Q1 2025 Deutsche Post AG Earnings Call

Ladies and gentlemen, thank you for standing by.

Okay and thank you for joining the DHL Group conference call.

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Speaker Change: I would now like to turn the conference over to Martin Siegen Bauer head of Investor Relations.

Please go ahead.

Speaker Change: Thank you and a warm welcome from my side. Good morning to you wherever you're following this this is the Q1 'twenty five results presentation that I take it you have in front of U S. Flex umbrella have with me our group CEO to be a smile group's CFO Melanie cries.

Speaker Change: We have the usual procedure.

Speaker Change: Go through the deck after that there's time for Q&A.

Speaker Change: We are aware that there are other events going on in the sector. Today, So that should help us to go through what we have in a very focused manner.

Speaker Change: Then over to you to peers. Thank you Martin and good morning, everyone. Welcome to our Q1 call on page two you find the highlights we believe we had a good start into the year 2025 in what remains an interesting environment.

Speaker Change: We had about 5% growth in earnings we had slight growth in revenue as well and we delivered.

Speaker Change: From our perspective, a pretty good free cash flow.

Speaker Change: <unk> on what you heard earlier from US that we also look carefully at cost and Capex in this environment, particularly we had EBIT improvements in express supply chain supply chain in a very steady and consistent way that you have seen over many quarters now and also a.

Speaker Change: Again, with BNP, Germany, which is a bit more due to the specifics of the quarter given the elections, we had in Germany in December price increase ahead of wage increases in April the macro environment overall has been in line with our expectations was quite so.

Speaker Change: Dude, obviously induced volatility due to changing U S trade policies, which makes the day to day quite interesting on the financial review for the quarter. It was actually quite a small impact.

The operational occupations is much higher than the net impact that you see in earnings and we also expect that and we'll talk about that going forward, we execute on our growth strategy, we announced.

Speaker Change: Announced further acquisitions, especially in the life science and healthcare space. We continue to follow what we said we want to buy capability not scale, and then leverage scale that capability across our network.

Speaker Change: It's not only the case in life Science and health care, but also in the broad range of sub industries on the new energy and obviously, our continued drive in ecommerce as well, but we also executed against our cost and Capex leaves us as planned overall happy with capacity management, especially next.

Speaker Change: Press that was another quote quarter well done on the operational side.

Speaker Change: So that was also supporting our results.

Speaker Change: The environment remains changing you will follow that as well on page three you have a summary of some notable items in terms of the development of U S trade policy.

Speaker Change: Importantly, we obviously recognize that as well that even with some of those tariffs being either exempted or being put on hold for a certain time period. There is a notable increase in the effective U S tariff rate.

Speaker Change: There's obviously a lot of uncertainty a lot of changes we've seen further changes yesterday night announced as it relates to auto.

Speaker Change: Not only has impact on our customers' financial calculation, but it also has operational impact we've seen this in February with the discontinuation of the de Minimis for four days, which created quite some operational challenges. We also saw that with some of the executives orders.

Speaker Change: <unk> on I E P. A.

Speaker Change: On section 50 of the U S code that that triggered what we believe was an unintended consequence to move quite a substantial number of clearances from informal to formal so.

Speaker Change: These are the practical implications that we see.

Speaker Change: For us it's important that we continue to focus on quality.

Speaker Change: Deal with those industry wide impacts in a transparent way so that we keep a good relationship with our customers what we see on page four and that's obviously.

Speaker Change: On a bid high a conceptual basis.

Speaker Change: Lot of individuals sometimes quite complex considerations that our customers have.

Speaker Change: We.

To summarize this year in six different type of behavior that we observe.

Speaker Change: Strong is wait and see especially on the industrial side.

Speaker Change: We see that that customers.

Speaker Change: Just don't know where the things really come into effect and.

Speaker Change: And basically keep their current set up for the time being well recognizing that if those tariffs would come into effect will stay in place that would bring them into an economically disadvantaged situation, but there is still the belief with many of our customers also in the U S that this is Bob.

Speaker Change: Diamond is going to evolve and move back to lower tariff levels as those negotiations much talked about.

Speaker Change: Unfold.

Speaker Change: So that's why wait and see is actually something that we see rather skeptical of delays certain investment decisions and we also see some weighing on consumer confidence adjustment of pricing, obviously in space like e-commerce and absolute necessity, but we've seen it also in automotive and electronics pasta.

Speaker Change: Delivery is something that we do we expect now in April may two effect heavily e-commerce, especially the frontloading of deliveries and that's coming to those effects that are rather positive for logistics player like US who has a strong global footprint and a disproportionately high.

Speaker Change: High market share in non direct U S trade lanes that the frontloading of deliveries, especially electronics took place.

Speaker Change: Some later and different than we expected based on historical experience again. This shows that some players some of our customers don't act before a deadline because they're not sure whether the policy stays in effect.

Speaker Change: But we've seen some frontloading in shifting of inventories.

Speaker Change: And also thereby higher demand for airfreight for warehousing, especially in Asia.

Speaker Change: Structural shift of production also fly out of the supplier footprint is starting.

Speaker Change: We do see that particularly Chinese manufacturers, who have overseas capacities as well so production capacity in countries that are not impacted.

Speaker Change: As much by U S tariffs that subsequent auction is considered and reconfigured for export to the U S and the markets which are.

Speaker Change: These plants originally served oven served by China export by the production capacity available in the home country of these Chinese companies. So this is starting.

Speaker Change: And that is obviously for us quite a positive element because this leads to more transport and more complex supply chains than the more efficient set up before the shift in delivery mode and that also means the mode of inquiry into the country is something that is especially.

Speaker Change: Irrelevant for E Commerce, and we see that on the next page on page five.

