Q2 2025 Deutsche Post Earnings Call
This call will be recorded you can find the privacy notice on D. H L Dot com.
Throughout todays presentation, all participants will be in a listen only mode.
The presentation will be followed by a question and answer session.
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I would now like to turn the call over to Martin Sieg in Vogue head of Investor Relations. Please go ahead.
Thank you and a warm welcome from my side to our Q2 call to everyone out there I take it you have the materials that we released this morning in front of you.
See that we can make this.
Straightforward exercise today with the presentation by Melanie crossovers CFO and afterwards the Q&A.
With that over to you Melanie yes.
Yes. Thank you very much Martin and good morning, a very warm welcome to all of you out there also from my side. Thank you for joining our Q2 2025 investor call.
I will as usual provide a short review of the key numbers and observations for the quarter and I look forward to addressing your questions afterwards.
Starting with page to page two summarizes our key observations for the second quarter of 2025.
We indeed saw an impact of lower volumes in global trade. However, we have managed this volatility effectively driving our strong performance in all of them.
Logistics portfolio with an increase in Q2, EBIT and sustain strong cash generation.
This outcome shows the effectiveness of our cost actions both in terms of adjusting capacity to cyclical fluctuations and in implementing structural cost measures under our fit for growth program.
This allows us to continue investing into attractive structural growth opportunities aligned with the priorities outlined in our strategy 2030.
More details on both inorganic and organic investments will follow at the end of my presentation.
Let me start on page three with some observations on global trade as I know that this is on everybody's mind. These days.
The graph on the left illustrates the diversification of global trade desk.
A destination.
S remains the largest destination market and as expected. This is the area, where we have seen the most significant impact on trade flows in Q2.
Nevertheless, it is the essence of global trade that it finds its way to keep flowing as we will also see in the express regional development later on.
Our ambition is the most diversified global logistics company is to support our customers and keeping their businesses growing and enabling them to continue leveraging the opportunities from the diversification of global trade also under the current circumstances.
Q2 EBIT and strong cash generation; this outcome shows the estimates of our cost action, both in terms of adjusting capacities to cyclical fluctuations and in implementing structural measures under our Fit for Growth plan.
So flows have been extremely volatile throughout the second quarter from week to week in the cross trade lanes pay.
Page four summarizes what this means for our Q2 volumes when we filter out the weekly noise B to B volumes were eventually slightly lower across modes. However, there was no massive decline nor did we see a fundamental motorist ecommerce was a structural trend and continues.
And this allows to continue investing into attracts properties lined with the priorities, outlined in our strategy, 2030 M on both inorganic and organic Investments below at the end of my presentation.
To drive better momentum in B to C. Generally this China U S de minimus being the only market segment, where we see a significant impact on trading volumes.
Let me start on page 3 with some observations on global data. I know that this is on a lot of people's minds these days. The graph on the left illustrates the diversification of global trade.
Okay.
Page five highlights how we translated these external conditions into a 6% year over year increase in Q2 EBIT for our group portfolio.
By destination, the U.S. remains the largest dominant market and, as a result, this is the area where we have the most significant impact on trade in Q2.
Express has really excelled and cost flexibility and used management delivering the fourth consecutive quarter of EBIT increase despite an underlying volume decline and I will come back to the drivers of this performance in more detail in a minute.
Nevertheless, it is the essence of global trade that it finds its way to keep growing. As we will also see in the extremal development later on our ambition, as the most diverse.
As shown in the line and the bottom of the page. We have also started to book first one off costs related to our fit for growth program in the second quarter impacting express DTF F and E Commerce and this is one reason why DTF F has seen lower EBIT conversion in the quarter. This extreme volatility in overall.
Customers in keeping the businesses going and enabling them to continue leveraging. The opportunities from diversification of global trade, also under the current circumstances,
So I've been extremely volatile, so second quarter on week to week and across trade Lanes, page 4 summarizes. What this means for our Q2 volume.
<unk> demand also dampening GP generation and productivity in the sector.
Supply chain continues to demonstrate a resilient performance. This EBIT margin at 7% and that is after adjusting for the positive net M&A one off we had in the quarter.
E Commerce booked 8 million cost of changed over a slightly down year over year also excluding these costs, but in line with expectations, reflecting as you know continued investments into the structural e-commerce trend.
When we filter our weak noise between volumes, we eventually see slightly lower volumes across goods. However, there was no massive decline, nor do we see a fundamental mode shift. E-commerce was structural and continues to drive momentum. Generally, with China, the U.S., and the minimum, only markets meant they receive significant impact on trading volume.
Page 5 highlights how we played these external conditions into a year-over-year increase in Q2. But for our group portfolio,
And last but certainly not least in pnp.
Please see our targeted cost actions based on structural network changes, providing the necessary benefits to manage the ongoing structural volume shift from major parcel, which we saw as expected to continue in the second quarter.
As I mentioned cost of change and supply chain one off benefits are summarized in the EBIT bridge on page six with positive and negative nonrecurring effects roughly balancing out for a positive 4 million euro net effect in the quarter.
The positive one offs related to M&A, there's a small disposal and corporate functions and the lodge, a 54 million Euro net positive M&A effect on supply chain. There's a positive contribution comes from the first time full consolidation of our ethanol joint venture in Saudi Arabia.
Express has really excelled in cost, flexibility is management, delivering the consecutive quarter of ebit increase despite an underlying volume down, and I will come back to the drivers of this performance in more detail in a minute. As shown at in the line of the page, the all art book for the programing, and this is 1 wide dgff has seen lower bit conversion in the quarter, the stream volatility, and overall weaker demand also dampening degeneration and productivity in the
We also had a positive free cash flow effect of roughly 100 million in net cash from <unk> <unk> from <unk> in this quarter.
By Jane continues to demonstrate a reading performance with EBIT margin at the present. And that is our adjusting for the positive. Net me 1 of we had in the quarter.
And I'll get technical this will reverse out.
Becoming cash flow neutral eventually there is no impact on our overall free cash flow generation. However, the current accounting assumption is thats. The outlaw will go through different lines in the cash flow statement and that technically will lead to a net negative impact of 100 million euro on the free cash flow excluding M&A if you will.
E-commerce book, a million euros, cost of change. So, it was slightly down year-over-year, also excluding the cost. But it is in line with expectations, reflecting, as you know, investments into the structural trend.
