DHLGY Q2 2025 Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the DHL Group Conference Call. Please note, this call will be recorded. You can find the privacy notice on dhl.com. [Operator Instructions] I would now like to turn the call over to Martin Ziegenbalg, Head of Investor Relations. Please go ahead.

Martin Ziegenbalg: Thank you, and a warm welcome from my side to our Q2 call to everyone out there. I take it, you have the material that we released this morning in front of you. We see that we can make this a straightforward exercise today with the presentation by Melanie Kreis, our CFO, and afterwards, the Q&A. And with that, over to you, Melanie.

Melanie Kreis: 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. So starting with Page 2. Page 2 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 a strong performance in our Logistics portfolio with an increase in Q2 EBIT and sustained strong cash generation. This outcome shows the effectiveness of our cost actions, both in terms of adjusting capacities to cyclical fluctuations and in implementing structural cost measures under our Fit for Growth program. And 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 3 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. By destination, the U.S. remains the largest destination market. And as expected, this is an 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 as the most diversified global logistics company is to support our customers in keeping their businesses going and in enabling them to continue leveraging the opportunities from the diversification of global trade, also under the current circumstances. So flows have been extremely volatile throughout the second quarter from week to week and across trade lanes. Page 4 summarizes what this means for our Q2 volumes. When we filter out the weekly noise, B2B volumes were eventually slightly lower across modes. However, there was no massive decline nor did we see a fundamental mode shift. E-commerce was a structural trend and continues to drive better momentum in B2C generally, with China, U.S. de minimis being the only market segment where we see a significant impact on trading volumes. Page 5 highlights how we translated these external conditions into a 6% year-over-year increase in Q2 EBIT for our group portfolio. Express has really excelled in cost flexibility and yield 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. As shown at the -- in the line at 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, DGFF and eCommerce. And this is one reason why DGFF has seen lower EBIT conversion in the quarter, with the extreme volatility and overall weaker demand also dampening GP generation and productivity in the sector. Supply Chain continues to demonstrate a resilient performance with EBIT margin at 7%, and that is after adjusting for the positive net M&A one-off we had in the quarter. eCommerce booked EUR 8 million cost of change, so was slightly down year-over-year also excluding these costs, but in line with expectations, reflecting, as you know, continued investments into the structural eCommerce trend. And last but certainly not least, in P&P, we are very pleased to see our targeted cost actions based on structural network changes, providing the necessary benefits to manage the ongoing structural volume shift from mail to parcel, which we saw as expected to continue in the second quarter. The mentioned cost of change and supply chain one-off benefit are summarized in the EBIT bridge on Page 6, with positive and negative nonrecurring effects roughly balancing out for a positive EUR 4 million net effect in the quarter. The positive one-offs relate to M&A with a small disposal in corporate functions and the larger EUR 54 million net positive M&A effect in supply chain. There's a positive contribution comes from the first-time full consolidation of our ASMO joint venture in Saudi Arabia. We also had a positive free cash flow effect of roughly EUR 100 million in net cash from M&A from ASMO in this quarter. Now it gets technical. This will reverse out, becoming cash flow neutral eventually with no impact on our overall free cash flow generation. However, the current accounting assumption is that the outflow will go through different lines in the cash flow statement, and that technically will lead to a net negative impact of EUR 100 million on the free cash flow, excluding M&A view. We will flag that transparently as it unfolds in the remainder of the year. The cost of change of EUR 58 million relate to