bit difficult to foresee. But it would be nice, of course, to maintain, and that's what we're working on. But there is a risk that that can come slightly down. But overall, of course, we do not normally comment on the yields because we don't really know how it will pan out. But I can promise you that we work every day to maintain that we are as profitable as we can be.

We said, you know, around 8,000 on air. We are at 8,200, I think it is. And I think on ocean freight, you know, we are a little bit higher than we came out of Q4. It's like 3% up. So it's how does the yield develop? How does the volume develop? And we cannot say that, you know, 100%. But it's going to be within those areas that we're talking about right now.

Perfect.

Thank you.

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

Yes, thank you for taking my question. I wanted to understand a bit more on the volume impact you've had in the Middle East, kind of how much of the volume decline sequentially in air and sea was Middle East, and where do you think you're doing the on-market share. Kind of going back to your earlier comment, Jens, around you've retained customers. How are you tracking compared to kind of the 5% churn you had assumed in your business plan for Schenker?

I think if we look at the Middle East, it is, of course, operation in the Middle East is a low part of our business if you want to isolate it to that. So it's probably... If we look at the volumes, it's probably of the overall groups, let's say 1% or perhaps even less. But it is still something, you know, it's important for the region. But of course, for the group, it's of course less prominent. If we look at the, when we look at the customers and what we're looking at is when we have the churn, when we put it into the business plan, we measure it in GP. So let's say, for example, that we have some volume in our comparable figures where it could be very low GP margin. Then you might lose a little bit more volume, but it doesn't have a big impact on the GP. So if we sit and look at then the customers themselves, or top 200 customers, top 250 actually, we can see that we're doing very well on them and basically also during the tender season here that we're going to continue to develop that business with them and evolve. So I think overall for these estimates that we've given, I think we are able to deliver on them.

Just a follow-up then. So we should see Q2 volume seasonally improving?

Yeah, I would think based on the tender season and basically also the development that we have in the operation, we should see that the volume definitely should improve. You always have to take the market into consideration though. So you also have to look at How is the market developing as well? But of course, with that said, then we're going to see a better development now because now Schenker is part of the comparable figures.

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

Good morning. Thank you for taking my question. Also, a follow-up on the yield. A question regarding the Schenker integration and the progress there. As you pointed out earlier, Jens, you've been mentioning several times that Schenker had significantly lower yields compared to DSV standalone. How is the progress with the turnaround there and how do you do that work? And then maybe in connection with that, If you see some improvements, some of the other building blocks that you've been giving us here this morning is problems with pass-through of fuel in the first quarter. You mentioned those lower yielding volumes which will phase out in air freight. It sounds like we're going to see, if not a significant, at least some sequential increase in Q2 yields compared to Q1. Maybe just a comment on that as well.

I think if we sit and look at it, we will see how that pans out, Lars. But I think there's definitely a flaw to our yields. I think that's also what we can say. to it right now it is already as you say a little bit higher than some people would have expected but let's see also now the tender season how you know have we secured the volumes you know at good rates of course we think that we have contracted you know in a way that is normal for us so I can't really rule that out but I think we are We are in a good spot when it comes to the yields and now we have to deliver on the volumes and then we are going to get the GEP that we are all looking for.

And the Senker improvement of yields?

What happens when we buy a company like Schenker is then perhaps we produce in a little bit of a different way. So we might say, listen, let's do the customs formalities for you. Perhaps they didn't have that focus. Perhaps we would say, listen, you know, the local charges, you know, this is how One of the things that Schenker had was a different profit split than we had. So it didn't really incentivize that we perhaps would do as much of the work as we try to do in GSV because the profit split was done in a different way. So I think the activity-based costing and the way that we operate the business incentivizes us to do the upselling on the local collection, the local distribution. Many of these things that help us to drive the yield up and that's been a gradual change. improvement or journey for us, I think we've already done a lot of that work during the course of the year. And that's part of why we're already above 8,000 on air freight and definitely also keeping the yield on ocean freight. I believe that Schenker had a yield on ocean freight, if I can remember the numbers correct, that was below 2,500. or something like that. So try to imagine you take that volume and put it into hours and then we can lift the GDP up and have this level. So I think we've done a lot of work. We can probably upsell a little bit more, but I think most of it has already happened.