That transparently as it unfolds and the remainder of the year.
And that’s not least in PNP. We are pleased to see our targeted actions based on structural networking, providing the necessary benefits to manage the ongoing structural volume shift from mail to parcel, as expected to continue in the second quarter.
The cost of change of 58 million related to structural cost measures in the three divisions mentioned, but what is important to understand is that not all fit for growth measure do require cost of change to the contrary we initiated the first fit for growth measures last year without any cost of change and we are seeing fit for growth.
The mentions of change and supply chain 1 of
With positive and non-recurring effects, we expect a net positive effect of approximately €4 million in water.
Benefits clearly supporting our EBIT performance I would say even better than initially expected, particularly in express and CMP.
the positive 1 is relate to m&a with a small disposal in corporate functions and the larger field to 4 million euro positive, m&a effect and supply chain where the positive contribution comes from the first time consolidation of our under, in Saudi Arabia,
On page seven we present, some examples of relevant cost Kpis, which we are actively steering and tracking for express and you can see here that across the network.
We also had a positive free capital effect of roughly $100 million in net cash from M&A this quarter.
We see really positive.
Declines in all categories.
This is a combination of efficient capacity management and structural changes under our fit for growth program.
Next to the strong used management these cost measures.
Primary driver of the increase in express Q2, EBIT, despite the year over year volume decline.
This will reverse out on becoming cash neutral. Usually, there's no impact at all on generation. However, the current accounting assumption is that the outflow goes to different lines in the capital state, and that technically leads to a negative impact of $100 million on the future. Excluding and as you like that, transparently as it is, in the remainder of the year.
The cost of 1058.
As we mentioned on page eight we have significantly reduced our air capacity and related costs.
Beyond the overall, 7% reduction, which you can see highlighted on this page again, we have further more flex capacity across our network to adapt to the volatile regional trade flows.
As such you'll see on the left side of the page the expected stronger decline in shipments into the U S to which we have responded with a significant reduction in airlift and in local pickup and delivery capacity.
In the 3D. But what is important to understand? Is that not all physical measures, do require cause change to the contrary, we initiate the first fit for growth measures last year, without any cost of change and we are seeing good for growth benefit. Clearly supporting our e performance. I would say even better initially expected, particularly in Express and CNP.
At the same time, the positive year over year developments in APAC in Middle East Africa are noteworthy.
Although not sufficient to drive year over year growth for total global volume they demonstrate the high diversification of global trade as discussed earlier or simply put there after the growth opportunities in growing trade lanes also in the current environment.
Looking ahead, we expect this volatility to continue.
7, we present some examples of relevant cost kpis, which we are actively steering and training press. And you can see here that um, cross the network on, um, we see really um, a positive. Um, hi clients in all categories um which is combination of efficient capacity management and structural changes in our fit for growth program.
And we also expect a usual seasonal uplift for the peak season and for that reason we are currently preparing the demand surcharge 2025.
Next to the wrong youth management cost measures are very driver driver of the increase in equity to ebit despite the over year volume decline.
Similar mechanics, as last year, and we will announce the details in due course.
I have now talked about what we see in terms of the global trade environment, what it means for our volumes and Toby cope with it.
Is clearly still a lot of uncertainty and volatility, but based on what we know NC at the moment, we are reiterating our guidance today.
As much on page 8, we have significantly reduced our capacity and rate costs. Um, beyond the overall 7% reduction between the highlighted on the stage. Again, we have further more flexibility across the network to adapt to volatile regional trade Force.
Maintain a quantification around changes in tariffs on page nine where we continue to monitor and escalation and tariffs and trade conflict not covered in our current assumptions and one of the topics, which we are watching here is the de minimus exemption for shipments from rest of world into the U S.
As such the left part of the page, the expected strongest decline in shipments into the West, to which we have responded with a significant reduction in lift, and in local pickup and Delivery. At the same time, the positive overview developments in APAC, and Middle East, Africa are not worthy.
There have been several iterations on that topic in recent months for example, the discontinuation of the de minimus exemption earlier in the year for four days after which it was reinstated.
Then as you all know we had the beginning of May the abolishment of de Minimis from China, Hong Kong into U S.
And now there was a new executive order issued on July 30th which brings the timeline for the rest of work phase out forward to August 29th compared to phase out in 2007, which was foreseen in the textbook past just one month ago to obviously also quite a dynamic environment with regards to.
Though not sufficient to drive you over your gross, total global volume demonstrates the high diversification of global trade as fast earlier—or simply put, there are still growth opportunities and crew trains also in the current environment. Looking at the exact volatility, we expect this to continue. Um, we also expect a usual seasonal uplift for peak season. For that reason, we are currently preparing for demand for Q2 2025 with SIM mechanics from last year, and we will announce the details in due course.
De Minimis.
We will have to see whether the latest executives all the from last Wednesday will be implemented as announced and if yes, what substitution effect will occur.
In a worst case scenario, we would see a maximum risk maximum risk of up to 200 million euros on our full year 'twenty five EBIT.
I have now talked about what we see in terms of the Google trade environment. What this means for volumes is that there is clearly still a lot of volatility, but based on what we know, we are reiterating our guidance today. We maintain a qualification around tariffs on page 9, where we continue to monitor and escalate in various trade conflicts not to hurt our current assumptions.
Decided not to include these risks into the guidance as we don't consider this worst case scenario the likely path forward, but I want you to be aware of that topic as it is one of the many moving parts.
I'm also talking about the minimum exemption for shipments from the rest of the world into the U.S.
Turning back to a more straightforward topic I'm, particularly pleased to conclude my review was a cash flow perspective on page 10.
Continued strong cash generation, allowing us to invest in a balanced manner across all priorities of our finance strategy.
We remain in strong Capex control remote given current volume development. We also continue to invest in targeted opportunities that will drive our midterm growth path focusing on the growth topics identified by strategy 2030.
Then iterations on that topic in recent months. Um, for example, the discontinuation of the minimums exemption earlier in the year or 4 days, after which it was reinstated. And then I know, um, we had a beginning of May. The bullish of the minimum is from China or Hong Kong into the US. And now there was a new executive order issued on July 30th, which brings the timeline for the rest of world, phase out forward to August 29th, compared to a phase out and7, which was
It has been 3 billion euros on shareholder returns in the first half of the year through our dividend payment and ongoing share buyback program and Additionally, we have seized some good opportunities for targeted inorganic growth leading to a temporary acceleration in M&A announcements and spending fully aligned with our strategic ambitions.