structural cost measures in the 3 divisions mentioned. But what is important to understand is that not all Fit for Growth measures 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 benefits clearly supporting our EBIT performance, I would say, even better than initially expected, particularly in Express and P&P. On Page 7, 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 see really positive, i.e., declines in all categories, which is a combination of efficient capacity management and structural changes on our Fit for Growth program. Next to the strong yield management, these cost measures are the primary driver of the increase in Express Q2 EBIT, despite the year-over-year volume decline. As we mentioned on Page 8, 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 furthermore flexed capacity across the network to adapt to the volatile regional trade flows. As such, you see on the left side of the page the expected strongest 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. At the same time, the positive year-over-year developments in APAC and Middle East, Africa are noteworthy. Though 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 are still growth opportunities and growing trade lanes also in the current environment. Looking ahead, we expect this volatility to continue, and we also expect a usual seasonal uplift for the peak season. And for that reason, we are currently preparing the demand surcharge 2025 with 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 how we cope with it. There is clearly still a lot of uncertainty and volatility, but based on what we know and see at the moment, we are reiterating our guidance today. We maintain a qualification around changes in tariffs on Page 9, where we continue to monitor an escalation in tariffs and trade conflict not covered in our current assumptions. And one of the topics which we are watching here is the de minimis exemption for shipments from rest of world into the U.S. There have been several iterations on that topic in recent months. For example, the discontinuation of the de minimis exemption earlier in the year for 4 days after which it was reinstated. Then as you all know, we had, at beginning of May, the abolishment of de minimis from China, Hong Kong into the U.S. And now there was a new executive order issued on July 30, which brings the time line for the rest of world phaseout forward to August 29 compared to a phaseout in '27, which was foreseen in the tax bill passed just 1 month ago, so obviously also quite a dynamic environment with regard to de minimis. We will have to see whether the latest executive order from last Wednesday will be implemented as announced and, if yes, what substitution effects will occur. In a worst-case scenario, we would see a maximum risk of up to EUR 200 million on our full year '25 EBIT. We decided not to include this risk 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. Turning back to a more straightforward topic. I'm particularly pleased to conclude my review with the cash flow perspective on Page 10. We see continued strong cash generation, allowing us to invest in a balanced manner across all priorities of our finance strategy. While we remain in strong CapEx control mode given current volume developments, we also continue to invest in targeted opportunities that will drive our midterm growth path, focusing on the growth topics identified by Strategy 2030. We have spent EUR 3 billion 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 find the full list of announced acquisitions on Page 11, and you see the clear focus on the strategic topics of life science and health care, geographic tailwinds and e-commerce as well as the confirmation on the right that we pursue M&A, not for sheer size or volume, but as a complementary option to enhance our capabilities and market fleet. But to be clear, organic investment remains the primary driver of our midterm growth plans. On Page 12, we showcase some examples of our ongoing targeted investments into organic growth opportunities, driven by the midterm structural growth topics laid out in our Strategy 2030. To wrap it up, on Page 13, the key takeaways from our Q2 performance and current management priorities are, not surprisingly, we are effectively managing short-term volatility through cost and yield actions. And at the same time, we continue 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, 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 now look forward to hearing your questions. Over to you.