The next question comes from the line of Christian Goddiksen from SEB. Please go ahead.

Thank you. My question will focus on the road part. Maybe can you comment a bit on how successful you have been in implementing price increases? And then also maybe if you could separate the impact from the higher fuel prices in the road segment. Thank you.

I think if we look at the fuel prices on road, it's of course a hard negotiation that you have, but the road organization is used to adjusting what we call the BAF bunker adjustment factor. With the customers and some large accounts, they try to drag their feet a little bit, which is normal. But at the end of the day, of course, we can all see at the gas station that the fuel price is up. So I think there is a recognition that this is the case. Then if we look at road in general, I would say that You know, the road market in particular in Europe, where the majority of our business sits, it's still a market that doesn't evolve a lot. There's not a lot of growth. So of course we have to adjust our infrastructure so that basically we have the capacity that is relevant for a market like this. There's not a market for significant general increases in freight right now. I would say that because in certain markets even the volume is shrinking. But of course here and there, there are inflationary adjustments that we have to make. So I think this is basically what is happening on the roadside right now.

Okay, thank you. That was clear. Just a quick follow-up on that. I think, as I recall, you implemented or you announced pretty high general price increases in the road segment. So, is it correctly understood then that much of that has not gone through?

No, that was in Q4 that we were out with some price increases at that time. And I think these adjustments, they are, of course, taking place when we negotiate. But here in Q1, I don't think, you know, that we've done something on top of what we've done in Q4. So if I misunderstood your question, then perhaps it could be interpreted in a different way. In Q4, we actually...

It was pointing towards how much of the price increases you announced that had gone through, because I think, as I recall last year, it was difficult to get it through.

But we've had the negotiations now. You can see the product of it. then the thing is of course when you have that we had to last year we had the pressure from the subcontractors it swings back and forth this market all the time then we went to the customers now also you can see that we've even been back to some of those top contractors and discussed a little bit with them because volume moved in a different direction and this is normal part of basically running an operation that you the market drives what can i say the pricing And of course, we try to make sure that we adjust as quickly as we can.

This is a very competitive market and very fragmented, obviously, so it's very dynamic.

Yeah, very clear. Thank you.

We now have a question from the line of Marco Limite from Barclays. Please go ahead.

Hi, morning. Thanks for taking my question. My question is on FTEs in road. So you've been able in Q1 to use FTEs in R&C and contract logistics. But if you look at road, number of FTEs is probably flat. So just wondering why is that and, yeah, what is your expectation? And then just to clarify on your statement on time lag of cost savings. So basically, in Q1, we've seen R&C FTEs coming down quarter-by-quarter, but OPEX not really. I understand there were some provisions, but is there a time lag as well between, let's say, the reduction in FTEs and the P&L cost savings too? We'll have to model that. Thank you.

Yes, I'll give it a go on that one. If you look at the FT Eastwood Road, I think it's important to say that this is a mixed, it's both white collar workers and blue collar workers. And the majority of the savings relate to the white collar. And then, of course, the activity for the blue collar will vary quite a bit over the quarters. In terms of timing, I think I will go back to what Jens mentioned earlier in the call. It does take three to six months from we go live till we really will be able to see the synergies on the staff cost line. And when we consolidate some of the facilities that's also part of the syndicate that you will see in the GP and that takes a little bit longer normally.

Makes sense, but should we expect a number of people in a row to decline in the next coming quarters based on what you just said?

You should. Unless we get a ton of new volume, obviously, then we have to cater for the blue collar workers. But otherwise, yes.