You'll find the full list of announced acquisitions on page 11, and he has a clear focus on the strategic topics of life science and healthcare geographic tail winds in e-commerce.
As well as the confirmation on the rise as we pursue M&A not for XI a sizable volume, but it is a complementary option to enhance our capabilities and market reach.
For seen in the tackle past just 1 month ago. So obviously also quite a dynamic environment, um, with regards to, uh, the Minimus, we will have to see whether the latest exit is over from last, Wednesday will be amended as announced and if yes prostitution effects will occur. Um, in this case scenario, we would see a maximum risk. Maximum risk of up to 200 million euros on our full 25 e bit. We decided not to include this into the guidance, as we don't consider this worst case scenario, the likely path forward, but I want you to be aware of that topic, as it is 1 of the many moving parts.
But to be clear organic investment remains the primary driver of our midterm growth plan.
On page 12, we showcased some examples of our ongoing targeted investments into organic growth opportunities driven by the midterm structural growth topics laid out in our strategy 2030.
Turning back to a more straightforward point, I am particularly pleased to conclude my review. With the perspective on page 10, we see continued cash generation, allowing us to invest in a balanced manner across all priorities of our finance strategy.
To wrap it up on page 13, the key takeaways from our Q2 performance and current management priorities not surprisingly.
While we remain in strong, capex, controlled given current volume developments. We also continue to invest in targeted opportunities that will drive our term growth paths. Focusing on the growth topic, identified by strategy 2030
Actively managing short term volatility through cost and yield actions and at the same time, we continued to invest into fundamentally attractive structural growth opportunities given the environment. We are addressing our cost base both from a shorter term cyclical capacity angle and through structural cost reduction under our fit for growth program.
Investments and spending fully aligned with our strategic ambitions.
And that is what you can quite clearly see in our Q2 numbers. So I rushed through the presentation to have enough time for your questions and I'll look forward to hearing your questions over to you.
Ladies and gentlemen, we will now begin our Q&A session.
You find the full of announced Acquisitions on page 11. And you see clear focus on the Strategic topics of life and Healthcare, Geographic tailwind and e-commerce as well as the confirmation on the right. That we present a knot for sheer size or volume, but as a complimentary option to enhance our capabilities attributes
If you have a question we ask that you. Please use the raised hand function at the bottom of your screen.
But we clear organic investment Remains the primary driver of our midterms plans.
If you have dialed in please select some nine to raise your hand and staff six to on mute.
Once your name has been announced please on mute and ask your question.
On page 12, we showcase examples of our ongoing targeted investments, organic growth opportunities driven by the term "structural growth," and strategy 2030.
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Wrap it up on.
And amendment for the SaaS question. Please.
Yeah.
Our first question comes from Andy Chu with Deutsche Bank, Andy Please Amit your line and ask your question.
Priorities are not surprising. We are effectively managing short-term volatility through cost actions, and at the same time, we continue to invest in fundamentally attractive work opportunities.
Thank you good morning, good morning, Martin a couple of questions from May place. Some so they fit.
Gross benefit.
Could you just give us an idea of what I'm trying to try and quantify those.
Floral ships, you gave us what the cost of change.
Maybe.
If we could just help us sort of what sort of current trading are you trying to say more of the same kind of run rates or op growth.
Given the environment, we are addressing our cost base, both from a shorter term thicker capacity and and to production under of the growth program. And that is what you can quite clearly, see and how you. So enough time for your question and all look forward to hearing your questions or to you,
And the business was 6% at the group level is that kind of the run rate that you've seen year on year or might be.
Ladies and gentlemen, we will now begin a session.
If you have a question, we ask that you please use the hand function at the bottom of your screen.
Right.
Okay.
Okay.
Okay.
Okay.
After Q3, thank you.
Yeah morning, Andy. Thank you for the question so on the fit for growth benefits.
If you have dialed in with your hand and start to fix to unmute when your name's been announced, please unmute and ask your question.
Obviously, we are tracking that quite closely of its internal monitoring them, but I think when you look at the ultimate effects for me it's not.
Please lower your hand, your hand function. Thank you. And a moment for the first question, please.
Not meaningful to break out.
Specific number because that is also coming together with the general cost management, which we are doing but what I can say is that it's clearly a net positive effect in the quarter. So we are seeing bigger benefits than what we had in terms of cost of change in the quarter already and overall.
Our first question comes to you, Andy. Please unmute your line, and ask your question.
I'm very pleased with the development of your really ahead of schedule and you can see that particularly in express and Pnp.
The team is totally focused on implementing the fit for growth measures.
On the current trading what did we see into July August beginning of the.
The third quarter I think you used the term more of the same.
And I think that is probably the.
Thank you, good morning. Um, I have a couple of questions, please. Um, benefits. Um, could you just give an idea of trying to quantify those for us to give us the cost of change? And then maybe um, if we have a sort of word on sort of current trading, you kind of see more of the same kind of run rate or of growth. Um, um, in the business sort of 6% that the group, that kind of the run rate that you’re saying year on year or maybe you can be honest sequentially? Um, versus Q2 as we have stuck you through. Thank you.
The best description.
Haven't seen a significant acceleration.
In the growth dynamics and it remains very volatile so I think more of the same it was a very good summary.
Thank you.
Thanks, Andy and the next caller should be Alexia.
Next question comes from Alexia <unk> with Jpmorgan Alexia. Please on mute your line and ask your question.
Good morning, Thanks for taking my questions.
Turning to go back to the fit for growth comments, you just made that not.
Post. This effect is ahead of the cost of change impact should we expect in the coming quarters. These numbers to kind of accelerate and or should we kind of expect a similar pace of the cost of change and therefore the commensurate.
Yeah, good morning, Andy for wonderful growth benefits. Um, I mean obviously our tracking that closely um, with internal monitoring. Um, but I mean, you can look at the automatic effects for me. Um, it's um, uh, not meaningful to break out on a specific number because that is also, um, coming together with the general cost management which we are doing. Um, but I can say that, um, it clearly a net positive effect. Um, in quarter, um, we are seeing bigger benefits, um, than what we had in terms of cost of change, um, in the bot already. And also
Net flows Devine and if I can just ask related to that are there any notable areas of the network that you are currently using money that you can quantify and that youre addressing that would be helpful. And then the second question because I didn't quite.