That these are the additional services that we tried to offer our collaborate on with our customers.

Speaker Change: Particularly break bulk solution is something that is much discussed as a solution for some ecommerce imports now whether that really works in the way, it's foreseen and what's the specifics that are required to make this an efficient and combined import in the United States is to be seen.

Speaker Change: As we speak there are pilots and ongoing discussions on some operational formalities in details with customs as often the case with the implementation of such solution. We obviously had break bug all along but here. It is also the question who is importer of record and what additional data is required.

Speaker Change: <unk> for these products, we obviously have multiple dimensions of U S trade policies and related areas that need to be considered.

Speaker Change: But we do indeed see that our broad portfolio of services, but also the geographic footprint is an advantage in this context on page six because we got the question.

Speaker Change: What is our exposure to the transpacific, particularly China, Hong Kong to the U S. You see this quantified here those figures have historically been partially higher.

Speaker Change: You know and we've talked about in earlier calls that we have reduced our exposure, especially as it relates to e-commerce on the transpacific already.

Speaker Change: Over the last year, especially in the <unk> segment as well. This is also why the shipment number in the BDC space has been notably down for DHL Express now for some quarters and also in the first quarter of this year. So yes, we have some remaining exposure as you would expect through the.

Speaker Change: Transpacific.

Speaker Change: On the eastbound direction, but relative it is relatively small also if you compare it with some of our peers.

Speaker Change: What is important for us to highlight on page seven is that we continue to execute our strategic initiatives as we have communicated last September and did a deep dive that many of you attended in.

Speaker Change: About four weeks ago five weeks ago now.

Speaker Change: We continue to execute our strategy in life science and healthcare.

Speaker Change: We did one of those specialist acquisitions that we're looking for capabilities that help us accelerate our progress in offering great solutions for our customers and then allow us to scale those capabilities in a rapid fashion globally, we ice DHL the global.

Speaker Change: <unk> and that's what we also want to achieve here. The main trade lanes is something that many can cover.

Speaker Change: We play our strengths as a global player also on those fringe lanes and this is something that has helped us to maintain good profitability as well we remain excited about some of those geographies that have intrinsically good.

Speaker Change: Characteristics demographics for instance in the therefore post for domestic growth in consumption, but also can and are benefiting from those geopolitical trends we call. This the <unk> 'twenty.

Speaker Change: Geographic tailwind countries.

Speaker Change: Of which we identified 20 those have a specific focus for us to deliver great solutions and great service to those customers, who diversify their manufacturing footprint, especially.

And seek to set up shop in those countries for distribution manufacturing and that's working out very well for us and we also as the third point continue to invest largely organically into the e-commerce space and continue to do so it is a sector that has provided.

Speaker Change: US with good structural growth and we'll continue to do so for the decades to come on.

Speaker Change: On page eight some examples only on fit for growth. This is obviously, a very granular program with many many initiatives and the deployment of technology in several areas to enhance efficiency, but also some specific focus on bread and butter.

Speaker Change: <unk> aviation net supply cost for instance declined by 7%. So you see here with those examples. This is obviously supporting earnings as well in this environment, which again from a macro perspective is largely in line with what we expected.

Speaker Change: And with that I hand, it over to Melanie for some more specifics on the divisional performance.

Melanie Cries: Thank you very much to the us and good morning to all of you also from my side.

Melanie Cries: So given how dynamic today's environment is I could imagine that your interest today lies more than ever on the future rather than on past performance.

Melanie Cries: This is the official Q1 call, let's quickly talk about our Q1 performance, which you can see summarized for the five divisions on page nine.

Melanie Cries: So we have already sold the traction we're getting on our express cost measures and I will talk about the express performance and also about the global forwarding trait development on separate slides in a minute, which is why I want to focus on page nine on the other three divisions.

Melanie Cries: Starting this kitchen supply chain, which I can sum up quite quickly so another quarter with solid EBIT growth and nothing special needs to be mentioned and from my perspective. This is as it should be for such a resilient structurally growing business.

Melanie Cries: Supply chain Q1 financials reflect a smooth operating performance driven by our high quality service offering and operational excellence agenda, including our automation and robotics roadmap as presented by Oscar at our handy at the beginning for months.

Melanie Cries: And DHL ecommerce, we continue to see good organic topline growth at plus 6%, even in an environment of somewhat more cautious consumer spending.

This topline growth drive EBITDA growth, which is however, currently not translating into EBIT growth due to our ongoing investments exactly as expected for the current investment phase and as explained by Pablo in London.

Melanie Cries: Turning to PMT.

Melanie Cries: Finally, able as you know to increase prices unregulated mail at the beginning of the year.

This will help to bring the full year EBIT back to the minimum requirement of about 1 billion euros as reflected in our full year guidance.

Melanie Cries: I think I'll remark I want to point out that he had some changes in our product portfolio in Q1, which somewhat skews the reported year over year comparisons between mail and parcel.

Melanie Cries: We have therefore added the like for like comparisons onto the PMT slide in the appendix.

Melanie Cries: On the trading side similar to DSA.

Melanie Cries: We see continued volume growth at higher pricing and pathogen many although on a somewhat slower than usual growth lever, reflecting consumer uncertainty.

Melanie Cries: Fundamentally however, the composite growth story continues and the passive pricing discipline as explained by Nicola in London is fully intact.

Speaker Change: Now turning to page 10, let's have a closer.

Melanie Cries: And also look at express.

Melanie Cries: In Q1, nuance again turned and expected volume decline into a year over year increase in EBIT and the question is how did John can do that.

Melanie Cries: Key drivers are fundamentally the same ones. We saw in our strong peak season performance last Q4, it's a combination of pricing mix and cost management, leading to good capacity utilization.