The next question comes from the line of Jakob Lex from Volta Research. Please go ahead.

Good morning. Thanks for your time. Just one for me. Can you give an update on anticipated asset sales, how much are remaining at this point? And given the asset sales, do you still see potential to get back to share repurchases by year end? Thanks.

I think if we look at the asset sales for Schenker, I think it's clear that they have still some terminals that we can divest. And we're talking about, what can I say, a couple of billion that we can, you know, euros, not kroner, that we can divest. We're in the process of that. It will take some years. to get it out but we of course try to do as much as we can this year and next year and then there will be a right of use asset for many of them because some of them we will have to put on the balance sheet and you know and keep but it will be a lease and some of them of course will be extra facilities that we can divest in full so I think normally we would say that you know a little bit less than half of the volume we divest will come back as our U-asset on the balance sheet. And we will then have a more flexible approach to the facilities. So we are continuing that route.

Thanks, Sarah.

The next question comes from the line of Cedar Ekblom from Morgan Stanley. Please go ahead.

Thanks very much. Hi, gentlemen. I just want to go back to a comment that you made earlier regarding the efficiency potential of your business. So you said that you don't think that there is anything in the infrastructure of the business that you cannot produce at a level of efficiency that you've produced in the past. Would it be fair to therefore assume that conversion margins north of 45% at some point in the future are achievable? I mean, that's just how I'm sort of backing out those comments. I'd appreciate you understand what you mean by that statement. Thank you.

No, I fully agree. Otherwise, then we fail. Was that clear?

Thank you. That's helpful. Yeah, yeah, that's helpful. Thank you very much.

We now have a question from the line of Paras Jain from HSBC. Please go ahead.

Hi. Thank you for taking my questions. My question is more on with the increase in the oil prices, what are your customers telling you with respect to second half of the year demand? Where do you see the inventory levels are today with some of your key customers? Any color you can share on the second-order impact of the Middle East crisis on your business, particularly on the volume side? Thank you.

If it's only in the Middle East or if it's in general, I think the Middle East, of course, will remain subdued. But supply chains still have to flow there. So, of course, they ship what they have to ship, and, of course, they try then to use the inventory levels and get them down. Globally, it's a little bit different situation. I think if you sit in Europe, of course, now the fuel has come up, so you might be a little bit holding back. But apart from that, the supply chains will flow. It will do the same into the Americas and also other areas on the globe. But inventories, they are not high. So it's not like there's a situation where you don't have to ship. But of course, given the prices, you don't build a lot of inventory right now. So I think you will see a volume development as you've seen it in Q1. And of course, everybody is then concerned about inflation. I think that's also what you see in all the economic projections. And then, of course, they're also concerned about the interest rate. So it's a volatile environment we're looking into. But I guess that's how it normally is. Good?

Maybe if you can just follow up, just on the air cargo side now, We are hearing about the capacity cut or grounding of planes as we go into the summer. Does that imply that probably demand destruction could outweigh or will be much less than the supply pullout and therefore that can support the air yield? And is that gone into your number where we expect air cargo to be slightly on the higher side?

The information we have right now is that it's going to be difficult to keep things flying, but they will keep flying. Of course, there's capacity coming out. You see all the marginal routes. They are being idled by many airlines. So I think the normal market mechanism will make sure that the cargo will flow. But if something happens that is more disruptive, then, of course, the yields are going to come up. There's no doubt about that. And we also saw that under COVID, but that's not what we have in our projections. Good? Then I think we've come to the end of the Q&A session. Thank you very much everybody for listening in. Thank you very much to all our employees that hopefully are also listening in. And thank you for all your hard work and efforts. And we look forward to continue the dialogues with all our investors. And we then also look forward to speaking to you again next quarter. Have a great day and take care out there.

Maybe we will see some of you already at the Capitals and Markets Day, 12th of May. Have a great day.