I missed it when you talked about this kind of negative scenario you wanted the market to be aware of is not really on the de minimis change or just more broadly on the tariffs and how should we think about it is it just for the 2025 V bids.
all I'm a representative is totally focused on implementing the fit for
And does it relate to the capture of the demand surcharge and express just kind of understand what but to look out for to know whether that $200 million negative happens or not thank you.
Thank you. Thank you. With JP Morgan. Please unmute your line and ask questions.
Yeah. Thank you Alexia so on the fit for growth.
So we obviously expect the program to accelerate and we do expect that we will see again cost of change bookings.
In the second quarter and for the full year.
In line with the overall cost of change numbers will that shouldn't go any higher.
But do expect some more cost of change to come in the third quarter, and we will flag that transparently.
As well in terms of losing money I think that is a very difficult question in a network and that is not I assume you're talking about express and that is not how we.
Think about it I would say that we have really managed to make the necessary capacity adjustments.
Adjustments on the aviation side, but you also see some numbers what we have done on the <unk> side, maybe also pointing out the significant reduction of he made in the U S to adjust for the lower volume in flow into the U S.
That is really across the network.
Extremely well managed.
It was a de minimis topic.
As mentioned.
Obviously, one of the most volatile topics of the last months, where we have seen quite a bit of back and forth.
A similar base of the cost of change and therefore comes the commensurate um impact. And if I just upgrade to that, are there any notable areas of the network that you're currently using that? You can quantify that you're addressing, that would be helpful. And then the second question because I didn't quite, um, I made it when you talk about this kind of negative scenario, you wanted. Um, the market to be aware of is that really on the minimum change, or just more broadly on the tires and how should we think about it? Is it just for the 258 bit and does it relate with the capture of the demand search charge and express just want to understand what, what to look out for to know whether, you know, that 100 million negative happens or not, thank you. Yeah, thank you. Alexia so, um, on the for growth, um, yeah, so we obviously affect on the program to, um, accelerate on and, um, we do affect that you will see again, bookings. Um, in uh, second quarter for the full year.
Early July there's a new textbook.
Said that rest of world de minimus would stay in place until the summer of 2007, just four weeks later, you get an executive order, which forces the complete abolishment of de minimus rest of World by August 29th there are still many moving parts for example, the whole question of the postal.
Some of the de minimus abolished event and that is why we now have to really watch and see.
We implemented the way it was announced.
What will give us the details on what will that mean for trade flows substitution effect opportunities, which could also arise from the whole thing.
But we still, um, in line with the overall cost of change number, so that shouldn't go any higher. Uh, but um, I do expect more change from in the third quarter and we will flag that transparently, um, as well in terms of losing money. I think that is a very difficult question in the network and that is not. I assume you're talking about expression and that is not how we, um, think about it. Um, I would say that we have really managed to make, um, the necessary capacity, um, adjustments on the aviation side, but you also see some numbers. What, we on the beauty side,
Being a conservative finance person I of course pushed blood team for tell me what would be the worst case.
Scenario.
All implemented August 29th and only the negative stuff come through in this worst case, what number would we talk about and that would be 425 up to 200 million euros, and I decided to share that number of as you openly because I guess he will try to do the same type of worst case calculations. So.
It's again not the likely scenario that is why we have not included into the guidance, but we just wanted to be as transparent as we can possibly be with all the uncertainty.
Thank you, Matt and I appreciate that and can then just tick because what is the number you expect for cost of change for the full year is that something you've discussed in the past.
Yeah. So we said that it would be kind of like up to 200 million and I think looking at what we have now booked in Q2.
We will definitely stay.
Within that number thank you.
Yes.
Um, maybe also point out the significant reduction of the late in the US on to adjust for the lower volume, inflow into the US. Um, so as that is really cross Network extremely well managed. Yeah, it was a the Minimus topic. Um, as mentioned, um, this is 1 of the volatile topics, um, of the last months where we have seen quite a bit of back and forth, um, early July, um, with the new tax bill. Um, it was, um, said that, um, rest of world, the minimum is put stay in place, um, until small of 97 Just 4 weeks later, we get an executive order, which we'll see the complete all of the minimums rest of the World by August 29th. There are still many moving parts. For example, the whole question of the total implementation of and is my, we now have to really watch and see, will it be implemented the way it was announced. Um, what will be the details? Um, what will that mean for trade flow substitution effects opportunities, which could authorize from the whole thing. But
Thank you.
Our next question will come from Mark or to meet with Barclays. Marco. Please on mute your line and ask your question.
Yeah.
Okay.
So you used to.
Mute button at the bottom of using screen.
Okay.
Okay.
And again, we would give them a minute and continue with the neighbor.
Being a conservative Finance person. I, of course, pushed my team for the, what would be the worst case? Um scenario. Um, it is all implemented August 29th. Only the negative stuff comes through in this worst case number that we talked about and then be um for 25 and up to 200 million euros. And I decided to share some with you openly because I guess you will try to do the same type of worst case calculations. Um so it's not the likely scenario that is likely not included it into the guidelines that we just wanted to.
Our next question comes from the line of <unk> Kayani with Bank of America.
To be as transparent as you can possibly be with the uncertainty.
Many back please on mute your line and ask your question.
Good morning, Martin and Melanie Thanks for taking my question to ask the first one I just wanted to ask around the demand surcharge, which you said is in planning. So if I remember correctly from last year at this time you'd already I think announced it.
Thank you, Melanie. I appreciate that. And can you tell me what the number is for the cost of change for the full year? Is that something you've discussed in the past?
So kind of what are you waiting for on the demand surcharge at this point.
Yeah. So that it would be kind of like up to 200 yen, um, and um, looking at what we have now booked, um, Q2 uh, I think we will definitely stay, um, within that, uh, number.
Thank you.
Thank you.
What our discussions with your customers like and how should we think about it across trade lanes, given the big shifts in demand compared to last year that you've just talked about because I think last year. It was more kind of on the Asia U S trade lane, so any thoughts on that would be super.
Our next question will come from Marco with Barkley's. Marco, please unmute your line and ask your question.
You can.
Please use the unmute button at the bottom of your Zoom screen.
And then just related to fit for growth targets.
I think those you've talked about the cost savings of over a billion run rate by the end of 'twenty 'twenty six so you've talked about kangaroo the impact this year, how do we think about data next year, both on kind of the cost of change as well as the benefit side.