Melanie Cries: This expected volume dynamic in Q1, we continued to drive higher weight per shipment higher yields in terms of revenue per kilo and we have managed our capacity so successfully that'd be great.

Melanie Cries: Able to turn year over year lower volume into a year over year higher load factor, which I think is quite a remarkable achievement by the express team.

Melanie Cries: And so he has explained there are currently a lot of moving parts in global trade that is quickly changing rules and procedures that come with operational challenges, but express has clearly proven that we are well equipped to adapt and <unk> also showed DHL Express is the most international network out there and is that is a good position to be.

Melanie Cries: In current circumstances.

Melanie Cries: Now turning to forwarding trade on page 11.

Melanie Cries: The first observation from my side is that in light of the constantly changing news fluent speculations on trade policies.

Melanie Cries: And year trends in the core and ocean freight businesses have actually been quite stable in July.

Melanie Cries: Since April <unk>, the weekly volatility in volumes across trade lanes has further increased and remains difficult to forecast.

Melanie Cries: What is key to remember for DHL forwarding is that we are a truly asset light business and we have a highly diversified trade the knicks as shown before.

Melanie Cries: I can express the absolute priority for Tim and his team is to support our customers in these volatile times and we are convinced that this will ultimately also be supportive to our financial performance.

Melanie Cries: Let me have a quick word on the EBIT decline at CHF rates, which is as you know our road train business predominant in Europe.

Melanie Cries: As you heard from others, the core industrial markets in Europe have been quite challenging.

Melanie Cries: We are addressing this by optimizing our internal cost base, notably through an improved Tms and <unk>.

Melanie Cries: One we have seen worsening markets combined this additional cost and distraction from the system rollout and the last major market just Germany.

Melanie Cries: Yes, they were not pleased with <unk> performance in Q1, and we are convinced that we are working on the right remedies.

Melanie Cries: That already takes me to my last page to wrap it up from my Slide my side.

Melanie Cries: Despite some challenges we delivered a good Q1, both in terms of EBIT as well as in terms of free cash flow generation.

Melanie Cries: That got us off to a good start on cost to our 25 tablets.

Melanie Cries: There's quite a bit of turbulence, but no real directional conclusions on the impact of trade and tariff volatility as laid out by to be us the hands today leave our 25 guidance fully unchanged.

Melanie Cries: The same goes for our midterm assumptions that we are absolutely convinced that we are executing on the right cost capex and growth levers. The strategy 2030, as he explained in full length and divisional detail at our CMT.

Speaker Change: And does that I hand, it back to <unk> for the conclusion and I'm looking forward to your questions after that.

Speaker Change: Yeah. Thank you Melanie.

Speaker Change: So.

Speaker Change: Thank you here that we have had a good start into the year and then we also have a confidence over the remainder of the year with focusing on what we can control. We obviously recognize the volatility around us, but we see it in a balanced way.

Speaker Change: Really produces some demands on our customers, especially and also on all operations and we will continue to be conservative.

Speaker Change: Focus on profitability and cost control, but we both going to execute on our strategic initiatives to accelerate growth and also see opportunity in.

Speaker Change: In this volatile environment by leveraging our global footprint and the breadth of our services for our customers' benefit to deal with the uncertainties that are caused by the trade policy of the United States and the response of other nations so with that I would turn it over to you for.

Speaker Change: Questions.

Melanie Cries: Excellent. Thank you. So it is Melanie operator, if you then start the Q&A section. Please ladies and gentlemen, we will now begin our Q&A session. If you have a question. We ask that you. Please use the raise hand function at the bottom of your screen.

Melanie Cries: If you have dialed in please select stateline to raise your hand, and SaaS six to unmanned.

Melanie Cries: Once your name has been announced.

Larry: Please on mute and ask a question if you want to withdraw your question. Please Larry I'll hand, using the right hand function.

Speaker Change: Thank you and amendment for the SaaS question.

Speaker Change: Our first question comes from Alex Irving at Bernstein. Please.

Speaker Change: Ask your question.

Alex Irving: Hi, Good morning, two from me. Please first one is on the 2025 Guy.

Alex Irving: Change that can we interpret this as being the painful is largely in line with the 90% level.

My second question is on <unk> and <unk> on the body and effective loss share.

Alex Irving: <unk>.

Alex Irving: <unk> went up in Washington to address it.

Alex Irving: Alright.

Alex Irving: Thank you Alex for those questions.

Alex Irving: The line was not very good I hope, it's better with other asking so we hope we understood in the correct way. So in terms of the 2025 guidance, we don't see a reason to change it.

Speaker Change: The overall development as you rightly assumed is in line with plan, we assumed a relatively weak macro for the year.

Speaker Change: We're transparent about that and the effects that the changes in trade policy have which are certainly for certain customers and certain parts of the business.

Speaker Change: Quite substantial but if you look across the portfolio, we do continue to see pluses and minuses and overall in the first quarter that is clearly holding the balance and we also expect that to be the case currently for the rest of the year.

Speaker Change: An app right.

Speaker Change: We see this largely as a sectorial topic.

Speaker Change: We have a different exposure, we talked about that earlier too as to certain types of industries.

Speaker Change: <unk> included a tick.

Speaker Change: And we do obviously recognize the numbers of competitors.

Speaker Change: And we also see quite a competitive and uncertain airfreight market. Currently so theres a lot in flux, we don't see that we structurally lose share, but we also still have to see and analyze what our competitors publish.

Speaker Change: Basically we had kuna in DSV now this morning.

Speaker Change: So we're still looking at those figures and trying to fully understand them and compare them with our portfolio.

Speaker Change: Alright, thank you.