Operator: [Operator Instructions] Our first question comes from Andy Chu with Deutsche Bank.

Andy Chu: Melanie, Martin, a couple of questions for me, please. In terms of the Fit for Growth benefits, could you just give us an idea of -- and try and quantify those for us. You obviously gave us the cost of change. And then maybe if we could just have a sort of word on sort of current trading. Are you kind of seeing more of the same kind of run rate of growth in the business, sort of 6% at the group level? Is that kind of the run rate that you're seeing year-on-year or maybe a view kind of sequentially versus Q2 as we have started Q3?

Melanie Kreis: Yes. Andy, thank you for the question. So on the Fit for Growth benefits, I mean, obviously, we are tracking that quite closely with internal monitoring. But I think when you then look at the ultimate effects, for me, it's not meaningful to break out a 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, I'm very pleased with the development. We are really ahead of schedule, and you'd see that particularly in Express and P&P, where, yes, 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 third quarter? I think you used the term more of the same, and I think that is probably the best description. We haven't seen a significant acceleration in the growth dynamics, and it remains very volatile. So I think more of the same is a very good summary.

Martin Ziegenbalg: Thanks, Andy. And the next caller should be Alexia.

Operator: Our next question comes from Alexia Dogani with JPMorgan.

Alexia Dogani: Just, Melanie, to go back to the Fit for Growth comments you just made, that the net positive 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, kind of the commensurate net positive impact? And if I can just ask related to that, are there any notable areas of the network that you're currently using money that you can quantify and that you're 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 that 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 EBIT? And does it relate with the capture of the demand surcharge in Express? Just kind of to understand what to look out for to know whether that EUR 200 million negative happens or not.

Melanie Kreis: Yes. Thank you, Alexia. So on the Fit for Growth, yes, 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. For the full year, we're still in line with the overall cost of change numbers, so that shouldn't go any higher. But do expect 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 on the aviation side. But you also see some numbers, what we have done on the PUD side, where we're also pointing out the significant reduction we made in the U.S. to adjust for the lower volume inflow into the U.S. So I think that is really across the network, extremely well managed. Yes, to the de minimis topic, as mentioned, this is obviously one of the most volatile topics of the last months where we have seen quite a bit of back and forth. Early July, there's a new tax bill. It was said that rest of world de minimis would stay in place until summer of '27. Just 4 weeks later, we get an executive order, which foresees the complete abolishment of de minimis rest of world by August 29. There are still many moving parts, for example, the whole question of the postal implementation of the de minimis abolishment, and that is why we now have to really watch and see, will it be implemented the way it was announced, what will be the details, what will that mean for trade flow substitution effects, opportunities, which could also arise from the whole thing. But being a conservative finance person, I, of course, pushed my team for tell me what would be the worst case scenario if this all implemented August 29 and only the negative stuff come through. In this worst case, what number would we talk about, and that would be for '25 up to EUR 200 million. I decided to share that number with you openly because I guess you 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 it into the guidance, but we just wanted to be as transparent as we can possibly be with all the uncertainty.

Alexia Dogani: Melanie, I appreciate that. And can I just check, because what is the number you expect for cost of change for the full year? Is that something you've discussed in the past?

Melanie Kreis: Yes. So we said that it would be kind of like up to EUR 200 million. And I think looking at what we have now booked in Q2, I think we will definitely stay within that number.

Operator: Our next question will come from Marco Limite with Barclays.

Martin Ziegenbalg: Okay. And again, maybe we give Marco a minute and continue with Muneeba.

Operator: Our next question comes from the line of Muneeba Kayani with Bank of America.

Muneeba Kayani: Martin and Melanie, 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. So kind of what are you waiting for on the demand surcharge at this point? What are discussions with your customers like? And how should we think about it across trade lanes, given the big shift 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 helpful. And then just related to Fit for Growth targets, I think those -- you've talked about the cost savings of over EUR 1 billion run rate by the end of 2026. So you've talked about kind of the impact this year. How do we think about it next year, both on kind of the cost of change as well as the benefits side?

Melanie Kreis: Yes. Thank you, Muneeba. So on the demand surcharge, you're right. Last year, we announced at the beginning of August, and we then already informed our customers about the details. It went into effect September 15. So I think we announced it so early last year, a, because it was the first time we ever did it. So now it's more of, a, "Hey, this is what we have to do in the peak season." 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 details, 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 transpacific compared to what it was last year. With regard to Fit for Growth, yes, indeed, the intention is to get to a contribution of EUR 1 billion by the end of '26. That remains unchanged, and we do expect that the cost of change part is going to fall more into the current year than into next year. That is why we said at the beginning that all the impact is probably just going to be a small net positive for '25. Looking at the progress we see, including also progress from 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 targets for the year.

Martin Ziegenbalg: Muneeba, good for you? Maybe Marco wants to give it another try.

Operator: Our next question comes from Marco Limite with Barclays.

Marco Limite: Can you hear me now?

Melanie Kreis: Yes, we can.

Andy Chu: Amazing. I apologize for that. I've got a couple of questions. So the first question is on your Express volumes where we've seen B2C volumes down 20%. Now I mean, if we aggregate the volume decline since 2022, eCommerce volumes in Express are down 40%. Yes, just wondering if you will give a bit more color of what's happening there. 20% this quarter is a very big number, more than Q1 and the previous quarters. And then the second question is if you call out any comment about the changing leadership in the freight and forwarding business. Clearly, Oscar has had -- has done an amazing job in Supply Chain, but why do you think that the know-how and the skill set from Supply Chain is a good fit also into the freight and forwarding division?