Neighborhood, kayani, with Bank of America.
Please unmute your line and ask your question.
Yeah.
Yeah. Thank you maneuver and so on the.
The demand surcharge Youre right last year, we announced at the beginning of August and he then already informed our customers about the detail that went into effect on 15th of September. So I think we announced that its so early last year because it was the first time via.
Did it so now it's more of a hey, this is what we have to do in the peak season, and that's one of the reasons why we haven't communicated the details with the customers yet.
The second thing is of course that it is a very volatile environment out there and the intention of the demand surcharge is to optimally balance the cost of production on the supply side with anticipated demand and here, we really take some time to work through the <unk>.
So that we really get it right, including the right.
Demand surcharge per trade Lane, where again as you said obviously the situation is quite different on the trans Pacific compared to what it was last year.
Uh, morning, Mark and Melanie. Thanks for the question. Uh, first, I just wanted to ask about the demand search charge, which you said is incoming. If I remember correctly, last year at this time, you'd already, I think, announced it. So, kind of what are you waiting for on the demand search charge at this point? Um, what options do your customers like and how should we think about trading shifts in demand compared to the other, you've just talked about? I think last year it was kind of on the Asia-US trade link. So, any thoughts on that would be super helpful. And then, uh, just needed to fit for growth target. Um, I think those you've talked about, the cost savings of over a billion run rate by the end of 2026. So, you talked about kind of the impact this year. How do we think about it next year, both in terms of the cost of change as well as the benefits aside? Thank you.
But with regard to fit for growth, yes. Indeed, the intention is to get to a contribution of <unk>.
1 billion by the end of 2006 that remains unchanged.
And we do expect that the cost of change part is going to fall more into the current year then into next year that is why we said at the beginning that all of the impact is probably just going to be a small net positive for 25 looking at the progress of the sea, including also progress.
Mhm. Yeah, thank you. Um, so, um, the demands are charged. Um, you're right. Last year we announced that at the beginning of August, um, and um, we then already, uh, informed, our customers about the details, it went into effect, um, 50, um, of September. Um, so I think the answer to it too early last year, a because it was the first time we ever did it.
Measures, which do not require cost of change.
There will be a positive contribution.
Falling into then the overall cost reduction progress, which you can see in our numbers.
And that is of course in the current environment also needed.
To deliver on our overall target for the year.
We worked good for you.
Thank you.
Thank you Michael wants to give it another try.
Our next question comes from Mark going to meet with Barclays marker. Please on mute your line using the black bar at the bottom of using screen and ask your question.
Hi, Good morning can you hear me now.
Yes, we can good morning.
Oh amazing Thank you I apologize for that I've.
I've got a couple of questions. So.
Um, so now it's more, um, hey, this is what we have to do in the next season. Um, that's one of the reasons why we haven't communicated um, the details with the customer yet. Um, the second thing is, of course, that um, it is a very volatile environment out there and the intention of the demand surge is optimal balance. Um, a lot of production on the supply side with anticipated demand. Um, and here, uh, we, um, take some time to work through the details so that we really get it right, including right, um, a demand for a charge per trade lane. There, again, as you said, um, obviously the situation is quite different, um, on the trans-Pacific compared to what it was last year with regard to fit for those. Um, yes. And the intention is to get to a contribution of um, a billion by the end of um, 2026. Um, that remains unchanged. Um, and we do expect that, um, the cost of chain part is going to fall more.
The first question is on your express volumes, where we're seeing you can see volumes down 20%.
No I mean.
We aggregate the volume declines in 2022 E Commerce volumes and express are down 40%.
Yes, just wondering if we'll give a bit more color of what's happening there.
90% this quarter is a very big number more than Q1 in the previous quarters.
And then.
The second question is if you call out any comment about the change in leadership in the freight forwarding.
Into the current year than into next year. That is why we said at the beginning that all the impact is probably just to be, um, small negative for 2025. Looking at um, the progress we see including also progressed from measures, which do not require a change, um, there will be a positive, uh, contribution, um, falling into then the overall cost reduction progress. You can see our numbers and that is, of course, in the current environment, although needed, um, to um, deliver on our overall.
For you.
Business.
Clearly Oscar.
Got an amazing job in supply chain.
Why do you think that the knowhow and the skill sets from supply chain is a good fit.
It also into the freight forwarding division. Thank you.
Yeah. Thank you Michael so on the express volumes, yes, indeed, the minus 20% and B to C meetings and to overall TDI volume decline of 10% in Q2.
Thank you. Thank you with another tribe. Please, Marco, please mute your line using the black bar at the bottom of your screen and ask.
Is a higher number than what we had in previous quarters and he is he do see the impact of the de Minimis Abolishment of war, China, Hong Kong to the U S. That is also what our competitors have talked about that clearly after may 2nd as it has been.
Hi, good morning. Oh, thank you for that. I've got a couple of questions. So, um,
A significant decline on the trends specific.
I think for us the impact of that has been a bit different to competition. Because we had already beforehand started managing down those volumes because for us they've earned the most profitable volumes.
So philosophy see a combination of kind of like a de minimus impact and regular.
<unk> management.
And with regard to the change in D. G. F leadership, yeah. So indeed, Tim who is turning 60 are this month.
First question is on your address. Now I'm, uh, if we aggregate the room, the client doesn't need 22. E-commerce volumes in a crash around 40%. Just wondering if there will be more of what's happening there. 20% of the orders are more than, and then, um, the second question is, uh, if you could add any comment about the change in leadership in the 3 or 4 business. Um, clearly, um, Oscar is amazing in supply chain, but why do you think they know how and feel that from the blockchain is a good fit also to the rewarding position. Thank you.
<unk> has decided to go into retirement.
And Oscar is taking over our global forwarding freight so first on the supply chain side we.
We have Henri Bendel, succeeding Oscar.
Who has done an amazing job.
Apply chain division for 15 years.
Good results and progress.
The EMEA region over the last years, because we really have a strong.
Bench.
And we're able to easily refill that position after taking over global forwarding and in first of all when you look at Orca C. V. He actually started with net loss. So there is a bit of holding a history in all.