Speaker Change: Alright, Thanks Alexandra continue Alexia. Please our next question comes from Alexander Johnny at J P. Morgan.

Speaker Change: <unk>. Please on mute your line and ask your question. Thank you good morning.

Speaker Change: Just two questions as well so firstly.

Speaker Change: Notwithstanding the comments you just made there to be ask could you just give us some indication.

Speaker Change: What you're seeing in terms of bookings out of China.

Speaker Change: I'm here may be in April.

Speaker Change: And what do you see as the opportunity to reallocate some of that lost.

Speaker Change: Booked volume from other locations in Asia, and kind of subsequent to that day.

Speaker Change: Are you seeing overall, given your low exposure to the China to U S. Trade Lane do you think the current situation can actually provide more opportunities and challenges in the current environment. So that's my first question.

Speaker Change: And then.

Speaker Change: My second question is slightly similar under 2025, EBIT Guide and I think when you introduce the fit for growth cost program. You indicated that most of the benefit will potentially come towards the end of the year, but today. The express performance was quite strong.

Speaker Change: Supported by cost action, so maintaining the guidance change is it because youre seeing.

Speaker Change: Better cost capture fast there that may offset some weakness in kind of that trend or how should we think about yes, the cost versus revenue tied us. Thank you.

Speaker Change: Okay.

Alex Irving: Yeah. Thank you Alex say were also great to understand.

Speaker Change: <unk>.

Speaker Change: So let me take the first question and then Melanie will come into the second.

So.

Speaker Change: By mode and by week, we have quite some fluctuations and that's to be expected. If you have that type of measures with the order of magnitude discussed announced changed.

Speaker Change: The way I would.

Speaker Change: Describe the impact is.

Speaker Change: As for four main elements that we see.

Speaker Change: Two of them are negative into a positive.

Speaker Change: We obviously do we expect and also see some structural decline in the China U S. Trade as you would expect that there is some elasticity of demand as it relates to price.

Speaker Change: And.

Speaker Change: Even on the baseline tariff as it's called with 10% that is still four times higher the effective tariff rate that we had before and that will have some impact on the trade with the U S. Now our exposure to that as you rightly picked up.

Speaker Change: Less.

Speaker Change: Disproportionately less than in other trades have been also disproportionately less than other competitors will have.

Speaker Change: There's a second element.

Speaker Change: That causes some level of concern also when we look at April, but we don't see that as a as a trend for the rest of the year necessary necessarily which is this wait and see.

Speaker Change: On the on the business side and also some weighing on consumer confidence.

Speaker Change: So that's also a negative.

Speaker Change: Now the positive is and we've seen some especially intra Asia moves to reposition inventory.

Speaker Change: And.

Speaker Change: Yeah, just deal with the day to day of those tariffs so shifting to higher value modes.

Speaker Change: There is some observation of that and we would expect that to continue as these changes continue to happen and again, we just had another change yesterday night and then there's the fourth point.

Speaker Change: Which is the reconfiguration of supply chains and that has only just started.

We see increasingly customers thinking about this that they have.

Speaker Change: Manufacturing capacity that currently business serve the U S. But is in the country that we currently expect to be in a favorable position as it relates to tariffs and that production then being used for exports to the U S and the local market being served by production capacity in China that obviously.

Speaker Change: Also looks for employment and that fourth element could indeed be quite positive because it significantly increases logistics cost.

Speaker Change: Leads to higher complexity and Thats intendency good for us how those four factors to positive and two negative how that balances out for the rest of the year.

Speaker Change: We don't really know.

But we see both the plus and the minus and this is also why we didn't change the guidance.

Speaker Change: Yes, Tim King the second question on other cost development. So we have to.

Speaker Change: Things happening here. The first one is set for growth.

Speaker Change: As a law.

Speaker Change: Fundamental structural cost improvement program and there we said that we expect a relatively linear ramp up over the next two years to the full year run rate coming into effect towards the end of next year.

Speaker Change: That is supplemented by the typical flex fiddle with regard to volume and seasonality and I think in the first quarter. We saw the first positive benefits of fit for growth for example in express but also in PMT and on top of that we saw what we had prepared on the volume flex side because as.

Speaker Change: Already mentioned as the volume development in express was not a surprise so we have prepared for that.

Speaker Change: Pitfall growth delivering increasing benefits in combination of the certificate volume seasonal flex made Q1 from my perspective, a very good quarter on the cost side.

Speaker Change: I think that's a cost focus is top of priority for everybody and you can ICC. It for example in the express and in the <unk> results.

Speaker Change: Thank you, Matt and intimate and then just ask a follow on.

Speaker Change: Wait and see approach to be as mentioned do you think there is a credible scenario that if things kind of materially deescalate on the level of diaries that there is a bit of a bullwhip effect of.

Speaker Change: Your customers kind of suddenly reordering weekly whilst there has been some near term capacity adjustments I think combine ocean freight blank sailings, if I think of express taking some capacity out just kind of your view on that.

Speaker Change: Initial scenario thanks.

Speaker Change: So the wait and see is indeed on the short term inventory management, but more importantly, and more worrying on investment decisions.

Speaker Change: I agree with you that.

Speaker Change: If there would be a substantial easing are likely that is others on a better position to judge that.

Speaker Change: You definitely would see flip back effects and then shortage of capacity I think that's to be expected.

Speaker Change: Again, how likely that is.

I leave to your judgment.

Speaker Change: Weighing on confidence is something that we believe we will see for the coming weeks, whether that really then transpires for the second half of the year I have my doubts.

Speaker Change: Historically, particularly on the consumer side, you see that these topics he's out after some weeks and consumers retained to normal buying behavior again that speculation about the future, but that's how we how we look at it currently.

Speaker Change: Okay.