Melanie Kreis: Yes. Thank you, Marco. So on the Express volumes, yes, indeed, the minus 20% in B2C, leading then to overall TDI volume decline of 10% in Q2 is a higher number than what we had in previous quarters. And here we do see the impact of the de minimis abolishment for China, Hong Kong to the U.S. That is also what our competitors have talked about that, clearly, after May 2, there has been a significant decline on the transpacific. 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 weren't the most profitable volumes. So for us, we see a combination of kind of like the de minimis impact and regular yield management. With regard to the change in DGF leadership, yes, so indeed, Tim, who is turning 60 this month, has decided to go into retirement, and Oscar is taking over Global Forwarding and Freight. So first on the Supply Chain side, we have Hendrik Venter succeeding Oscar, who has done an amazing job in the Supply Chain division for 15 years. It was very good results and progress in the EMEA region over the last years. So we really have a strong bench, and we're able to easily refill that position. Oscar taking over Global Forwarding, I mean, first of all, when you look at Oscar's CV, he actually started with Nedlloyd. So there is a bit of forwarding history in Oscar's yellow blood. But Oscar is also simply a fantastic manager and leader. And together with a strong team in DGFF, we felt that he's the right one to now take DGFF to the next level.

Operator: Our next question will come from Alexander Irving with Bernstein.

Alexander Irving: Two for me, please. First of all, in freight and forwarding, so you reported your lowest conversion margin since before the transition to CargoWise. How do you plan to get this from where it currently is up towards a 35% target? Is that yield? Is that missing volumes? Is that further cost reduction? Second, maybe a question on Supply Chain, please? So the top line, broadly flat at constant FX. Should this not be a segment with at least mid-single-digit top line growth? And when are we going to get back to those sorts of levels?

Melanie Kreis: Yes. Thank you for the 2 questions. So on the DGFF conversion, yes, clearly, that is not at the level where we want it to be, and Q2 was overall, in terms of financial performance, not the strongest quarter. I think we also see that January. The market is difficult. But obviously, we also have some internal homework to do. We made progress on the freight side, so that looks already better than in Q1, but we booked a cost of change in freight. We also booked some cost of change in DGFF. Those 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 2 factors you already pointed out. It is yield working on the GP side, where we also see, yes, some of the targeted growth initiatives gaining traction and, of course, continued focus on cost and efficiencies with the Fit for Growth component also playing a role in DGFF. On the Supply Chain growth, yes, so that's a very interesting question because Supply Chain is, in terms of speed of adjusting to a slowdown or an acceleration in the global economy, the slowest of our divisions. So you may recall a while ago, we had this slide, which division is the most macro dependent, which division reacts the fastest. That's Global Forwarding. Which one is more on the slow side? That's Supply Chain. So what we are now seeing in Supply Chain is also, yes, that things are not super dynamic in the global economy. You can see that in the throughput volume, in our warehouses, in some of our customers. And that is temporarily slowing down the top line growth in Supply Chain. Over the medium to long term, we still see a fantastic growth opportunities for that division. So I would say that we are now going through the Supply Chain cyclical adjustment to what is happening in the world around us.

Operator: Our next question comes from Patrick Creuset with Goldman Sachs.

Patrick Creuset: To clarify -- yes?

Melanie Kreis: Yes. Now we can hear you.

Martin Ziegenbalg: Now we can hear you. Start again, please?

Patrick Creuset: Just 2 clarifications, please, on Express. So one, just on the EUR 200 million worst-case scenario de minimis, can you just share whether you think that's -- if it happens, that's -- that would be down to a direct loss of volume and revenue for you or whether it takes into account largely the indirect -- potentially indirect effects on softer air freight market, therefore, lower ACS revenues and that kind of thing? And then secondly, on the surcharges, you're preparing for September. I mean, can you roughly give us a sense of the level related to last year? Should we think about it as last year's level being a best case? And then if the peak season surcharge was down year-on- year, is your current expectation that the lower cost base offsets that in the fourth quarter basically?