You need the minus 20% in B2C, um, leading then to an overall volume decline of, um, 10% in Q2. Um, is a number. Um, then what had, um, in previous quarters, and here we do see the impact of the minimums abolishment for China Hong Kong, uh, to us. Um, that is also what a competitors have talked about that clearly, um, after May 2nd, um, there has been a significant decline on the trans civic.
Cuz yellow blood.
But the answer is always assembly.
Fantastic manager and leader.
And together with the.
Strong human D. J F. F of he felt that he is the right one to now take on the GFS to the next level.
I think for us the impact of that has been a different, um, competition. Um, because we already beforehand started managing down those volumes because they were the most profitable volumes, a combination of like the minimums impact, um, and regular um, use management.
Okay.
Thank you.
Oh.
Our next question will come from Alexander <unk> with Bernstein Alexander Please Amit your line and ask your question.
Good morning, the only two for me. Please first of all in one reporting. So you reported your lowest conversion margin for the transition to cargo wise, how do you plan to get this totally is up towards the 35% target is that yield is up between volumes you got further cost reduction.
Second question on supply chain. Please so the top line will be flat at constant FX.
Traditionally you're stuck with.
But at least mid single digit topline growth and when it begins to get back to those sorts of levels. Thank you.
Um, if we are to the change in dgf leadership. Yes. So, indeed Tim, uh, who is planning 60 this month? Um, has decided, um, to go into. Um, and um, Oscar is taking over Google forwarding great on supply side. Um and we enter the seating Oscar um, uh, who has done an amazing job. Um, in the supply chain division for 15 years, um, this very good results and brokers in the year region over the last years. Um, but we really strong, um, uh, bench, um, and able to easily refill that position, Oscar taking over global forwarding. I mean, first of all, when you look at Oscar C, he actually started with net Lloyd. Um, so there is a forwarding history, um, in um, Oscars.
Yes. Thank you for the two questions and so on the did you F. F. A conversion, yes, clearly that is not at the level, where we wanted to be in Q2 was the overall in terms of financial performance not our strongest quarter.
Yellow blood. Um but has also simply a a fantastic manager and leader. Um and together with um a strong uh team in dgfs, we felt that he's the right 1 to now take um the GFF to the next level.
I think we can also see that generally the market.
Okay.
But obviously, we also have some internal homework to do we made progress on the freight side.
Thank you.
Looks already better than in Q1, but we booked a cause of change in trade. We also booked some cost of change and DTF them.
Any questions will come from Alexander Irving with Beny. Alexander, please be on the line. Ask your question.
Both of them are also impacting the conversion rate what do we have to do to move that into the right direction again I think it's a combination of the two factors you already pointed out it is the yields on working on the GP side.
Good morning to me, please. First of all, in forwarding, so you reported your low-motion margin since before the transition to CargoWise. How do you plan to get this from where it currently is up towards the 35% target?
That yield is that.
Volume.
We also see some of the targeted growth initiatives are gaining traction.
Of course continued focus on cost and efficiencies.
The fit for growth component auto are playing a role in DTF F.
Reduction. So if you have a commercial on supply chain to the top line, broadly flat at concrete FX, should this not be at least a single-digit top line growth? And when are we going to get back to those sorts of levels? Thank you.
On the supply chain growth yeah. So that's a very interesting question because supply chain is in terms of speed of adjusting to a slow down on the acceleration in the global.
Economy.
Slowest of our divisions, Oh, you may recall, a while ago, we had the slides of which division is the most macro.
And which divisions react the fastest that global forwarding, which one is more on the snow side that supply chain. So what we are now seeing in supply chain is also yeah that things are not super dynamic in the global economy.
You can see that in the throughput volume in our warehouses in some of all.
All our customers.
And that is temporarily slowing down is the topline growth and supply chain.
Over the medium to long term, we still see a fantastic growth opportunities for the division.
So I would say that we are now going through the.
The supply chain cyclical adjustment.
What is happening in the vote around us.
Alright, thank you.
Thank you.
Our next question comes from Patrick <unk> with Goldman Sachs. Patrick Please on mute your line and ask your question.
To clarify.
Yes, yes, now we can hear you.
Again please.
Right.
Just two clarification piece on express so one just on the 200 million in worst case scenario is de Minimis.
Whether you think thats.
If it happens.
The downhole diorite lots of volume and revenue for you or whether it takes into account.
Direct potentially indirect effects on.
The softer market, therefore, aloha, Acs revenues and that kind of thing.
Tim.
And then secondly on the surcharges.
And you're preparing for September I mean can you roughly give us a sense of the level of exits last year should we think about it is not just never being your best case.
And then if the peak season surcharge was down year on year with your current.
Patients at a lower cost base offset snap in the fourth quarter basically.
Yeah. Thank you. So let me start with the second question because I think you basically answered it yourself. So SVR given that this is offset of raw on the cost development in the current environment, we probably assume that we will have.
A lower cost base, and hence need a lower cost offset.
So.
And that would cause he leads.
To a lower income from the demand surcharge, but you would see the compensation on the cost side.
And that is all factored into our guidance and again the reason why they're not announcing the details yet is that it is obviously a quite dynamic environment out there in terms of changes not in Pennsylvania, and dynamic and so we really want to get it right.
And taking the time to really per trade lane and find the right balance.
On the de minimus worst cases, so I mean again, we run a holistic model for these different scenarios and you can spend all day at the moment doing scenarios, but so in this worst worst case scenario and the biggest impact actually comes from the assumed reduction in volume.
Yeah.
Alright.
Our next question comes from James <unk>.
With BNP Paribas James Please on mute your line and ask your question.
Alright. Thank you very much couple from me. Please just wondering on the I mean previously you said the minimus from China to U S is pretty small.
For you guys I don't know exactly.
That was roughly in line I was wondering if you could maybe help us with the math on the BTC shipments down 20% year on year.
Tim.
Jim on the Mitchell on that channel.
And then thanks very much.
$200 million guide on your very diligent of you on the worst case scenario de minimus. So wondering if you could take us behind the scenes and maybe quantify your worst case scenario.
On some of the tariff news, we've been having recently from from Donald Trump Thanks very much.
Okay.
Second question is if it's impossible to answer because there is so much news flow right. So I mean, when you just look at the.
The EU U S.
They feel they are I think as we all know the details are still to be worked out.
So I think I'm on the positive side, you can say that there is some types of time of type of clarity coming up I'm talking to customers that is also something they do appreciate very much.
But obviously it will lead to a significantly higher.
Tariff than what was there before and that should have some impact on.