Speaker Change: Our next question comes from Christian to Delek here at UBS Christian Please Amit your line and ask your question.

Christian: Hi, Thank you very much could I. Please ask your question.

Christian: Pardon me one of your competitors yesterday talked about the second quarter revenue declines then around 400 basis points of EBIT margin erosion in Q2.

Christian: Your exposure on China, Youre above does not perform very differently today or Paul could you offer any color on your expectations on <unk>.

Christian: Uh huh.

Christian: Secondly.

Christian: Our remaining on express could you. Please tell us what percentage of your breath imports into the U S are clearing customs and they're de Minimis.

Christian: And your charter is very helpful. But could you offer pillar total USD inbound what percentage of your ex present volume for me I think you alluded is not that much.

Christian: You could offer a pump from numbers and the last one if I may.

Christian: We've seen the <unk>.

Christian: Expressed the dedicated upgrade the capacity and block hours I think down four 5% for a while now I think there is part that around the middle of last year, if I remember well.

Christian: Third thing that birth book May could you tell us a little bit how you're thinking about capacity next breath, how much is how how is that developing year over year.

Christian: Thank you very much.

Christian: Okay. So we.

Speaker Change: You got to the first question. Our Q2 guidance you have you also saw what a competitor.

Speaker Change: Released in terms of Q2 guidance yesterday, we don't give quarterly guidance and we stick to that practice I think there are lots of moving parts.

Speaker Change: We are confident on the full year guidance and we have to see how Q2 really plays out.

Speaker Change: In terms of as I said.

Speaker Change: Question on express exposure to a de Minimis.

Speaker Change: I think we wanted to give you a with the slides we included a bit of a feeling for our exposure in express TDI two the China, Hong Kong trade lane into the U S. We have a mix there between b to b to C and including a de minimus portion and we're not going to go into more details on the numbers side I think the important thing here is.

Speaker Change: As we have already.

Speaker Change: <unk> reduced our exposure and we talked in the past of last year about the pricing measures. We took on Chinese E comm, which led to a reduction in volume.

Speaker Change: So it will have an impact, but I think beyond a comfortable position and knowhow to our management.

Speaker Change:

Speaker Change: Further on the e-commerce.

Speaker Change: So it is important to note that especially on the weight side.

Speaker Change: The dominant part is b to b, so as it relates to aircraft movements.

Speaker Change: The BTC side <unk> also described doesn't have that big impact the other element and whats to be seen is whether the de minimus volume goes into break bulk type of solutions.

Speaker Change: That is clearly.

Speaker Change: The intent of many shippers to continue to be able to offer the products now there is a whole variety as we know of executive orders out there and.

Speaker Change: Different hurdles to trade and whether those solutions are applicable for our cost to us. We don't know yet is yet to be seen.

Speaker Change: But we do not expect the complete wipe out of the de minimus volume. This volume will to some extent find other channels, we need to remind ourselves that a lot of those products are not manufactured in the U S.

Speaker Change: And even if they're manufactured that capacity would not be would not suffice to serve that relatively large market.

Speaker Change: So thats our expectations that will certainly be a decline on the ecommerce side.

Speaker Change: But we do expect other solutions to also take up a certain amount of volume.

Patrick: Okay, Yeah, let's continue with Patrick.

Speaker Change: Our next question comes from Patrick <unk> at Goldman Sachs. Patrick Please on mute your line and ask your question.

Speaker Change: Hi, David.

Patrick: Congrats on the Q1 performance just two questions on express the fastest can you talk a little bit.

Speaker Change: Weight per shipment trends that you see.

Patrick: In Q1, but also to the extent you can going to Q2, I mean, you alluded to.

Speaker Change: Some customers shifting to higher value modes of transport.

Speaker Change: That's first.

Speaker Change: Secondly, you've talked about your limited China U S exposure, but I think you have very strong market positions in southeast Asia to the extent you can can you quantify some of the some of the market stress you have there.

Speaker Change: Your percent of your network are central to Asia.

Speaker Change: Network trends you're currently seeing.

Speaker Change: And big picture to what extent essentially strength in southeast Asia.

Speaker Change: All sets.

Speaker Change: Sudden stop in China U S trade.

Speaker Change: Yes, Hello, and thank you Patrick on a weight per shipment.

Speaker Change: Is that more of a continuation of the trend of you have already seen in the last quarters.

Speaker Change: Has successfully targeted attractive business.

Speaker Change: All of this without too a good pricing on the right weight records and of course, the urgency the mix element here that the <unk> volume.

Speaker Change: The development is more stable than would be to see decline, which of course also has an impact on the weight per shipment.

Speaker Change: With regard to our southeast Asia exposure. So we have a fantastic market position in all of the Southeast Asian countries. This express we are the clear market leader in all of these markets and hence fantasy.

Speaker Change: Fantastic position to benefit from the dynamic there overall.

Speaker Change: Overall naturally that's.

Speaker Change: Those markets also in combination after substantially smaller than the production capacity you have in China, and Hong Kong and hence quarters out on flows.

Speaker Change: At a smaller level.

Patrick: And if I may add Patrick.

Speaker Change: Patrick.

Speaker Change: What's important to note is the Nx two.

Speaker Change: To the executive order I think was one four to five seven.

Speaker Change: Which has the exemption list.

Speaker Change: That has a lot of electronics that has a lot of.

Speaker Change: Stuff that is relevant for the express and also the the airfreight market.

Speaker Change: So I think that's important to keep in mind as well because you said the China U S trade stops that exemption list.

Speaker Change: Relevance as it relates to the total flows as well.

Speaker Change: Hey, just quick follow up.

Speaker Change: On the <unk> trends.