Melanie Kreis: Yes. Thank you. So let me start with the second question because I think you basically answered it yourself. So yes, we are. Given that this is offset for 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 that would, per se, 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 we are not announcing the details yet is that it is obviously a quite dynamic environment out there in terms of changes, not in terms of volume dynamic. And so we really want to get it right and take the time to really per trade lane find the right balance. On the de minimis worst case, 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, the biggest impact actually comes from the assumed reduction in volume.

Operator: Our next question comes from James Hollins with BNP Paribas.

James Edward Brazier Hollins: A couple for me, please. Just wondering on the -- I mean, previously, you said de minimis from China to U.S. is pretty small for you guys. I don't know the exact quote, but that was roughly in line. I was wondering if you could maybe help us with the math on the B2C shipments down 20% year-on-year, what that might have been ex de minimis on that channel lane. And then, Melanie, thanks very much for the EUR 200 million guide on your very diligent view on the worst-case scenario on de minimis. I was 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 Donald Trump.

Melanie Kreis: Okay. I think the second question is a bit impossible to answer because there is so much news flow, right? So I mean, when you just look at the EU, U.S. trade deal, where, I think as we all know, the details are still to be worked out. So I think on the positive side, you can say that there is some types of time -- type of clarity coming up. 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 transatlantic volumes from Europe into the U.S. There could be some upside, specifically on certain sectors from the U.S. into Europe. So I think we have -- would like, with so many topics, now really have to work through the details and really see also how this is then implemented in detail because, for us, being the ones who are doing the customs clearance, the devil is really in the detail. And there are still a lot of question marks around the recent announcements. With regard to de minimis B2C minus 20%, so the minus 20% in B2C volume in Express in the second quarter is impacted by the de minimis abolishment China, Hong Kong to the U.S. So we clearly have seen in May, June an acceleration -- a significant acceleration in the decline in volumes on that trade lane. What I had alluded to beforehand was that we had already done quite a lot of action on the pricing side before that. So we had already seen declining volumes before. But obviously, there has been a significant impact, and that is also visible in the minus 20% B2C volume decline in Q2 overall.

Martin Ziegenbalg: Thanks, James.

Operator: Our next question comes from Parash Jain with HSBC.

Parash Jain: I have 2, and if Melanie can talk about any qualitative color on how has been the start of third quarter, especially amidst tariff on, tariff off scenario. And secondly, if you can talk about some of the tools that Express business have to deal with the extreme volatility in freight volume. I mean, how easy or difficult it will be to take the cost out? And will it come in the form of return of aircraft? Or will it come from -- get rid of some of your older fleet? Any color on that will be helpful.

Melanie Kreis: Yes. Thank you for the 2 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 we see a continuation of this very pronounced volatility, which, of course, makes planning and network businesses like ours quite demanding. And against that background, I'm even more pleased with the ultimate result for Q2. So also now in the third quarter, we stay extremely 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 on Express, to flex on the aviation side, yes, I think what we are now seeing, for example, in the 7% capacity reduction in Q2 is the benefit of our aviation setup where we have this very good combination of own aircraft to 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 busier routes, that is what we have successfully used in Q2, taking us to the 7% capacity 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.

Parash Jain: Lovely. And maybe one quick question, if I can add up. Now that the DB Schenker acquisition has been completed, are there any early signs of movement among the key customers? Are you seeing any pockets where DHL's Freight and Forwarding business can grab some market share?

Melanie Kreis: So we 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 tenders are being pushed out, which would be natural opportunities to switch because customers are delaying decisions. So we do think that there are opportunities coming from the merger, but we see an impact on the speed from the current environment.

Operator: Our next question comes from Cedar Ekblom with Morgan Stanley.