Trans Atlantic volumes from Europe into the U S. There could be some upside specifically on certain sectors are from the U S into Europe. So I think that we would like with so many topics now really have to work through the details and really see also of how this is implemented in detail.
Because for us being the ones who are doing the customs clearance on the Devil is really in the detail.
There are still a lot of question marks around.
Our recent announcements.
With regard to de minimus B to C M minus 20%.
So the minus 20% in PTC volume in express in the second quarter is impacted by the de minimus abolishment of China, Hong Kong towards the U S. So we clearly have seen in May June and acceleration of significant deceleration in the decline in <unk>.
Williams on the trade Lane, what I had alluded to beforehand was that we had already.
Quite a lot of action on the pricing side before that so you had already seen declining volumes before but obviously there has been a significant impact and that is also visible in the minus 20%.
To see volume declined in Q2 overall.
Okay. Thank you.
Thanks James.
Our next question comes from Paresh Jain with HSBC.
Cash paid media audience and ask your question.
Yeah, hi, thank.
For taking my questions I have two and if you can talk about.
Any qualitative color on how has been the start of third quarter, especially Amit.
<unk> off scenario.
And secondly to if you can talk about some of the tools that express business have.
Yeah.
To deal with the extreme volatility in freight volume I mean, how easy or difficult it will be to take the take the cost out and will it come in the form of return of Aircastle will it come from.
Get rid of some of your older fleet.
Any color on that would be helpful. Thank you.
Yeah. Thank you two questions maybe on the first one start of Q3, I really think I said before the best description for me is it's more of the same.
So we don't see a significant change in volume dynamic and you see a continuation of this very pronounced volatility.
<unk>, which of course makes planning and network businesses like ours.
Quite demanding and against that background I'm, even more pleased with the ultimate results for Q2.
So <unk> in the third quarter. These days firmly focused on constantly adjusting the network to the new volume development and driving forward.
Our cost measures.
With regard to what tools do we have an express to.
It reflects on the aviation side I think what we're now seeing for example in the 7% capacity reduction in Q2 is the benefit of our aviation set up there. We have this very good combination of owned aircraft with long term leases medium term leases.
Short term leases.
Which allows us to really flex the capacity and that in combination with a lot of regional rejigging. So moving aircraft from the less busy routes to the busy hour routes.
That is what we have successfully used in Q2, taking us to the 7%.
<unk> adjustment and that is also the opportunity we have going forward and I think also very importantly, when volumes come back that will allow us also to flex back up.
And then maybe one quick question, if I can add up now that.
The DB Schenker Christian has been completed are there any early signs of movement. Among the key customers are you seeing any pockets where their vehicles freight forwarding business can grab some market share.
So if you think that the opportunity is out there, but I think in the current environment, we do see in our customer portfolio, but also in the customer portfolio of competitors a higher reluctance to change. So many tenants are being pushed out which would be natural opportunities to switch.
Because customers are delaying decisions so.
Do think that there are opportunities I'm coming.
From the merger.
But we see an impact on the speed from the current environment.
Thank you and have a good day.
Thank you you too.
Our next question comes from Steve <unk> with Morgan Stanley.
Please on your audience and ask your question.
Thanks, Hi, Melanie I just had a follow up question on niche points around de minimus.
So my understanding.
Was that de Minimis was arent quite a small part of watch the express business was doing.
And I understand the 200 million that you've given is for the group overall in terms of risks in the second half.
But I would expect that a lot of that would be in that express division, particularly because you talk about b to C volumes being down 20%.
And that being a lot linked to sort of China de minimis. So if I look at that $200 million and I say that that's only for four months of the year it.
It actually works out to be quite a large percentage of your express profitability.
So I just like to understand your comments around de minimus not being so big for your group, but then those numbers actually implying that it's quite large.
And then just on margins in B to C and B to B my understanding as well has been in the past that you haven't necessarily seen a meaningful difference in profitability between those two product groups.
But <unk> volumes were down a lot more <unk> and I know that your cost initiatives in place et cetera, but the margin was actually really strong.
Can you just talk about sort of b to B and B to C and if we really do need to think about different levels of profitability for those two product categories, because thats got implications for how we think about the potential margin recovery and.
When each of the volumes come back thank you.
Yes. Thank you she does though on the first question I mean, there is obviously quite a lot of dynamic now on the whole we de minimus and.
As I said before of as the new tax law, which was just pasta.
In the early days of July everybody assumed that it wouldn't all be in place until July 27.
Fly 30th there's an announcement that it will now be gone completely by August 29th.
And of course, all of these changes take some time to really settle in and that is why you also see a bigger impact at the beginning than in a steady state. So I mean customers are of course working on solutions and yes that is my I don't think you can extrapolate from a worst case 20 <unk>.
Five number for what that means going forward.
In terms of and just to be correct and so the number of which we have given is kind of like a worst case number for the group overall.
But obviously the biggest impact would be in express <unk>.
With regards to the margin question B to B to C and what can you kind of like derived from the Q2 numbers I think the important element in here is that the trans Pacific Trade Lane in terms of profitability is very different different for us and also different between us and competition for <unk>.
Competition that has obviously been one of the most important and most profitable trade lanes for us due to our distant third position in the U S. The economics have been very different and that is also fly for more than a year you have no talked about pricing out a b to C volume on the Trans Pacific because we <unk>.
Didn't see the best margin contribution from that business and that is the reason why this b to C volume decline in Q2 looks.
It looks as if they're losing PTC volume versus profitability.
Overall for the network and that is something we have been obsessed about ever since the beginning of B to C. B do make sure that there is also good.
Profitability and margin contribution from B to C to the express network.
Okay and can I just have one follow up please just on this de minimus topic. So it's such a worst case scenario of a 200 million euro cost from the end of August this year.
How do we think about what the cost the incremental cost would be 426 in a worst case scenario or.
Do we just double that 200 million or do we need to think about the.
The seasonal cost being very much weighted into.
Last quarter of the air and so actually the incremental cost into 26 would be modulation, maybe another $100 million painful or something like that.
So I mean there are.
So many moving parts at the moment, we have not tried to kind of like gives you a feeling for the overall impact I'm not on cost, but kind of like the overall EBIT impact.
The absolute worst case floor 25 of course, if that scenario, which again, we do not think is the likely scenario should materialize. We would take further cost actions, we would take of of important make further adjustments so that extrapolation to 'twenty six on that basis as well.