Speaker Change: Do you see those underlying dynamics continuing post Q1.

Speaker Change: Well I mean, the average of expresses obviously also influenced by the share of <unk> b to C being substantially lower in weight per shipment. So.

Speaker Change: If that plays out and we see more.

Speaker Change: Also b to C going as the B to B to C. So break bulk solution or similar things you would see a significant impact.

Speaker Change: Of the overall getting heavy debt.

Speaker Change: That also then depends how we report break bulk for instance.

Speaker Change: So in tendency, we would see that whether that trend really is an important one for the rest of the year.

Speaker Change: Is to be seen.

Speaker Change: Thanks.

Speaker Change: Thanks, Patrick and let's continue with see them. Please our next question comes from <unk> <unk> at Morgan Stanley.

Speaker Change: Please on mute your line and ask your question.

Speaker Change: Oh very much congrats Kevin.

Speaker Change: Yes.

Speaker Change: Alright, I just wanted to check.

Speaker Change: Coating business it was an area of weakness.

Speaker Change: The third quarter.

Speaker Change: Great.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: And also have asked Lanfranc business can you talk a little bit more about how we should think about.

Speaker Change: Tailwind from cost improvement.

Speaker Change: The rates of the <unk>, how should we think about the evolution of that conversion margin in that business, which took quite a big hit in Q1.

Speaker Change: Maybe thinking about conversion margins.

Speaker Change: Down on a full year basis or is there scope for a capex of about that.

Speaker Change: Stock at the beginning of the year. Thank you.

Speaker Change: Okay.

Speaker Change: So I think.

Speaker Change: If I start with that Melanie might Ed.

Speaker Change: You clearly need to separate the land freight topic from.

Speaker Change: The air and Ocean freight topic, and obviously, we've also seen very different dynamics, there between air freight and ocean freight on the land freight side, we're clearly not satisfied the European market. Currently also have seen this with our competitors is really weak.

Speaker Change: As demand weakness, which causes high competitive business. We also had some extra costs. We are finalizing the largest country. The transition of the system that really hasn't helped in the quarter either.

Speaker Change: With some additional costs that we will get rid off but.

Speaker Change: We also see the structural challenges in the European land freight market and we will spend time on this to improve our position there, which clearly is unsatisfactory in Q1.

Speaker Change: After a dynamics we have already discussed.

Speaker Change: It is also something where we obviously see that relative to competition.

Speaker Change: The first quarter doesn't look good we need to understand that in more detail.

Speaker Change: We see higher competitiveness newness, we talked about the uncertainty.

Speaker Change: Also due to uncertainty about the employment of those aircrafts currently in the E Commerce trade out of China that is clearly something that is also on the mind of some customers.

Speaker Change: So that I think they were good questions and we made some comments about the positives and negatives how this could evolve going forward on the ocean freight side, we are quite satisfied generally as it relates to DG, if we see ourselves on a good path of productivity enhancement good quality.

Speaker Change: <unk>.

Speaker Change: So structurally.

Speaker Change: That is well underway.

Cedar: Cedar does that address your question or you have a follow up.

Speaker Change: Okay. Thank you thanks, Cedar and thing next in line is Andy Chu.

Speaker Change: Next question will come from Andy Chu from Deutsche Bank, and we can move on the airline and ask your question.

Speaker Change: Thank you. Good morning, just one question from me probably for Melanie.

Speaker Change: So provenance Iraq.

Speaker Change: The Capex is down and the guidance is maintained.

Speaker Change: And sort of Pos.

Speaker Change: Periods. When there has been uncertainty the sort of capex has been sort of cost.

Speaker Change: Super tight and free cash flow side sales to me, there's a little bit of a sort of conflicting signals between actually the business is doing pretty well in a tough environment at the profit level, but capex is going to be otherwise.

Speaker Change: If you could just comment on that please thank you.

Speaker Change: Thank you Andy So I think as all of us in that area. We are taking a balanced approach. So we are clearly not starving the business of capex needed for future growth, but across all divisions, we see a good cost and capex discipline, which is exactly the way it should be so I think for me.

Speaker Change: In the current environment is the right balance and as we have shown in the past, we're really able to flex year Evansville, if things pick up we can also speed up again, if things remain subdued we will keep the cautious approach.

Speaker Change: If I may add Andy we talked about that also we had a big catch up especially in express if you look at our European infrastructure, we spend a lot of money there over the last years to upgrade it to enhance capacity and we just don't need that currently.

Speaker Change: We have good capacity and we have state of the art infrastructure.

Speaker Change: So that's important to keep in mind as well we can assure you that we are very keen to continue to invest in those growth areas and you've seen this on the M&A side, but also on the organic side, we do.

Speaker Change: <unk> to invest in those growth opportunities.

Speaker Change: Thank you that's helpful.

Speaker Change: Just one quick follow up on the guidance.

Speaker Change: We will give formal guidance in previous quarters.

Speaker Change: Particularly last day to give an indication for quarterly core repeat events.

Speaker Change: Typically it was around about $1 3 billion success three quarters of last year was there any sort of help you can give us this time around any indication of how we might think about modeling Q2 in a very volatile environment.

Speaker Change: Thinking looking at historical patterns is never a bad idea.

Speaker Change: And factoring in obviously from a day to day basis, what we see.

Speaker Change: That's.

Andy Chu: I think theres not much more we can say to that Andy.

Speaker Change: Okay.

Speaker Change: Thank you very much. Thanks, thanks, Melanie Thanks, Sandy and let's continue with Minerva. Please.

Speaker Change: Our next question comes from <unk> Kayani with Bank of America. Please mute your line and ask a question.

Speaker Change: Well.

Speaker Change: Can't hear you.

Speaker Change: Can you hear me now.