Cedar Ekblom: Melanie, I just had a follow-up question on these points around de minimis. So my understanding was that de minimis was all quite a small part of what the Express business was doing. And I understand the EUR 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 B2C volumes being down 20%, and that being a lot linked to sort of China de minimis. So if I look at that EUR 200 million, and I say that, that's only for 4 months of the year, it actually works out to be quite a large percentage of your Express profitability. So I'd just like to understand your comments around de minimis not being so big for your group, but then those numbers actually implying that it's quite large. And then just on margins in B2C and B2B. My understanding as well has been in the past that you haven't necessarily seen a meaningful difference in profitability between those 2 product groups. But B2C volumes were down a lot more than B2B, and I know that you've put cost initiatives in place, et cetera, but the margin was actually really strong. So can you just talk about sort of B2B and B2C and if we really do need to think about different levels of profitability for those 2 product categories? Because that's got implications for how we think about the potential margin recovery when B2B volumes come back.

Melanie Kreis: Yes. Thank you, Cedar. So on the first question, I mean, there is obviously quite a lot of dynamic now on the whole de minimis. And as I said before, with the new tax law, which was just passed in the early days of July, everybody assumed that it would now be in place until July 27. On July 30, there is an announcement that it will now be gone completely by August 29. And of course, all 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 why I don't think you can extrapolate from a worst case '25 number for what that means going forward. In terms of -- and just to be correct, so the number 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. With regards to the margin question, B2B, B2C and what can you kind of like derive from the Q2 numbers, I think the important element in here is that the transpacific trade lane in terms of profitability is very different, different for us and also different between us and competition. For 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 why for more than a year, we have now talked about pricing out B2C volume on the transpacific because we didn't see the best margin contribution from that business, and that is the reason why this B2C volume decline in Q2 looks as if we are losing B2C volume with a poor profitability. Overall, for the network, and that is something we have been obsessed about ever since the beginning of B2C. We do make sure that there is also a good profitability and margin contribution from B2C to the Express network.

Cedar Ekblom: Okay. And can I just have one follow-up, please, just on this de minimis topic? So if it's a worst-case scenario of a EUR 200 million cost from the end of August this year, how do we think about what the cost -- the incremental cost would be for '26 in a worst-case scenario? Do we just double that EUR 200 million? Or do we need to think about the seasonal cost being very much weighted into the last quarter of the year? And so actually, the incremental cost into '26 would be much less, maybe another EUR 100 million incremental or something like that.

Melanie Kreis: So I mean, there are so many moving parts at the moment. We have now tried to kind of like give you a feeling for the overall impact, not on cost, but kind of like the overall EBIT impact in an absolute worst case for '25. Of course, if that scenario, which, again, we do not think is a likely scenario, should materialize, we would take further cost actions. We would take -- we wouldn't make further adjustments, so that extrapolation to '26 on that basis is really not possible. We will then have to reassess how we set up the whole operations for '26. That was just to give you a bit of a sensitivity for a worst case in relation to our '25 guidance.

Operator: Our next question comes from Cristian Nedelcu with UBS.

Melanie Kreis: Cristian? We can't hear you.

Operator: Our next question comes from Marc Zeck with Kepler Cheuvreux.

Marc Zeck: Can you hear me?

Melanie Kreis: Yes, we can.

Marc Zeck: That's great. Just a small clarification regarding de minimis and, in relation to that, the demand surcharge. With that worst case EUR 200 million already assumed that in that case you wouldn't kind of -- you wouldn't do a demand surcharge for the fourth quarter. Or is that kind of a worst-case scenario possible, like the minus EUR 200 million from the de minimis impact and that then due to lower volume as such, you wouldn't do a demand surcharge and that's extra?

Melanie Kreis: So we -- I mean, in this world of scenario modeling, we do try to come to holistic scenarios. That is why we are trying to then factor in all elements. So that is really the all-inclusive worst case number we would see.

Operator: Our next question comes from the line of Cristian Nedelcu with UBS.

Cristian Nedelcu: Can you hear me?

Melanie Kreis: Yes, we can.