Really I'm not possible. We will then have to reassess how we set up.
Operations of 496.
Just to give you a bit of a sensitivity for a worst case in relation to our 25 guidance.
Okay. Thanks, so much I appreciate the help.
You.
Our next question comes from Christian <unk> with UBS Christian Please on mute your line and ask your question.
So it's down a few things.
<unk> working.
Yeah.
We can't hear you.
Christian you made Amit your line by using <unk>.
Yeah.
Okay.
Our next question comes from Mark <unk> with cabinets you refer.
These Amit your line and ask your question.
Good morning can you hear me.
Yes, he can morning.
Great.
Just a small clarification.
Regarding de Minimis.
In relation to the.
Demand for trucks.
Worse case 200 medium.
Already assume that in that case you wouldn't.
You wouldn't do a demonstrable trucks for the fourth quarter.
Sure.
Is that kind of worst worst case scenario possible like the minus 200 from a de minimus impact on that.
Due to lower volume and as such you wouldn't win amongst the trucking extra. Thank you go ahead.
I mean in in this world of scenario modeling.
Driving.
<unk> holistic scenarios.
And.
That is why we are trying to factor in all elements for that is really the all inclusive growth case known Bob you would see.
Thank you.
Our next question comes from the line of Christian <unk> with UBS Christian. Please you start six on your handset on mute.
Can you hear me.
Yes, they can morning.
Apologies part of it. Thank you very much for taking my question, maybe a couple left.
Dr. Conceptual one I think your your revenue was in the quarter, excluding FX were down 1% or something like that year over year.
Youre seeing more of the same going forward.
On the structural cost dropping from three four growth is not really meaningful meaningfully offsetting the revenue drop.
It does seem to me that it is your cyclical cost cutting is actually helping you have a resilient that'd be.
For the next couple of quarters at least.
My question is.
When when volumes start to recover as you've heard to assume that the.
Operating leverage benefit.
It will be less pronounced than historically, because you'll have a lot of the cyclical costs.
You have to reactivate maybe.
Maybe just quick conceptual directional question about the mid term.
The second one.
Our next breath.
Historically the Q3.
It's weaker due to seasonality versus Q2, and I think last year was the exception because you started doing in a more meaningful way capacity reductions.
Dressing the cost.
I was just wondering how if you can help us a bit how should we think.
Although the seasonal development this year.
You can expect in Q3.
I'll probably leave it there thank.
Thank you very much.
Yeah. Thank you. So I think first of all on the operating leverage I mean, what we are seeing at the moment on the cost side is a combination of the.
Cyclical capacity adjustments to the volume and the increasing benefits of our fit for growth and yes. When volumes come back. We will also increase over time capacity again.
What we have traditionally seen is that this is quite a sweet spot period, where volume then tend to come back quicker than we add capacity I'm, giving us good operating leverage.
And that is also what I would assume for whenever volume comes back on.
Going forward.
And on the seasonality.
Seasonality, Yes, Q3, as you rightly pointed out is not.
Not our strongest quarter for express and that is.
Now for the second half of 'twenty five.
Thank you very much.
No.
Our last question will come from Arthur <unk> with 60.
Please on mute your line and ask your question.
Okay.
Yes, good morning, Ken.
Good morning, Thank you very much.
There was a couple for me so just looking at the cash flow statement you had.
What looks like a profit on disposal of non core assets around $17 million just wanted to confirm.
If that were stripped out for normalized profits or knowledge.
So within that I can see the provision movement is negative from a cash flow perspective.
Wondered if.
If there was anything in the P&L for that.
Moving to the fundamentals of the business.
Obviously.
The volume trends.
<unk> been talking for some time.
Things are you sort of tracking to give yourselves and I like the one that volume rebound finally type place. Thank you.
Yes, so on the cash flow statement I have to see whether I got your question correctly. So we had I think of $95 million and changes in provisions.
And yeah. So I mean for example, some of the cost of change are which are the booked as provisions of Wassa.
<unk>.
And coming off that.
He quickly.
So <unk> had some.
Provisions, which we've been saying for the cost of change and so I will say this is more of the usual stuff I mean lost.
Q2.
So I'm still looking at the Q1, sorry apologies.
Mm Hmm, yeah. So changes in provisions was minus minus 50 in Q2 minus <unk> 95 in Q1 until I mean, do you have a lot of unusual stuff going through their own personnel provisions and.
I don't have anything I would point out here as extraordinary I think overall really the cash flow.
Art from the M&A line of the 253.
In net cash from acquisitions divestments.
It's really very unspectacular uneventful nothing.
Nothing to be seen there.
And the second question.
This was the second question that you had.
Yes.
What are you sort of walk through the volume.
Hey.
How are you looking forward to giving you Roger when things are going to come back.
Yeah. So I mean do you have a lot of daily volume track Us I'm and I'm as I said before it has been super volatile.
Also from week to week, but just something which I haven't seen any of that magnitude before so.
It's.
Very hard to see any types of pet on them at this point in time.
But of course, we are looking at yeah.
Daily volumes and express daily volumes.
The parcel networks Hum.
Or what do you see it in.
The supply chain.
Warehouses.
And as I said before when we now look at what we see in the beginning of the third quarter. It's more of the same another fundamental change in patterns.
Thank you very much.
Thank you.
This concludes the Q&A session I will now hand back to management for closing remarks.
Thanks, Abigail thanks to everyone out there for a very focused Q&A session. So thanks for that IR team is looking forward to discussing any other topics further with you over the next couple of weeks unless you prefer to go on you and your vacation and let me tell.
Turn it back to <unk> for your closing remarks, yes. Thank you very much also from my side for your interest for the good questions and the discussion yeah. If I wrap it up obviously, we saw some impact off the volatilities in the world around us on our Q2 numbers.
But for me the important message is that.
Focusing on the cost side doing both the regular cyclical capacity adjustments and pushing forward with our fit for growth agenda, but at the same time, we keep investing into growth opportunities and they are still out there do you really have to hunt for them.
We are confident that with this combination of strict cost focus and looking for growth opportunities in the current environment.
Deliver growth also going forward. Thank you very much and was that also from my side have a good summer and to those of you also going on vacation and have a nice summer holiday.
Yeah.
This concludes today's call. Thank.
Thank you everyone for joining you may now disconnect.