Speaker Change: Okay, great and good morning, So firstly on express and kind of a bit of a follow up here towards the earlier questions around what we heard from your competitor yesterday on that international business.

Speaker Change: They talked about a kind of a.

Speaker Change: Lower demand related surcharges into Q can you explain to us kind of how your demand surcharges have worked in express I don't think you have one currently.

Speaker Change: How you would think about those that through the course of this year.

Speaker Change: Understanding all the volatility and uncertainty.

Speaker Change: You have talked about.

Speaker Change: Then second question, we've heard from a couple of companies and industry sources that China U S volumes are down something like 30% or more but that's being offset by increase in volumes in other trade lanes would you agree with that is that what youre seeing across the year.

Speaker Change: At express and forwarding businesses. Thank you.

Speaker Change: Thank you Mani vessel on the surcharges, we did not.

Implement.

Speaker Change: Surcharge ahead of those deadlines out of China in particular, we didn't see that as adequate in the current environment. We're also due to the custom situations in the U S. For instance, there were service delays across the industry. So we want to take a balanced approach and charge, where there is a peak and where there is.

Speaker Change: Quality in the peak.

Speaker Change: Not to an epic truly we still believe thats, the right way and the fair treatment of our customers as it relates to the demand surcharge for the seasonal peak that's to be seen we currently do we expect such a peak.

Speaker Change: So we do not see yet or wouldn't expect that we would not have a normal seasonal pattern, particularly as we look towards Q4.

Speaker Change: Yeah. So the EPS, we had our demand charge, which.

Speaker Change: While the peak season of us into effect from mid September to the end of January.

Speaker Change: It was phased out as indicators and they havent done anything since in terms of China U S volumes.

Speaker Change: Yes, they are down in terms of is that fully compensated for growth somewhere else.

Speaker Change: I would expect that it won't be fully compensated, but it's really very volatile and a moving target.

Speaker Change: Thank you.

Speaker Change: Great. Thanks Juanita.

Speaker Change: Marco limitation next in line. Our next question comes from Mark <unk> Mark Kay. Please on mute your line and ask your question.

Speaker Change: Hi, good morning global warming, yes. Thank you.

Speaker Change: Okay.

Speaker Change: So a quick question of golf.

You have mentioned before that.

Speaker Change: As we do higher value motive chalkboard Bob.

Speaker Change: One of your competitor yesterday will help the main thing that there would be.

Speaker Change: Eric.

Speaker Change: Mohit directed so yeah, just if you could give a bit of color on that.

Speaker Change: Second question is on your crop on the road freight business.

Speaker Change: When do you expect that to.

Speaker Change: Okay turnaround.

Speaker Change: For how long, we could talk about let's say negative.

Speaker Change: EBIT and.

Speaker Change: Without expedition quarter of the year and.

Speaker Change: Third question is on the express capacity management as well.

Speaker Change: Okay prove the utilization of capacity.

Speaker Change: One.

Speaker Change: Is that the target for the remaining part of the year and how easy is it to do that in the current.

Speaker Change: The environment.

Speaker Change: Obviously more volatile than Q1.

Speaker Change: Okay, then starting on your first question in terms of modal shift obviously, there has been situations where customers will see say different things. If you have something that is steady.

Speaker Change: Jim for optimizing inventory cost versus transportation cost and generally then would like to downgrade to a lower cost transportation, particularly and to see.

Speaker Change: What we were referring to is if there is volatility of their deadlines. Looming. Then there is obviously a different consideration and thats, what we have been seeing and do you expect in this environment of changing elements changing regulation with substantial financial impacts to our customers that bet.

Speaker Change: Pressures volume.

Speaker Change: Into higher quality foster modes of transportation that this what we have seen historically over many decades and that what we would also would see in this situation. So if you expect smooth constant type of environment cost pressure you see this in automotive again and again moves from air to sea.

If youll see volatility you will see a higher share of our freight and also express I think that's the way to bridge. These two statements in terms of the road trade, we do expect it to get better but it is also market dependent and there we don't.

Speaker Change: Expect miracles.

Speaker Change: No.

Speaker Change: There is work for us to be done we also need to see how the European economy goes. So again, we do expect the run rates to get better.

Speaker Change: But we also have a dependency here on market developments.

Speaker Change: And then on the express capacity flex.

Speaker Change: No.

Speaker Change: We have now shown over many quarters.

Speaker Change: I'm in a position, where we can flex down I think of maybe coming back to Alex's earlier question could there be also a situation where we all of a sudden has to flex up and be able to do that as well as we also showed during the pandemic I think the big.

Speaker Change: Our strength here is our virtual aviation network that we have this great mix between owned aircraft long term leases short term needs of the operators different partners. So we feel well positioned.

Speaker Change: To deal with whatever scenario now unfolds.

Speaker Change: Hey, Michael is well enough.

Speaker Change: Okay.

Speaker Change: Alright. Thank you we are approaching the full hour. So two callers that I can see it's continue with Mark. Our next question comes from Mark <unk> with Kepler Cheuvreux.

Please Amit your line and ask your question.

Mark: Good morning. Thank you for taking my questions just a couple of really left for me.

Mark: Talked about extra cost in road freight forwarding in Germany due to the system transition can you quantify this cost.

Mark: And then similar question for actually the letter business on Germany can you quantify what was the boost from the election.

Mark: <unk>.

Mark: Third question really on de Minimis I would expect that <unk> got some boots on the ground. The talk with your customers do you feel that U S. Customs. This time around is better prepared to handle the.

Mark: Changes to the de Minimis, unlike like two months ago or so when they were until the upfront.

Mark: Thank you.

Speaker Change: Yes, So let me start as the first one on the extra cost on the road side, Yes, we have over the last years rolled out the new transport management system for our freight.