Cristian Nedelcu: Apologies earlier. Just maybe a couple left. Just a conceptual one. I think your revenues in the quarter, excluding FX, were down 1% or something like that year-over-year. You're seeing more of the same going forward. The structural cost cutting from Fit for Growth is not really meaningful -- meaningfully offsetting that revenue drop. Or it does seem to me that it is your cyclical cost cutting that is actually helping you have a resilient EBIT for the next couple of quarters, at least. So my question is when volumes start to recover, is it fair to assume that the operating leverage benefit to the EBIT will be less pronounced than historically because you'll have a lot of the cyclical cost that you have to reactivate? So that's maybe just a conceptual directional question about the midterm. The second one on Express. Historically, the Q3 EBIT is 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. And you've been addressing the cost. I was just wondering how -- if you can help us a bit how should we think at the seasonal development this year in Express in Q3. I'll probably leave it there.

Melanie Kreis: Yes. 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 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 volumes then tend to come back quicker than we add capacity, giving us good operating leverage. And that is also what I would assume for whenever volume comes back going forward. And on the seasonality, yes, Q3, as you rightly point out, is not the strongest quarter for Express, and that is also what we expect now for the second half of '25.

Operator: Our last question will come from Arthur Truslove with Citi.

Arthur David Truslove: Can you hear me okay?

Melanie Kreis: Yes, we can.

Arthur David Truslove: There was a couple for me. So just looking at the cash flow statement, you had what looks like a profit on disposal of noncurrent assets of around EUR 17 million. Just wanted to confirm if that was stripped out from normalized profits or not. And then also within there, I can see that the provision movement is negative from a cash flow perspective. But I just wondered if there was anything in the P&L for that. And then moving sort of to the fundamentals of the business. Obviously, the volume trends in Express have been soggy for some time. What things are you sort of tracking to give yourselves an idea of when that volume rebound might finally take place?

Melanie Kreis: Yes. So on the cash flow statement, I have to see whether I got your questions correctly. So we had, I think, EUR 95 million in changes in provisions. And yes, so I mean, for example, some of the cost of change, which we booked as provisions was coming up very quickly, yes. So we had some provisions, which we will be looking for the cost of change. And -- so I would say this is more of the usual stuff. I mean, last Q2 -- sorry, I'm still looking at Q1. Sorry, apologies. Yes. So changes in provision was minus EUR 50 million in Q2, minus EUR 95 million in Q1. So I mean, we have a lot of usual stuff going through there, personnel, provisions, and I don't have anything I would point out here as extraordinary. I think, overall, really, the cash flow in Q2, apart from the M&A line, the EUR 253 million in net cash from acquisitions, divestments is really very unspectacular, uneventful. Nothing to be seen there. And the second question on...

Martin Ziegenbalg: Arthur, remind us of the second question that you had.

Arthur David Truslove: Yes. So it was -- what are you sort of watching for, for the volume -- yes, what things are you looking for to give you the idea of when things are going to come back?

Melanie Kreis: Yes. So I mean, we have our daily volume trackers. And as I said before, it has been super volatile also from week to week, which is something which I haven't seen in that magnitude before. So it's, yes, very hard to see any types of patterns at this point in time. But of course, we are looking at, yes, daily volumes in Express, daily volumes in the parcel networks, turnover we see 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 and not a fundamental change in patterns.

Operator: This concludes the Q&A session. I will now hand back to management for closing remarks.

Martin Ziegenbalg: Thanks, Abigail. Thanks to everyone out there for a very focused Q&A session. So thanks for that. The 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 your annual vacation. And let me turn it back to Melanie for your closing remarks.

Melanie Kreis: Yes. Thank you very much also from my side for your interest, for the good questions and the discussion. Yes, if I wrap it up, obviously, we saw some impact of the volatilities in the world around us on our Q2 numbers. But for me, the important message is that we are 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. You really have to hunt for them. But we are confident that with this combination of a strict cost focus and looking for growth opportunities in the current environment, we will deliver growth also going forward. Thank you very much. And with that, also from my side, have a good summer. And to those of you who are still going on vacation, have a nice summer holiday.

Operator: This concludes today's call. Thank you, everyone, for joining. You may now disconnect.