Speaker Change: We went live in Germany as elastic lost the country that led to extra cost and I would say that this is actually the main reason IV or in the reps.

Speaker Change: Otherwise it would probably have been more around the breakeven line.

Speaker Change: In terms of let our business boost yeah, we were not going to quantify it but you can see that in Q1 also when you look at the like for like numbers, we had a better mail volume decline of MBA has seen over the past quarters and here obviously the elections played an important role.

Speaker Change: On the U S custom side, yes, I think people are better prepared whether it's efficiently well prepared is a different question.

Speaker Change: And to be honest, there is still a lot to be worked through.

Speaker Change: As also for that organization, the customs and border patrol, obviously, a time of high workload.

Speaker Change: And as you know there are quite a number of factors at play this is not only the de minimus.

Speaker Change: We have seen this shift from informal into foreign clearances now the exemption there again to reinstate the scope of formal clearances that also cover some of our and the industry's concern as it relates to de minimus shipments not falling directly into formal clearer.

Speaker Change: So because that impact is much much more severe especially when we don't have robust break bulk solutions. So it is a whole set of legal breaks here in play and if one really doesn't fit on the other it's a problem for the entire structure that we want to build here.

Speaker Change: So there is some uncertainty and concern around that.

Speaker Change: It's definitely operationally not boring.

Speaker Change: So we have to see how this comes together we're not.

Speaker Change: As you here not that much concerned.

Speaker Change: Some of that might actually be good for us because it shifts volume into channels, where we have a good value proposition and a strong a presence than the traditional challenges and so even if overall volume is expected to go down as it relates to e-commerce into the U S on the China U S Lane in.

Speaker Change: Tequila.

Speaker Change: How much of that comes our way very much depends on these moving factors.

Speaker Change: Mark Bristow answered I guess.

Good.

Speaker Change: Still one Cola our last question comes from Oliver Huang at Redburn Oliver. Please on mute your line and ask your question.

Oliver Huang: Thanks for squeezing me in here just a quick one I was just wondering if the current volatility essentially delaying execution on your 1 billion plus cost out program I know there was some good stats that you provided but is there any risk.

Speaker Change: Volatility is impacting that.

Oliver Huang: The answer is no.

Oliver Huang: No it's related to that and they also feel very blessed that our management team. So far has been able to execute the day to day, the structural cost improvement, but also.

Oliver Huang: And in that sense, we're not quite satisfied with the first quarter. It could have been if not more in terms of growth.

Oliver Huang: But we're also working on that and we'll continue to do so.

Oliver Huang: Thanks.

Oliver Huang: Yes.

Speaker Change: Our last question comes from Marc Michael Aspinall Jefferies Michael.

Speaker Change: She's on mute your line and ask your question.

Speaker Change: So you've dialed in press star six two on mute.

Speaker Change: Okay.

Speaker Change: Well. Thank you very briefly seems to be a pure line.

Speaker Change: Right now yes.

Speaker Change: Yes.

Speaker Change: Good morning.

Rocco: Rocco, making a couple of quick ones in hopefully you pointed out some of the Delta that you can provide.

Speaker Change: The quantum of owner.

Speaker Change: Food in terms of how big those products and services like bonded warehouses of break bulk breath currently in.

Speaker Change: If you have capacity on our capability to increase our services materially.

Speaker Change: I think we can quantify that this is a lot of different stuff and a lot of different countries that ranges from free trade zone warehouses to things that are customer specific worked out with customs.

Speaker Change: So.

Speaker Change: It is significant.

Speaker Change: But we can't quantify that and it's quite often I was a part of the integrated offering and baked into the pricing.

Speaker Change: So it is definitely a strength we can build on it is already sizeable and a good growth opportunity.

Speaker Change: Wood Mackenzie bear any fruit.

Speaker Change: In line with demand.

Speaker Change: Yes.

Speaker Change: Okay, and then one unit nanoparticle add any more color on the numbers.

Speaker Change: Okay.

Speaker Change: Do you have a sense of the hammer.

Speaker Change: What kind of bottom of the statement.

Speaker Change: We'll have to get anthem ballpark and trying.

Speaker Change: Trying to get a phone call how critical the delivery component cause customers to continue to grow for example.

Speaker Change: Well again the link the list on the annex shows that there is mutual dependency and you will also be aware that in China. The criticality of some imports from the U S has been discussed on different levels. So I think both nations recognize the criticality of.

Speaker Change: Of certain supply chains, working spare parts for aircraft medical equipment and Pharmaceuticals electronics.

Speaker Change: Uh huh.

Speaker Change: I have in the quantity of the U S needs no other source than that involving China as well.

Speaker Change: And we have already quite notable list of exemptions and special treatments.

Speaker Change: How this unfolds depends on whether this escalates further or we see which currently seems to be the mood some level of escalation as well we.

Melanie Cries: We don't want to speculate about that I think we have the flexibility Melanie laid that out in terms of shifting capacity.

So we will feel well prepared as well as we can for these different scenarios, we see significant prove in the developments of the last weeks that global trade is quite essential.

Melanie Cries: And its benefits and there's increasing realization of that.

What effect this will have time will tell.

Melanie Cries: Okay, great. Thank you very much.

Speaker Change: It's mark <unk>.

Speaker Change: Almost serves as closing remarks, I guess and.

Speaker Change: I want to close the Q&A session now with that thank you for your very focused approach looking forward to see you at conferences and Roadshows over the next couple of weeks and wishing you a good rest of the day and rushing on now to the next call. Thank you.

Speaker Change: Thank you all the best.

Speaker Change: This concludes today's call. Thank you everyone for joining you may now disconnect.