Earnings call transcript: Deutsche Post AG sees stock surge after strong Q4, FY2024

Deutsche Post AG (DHL) reported a robust financial performance for the full year 2024, with its stock price surging by 11.26% to reach a new 52-week high. According to InvestingPro data, the company’s YTD return stands at an impressive 14.5%, reflecting strong investor confidence. The company announced an EBIT exceeding €6 billion and significant strategic initiatives, including a €2 billion increase in its share buyback program. These developments contributed to a positive market reaction, despite some operational challenges. InvestingPro analysis shows the company maintains a GOOD financial health score of 2.53, supported by strong profitability metrics.

Key Takeaways

• Deutsche Post AG’s stock rose by 11.26%, reaching a 52-week high.
• Full-year 2024 EBIT exceeded €6 billion, indicating strong financial health.
• The company launched a cost optimization program targeting €1 billion in savings.
• An increase in the share buyback program by €2 billion was announced.
• Operational restructuring includes 8,000 job cuts in Germany.

Company Performance

Deutsche Post AG demonstrated strong performance across all divisions in Q4 2024, contributing to an EBIT of over €6 billion for the year. With annual revenue reaching $92.7 billion and a healthy dividend yield of 4.75%, the company continues to lead in global forwarding and express delivery, with a focus on e-commerce growth and life sciences initiatives. Despite challenges in B2B shipment volumes, DHL’s strategic initiatives and cost optimization efforts are expected to bolster its competitive position. For deeper insights into DHL’s financial health and growth potential, InvestingPro subscribers can access comprehensive analysis and additional ProTips.

Financial Highlights

• Full Year 2024 EBIT: Over €6 billion
• Free Cash Flow: Approximately €3 billion
• Proposed Dividend: €1.85 per share
• Share Buyback Program: Increased by €2 billion

Market Reaction

Deutsche Post AG’s stock experienced a significant increase of 11.26%, reaching a 52-week high of 43.39. This positive market reaction reflects investor confidence in the company’s financial health and strategic initiatives. The stock’s performance aligns with the broader market trend of rewarding companies with strong earnings and proactive management strategies.

Outlook & Guidance

The company maintains a positive outlook, with a 2025 EBIT guidance of over €6 billion and a medium-term target exceeding €7 billion. Trading at a P/E ratio of 15.71 and having maintained dividend payments for 24 consecutive years, Deutsche Post AG is confident in its structural growth levers and remains focused on improving its Return on Invested Capital (ROIC). The "Fit for Growth" program aims to achieve €1 billion in cost savings by the end of 2026. Get exclusive access to DHL’s detailed valuation metrics and growth potential through InvestingPro’s comprehensive research reports, available for over 1,400 top stocks.

Executive Commentary

CEO Tobias Meyer emphasized the company’s growth strategy, stating, "We are not going to shrink ourselves to greatness forever," highlighting the focus on sustainable growth. CFO Melanie Kreis added, "Our fundamental approach is to recoup inflation," indicating a proactive stance on pricing strategies amid economic pressures.

Risks and Challenges

• The announcement of 8,000 job cuts may lead to operational disruptions.
• Volatile market conditions and challenges in B2B shipments could impact future performance.
• The late Easter in 2025 is expected to affect Q1 volumes.
• Regulatory changes in US shipping could pose challenges.
• Inflationary pressures may affect cost structures and pricing strategies.

Q&A

During the earnings call, analysts inquired about the impact of de minimis changes in US shipping regulations and the company’s relationship with USPS. Executives expressed confidence in their pricing strategies to offset inflation and discussed the gradual implementation of cost savings measures in 2025-2026.

Full transcript - Deutsche Post AG (DHL) Q4 2024:

Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the DHL Group conference call. Please note that this conference call will be recorded. You can find the privacy notice on dhl.com. Throughout today’s presentation, all participants will be in a listen only mode.

The presentation will be followed by a question and answer session. I would now like to turn the conference call over to Martin Ziegenwerl, Head of Investor Relations. Please go ahead.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Thank you, and a warm welcome and good morning from my side to all of you who have dialed in to our call. As flagged, flagged, I’ve got with me our group CEO, Tobias Meyer and the group CFO, Melanie Kreis, who, as always, will take you through the deck that you have in front of you. And after that, we have sufficient time for Q and A. So without further ado, over to you, Tobias, please.

Tobias Meyer, Group CEO, DHL Group: Good morning. Thanks for joining us. Glad to have you and speak about the full year 2024 and how we finished it. On Page two, you find some highlights starting with the EBIT for the year, which stands at million. We had the expected relatively strong Q4.

We delivered what we think was a great peak season across all divisions, not only from a financial point of view, but also from a quality point of view and had also very targeted yield and cost measures, especially in Express. The cargo mix was really working out very well for us and that led to a strong finish. Also in terms of cash conversion, we stayed at the high level you’re now used from us with roughly billion in terms of free cash flow. We stay committed to a stable dividend at €1.85 per share, and we have upped the buyback program by €2,000,000,000 and extended it by a year. As was already talked about in Strategy 02/1930 with the setup for success component, we have now put our measures into a group wide program, which we call Fit for Growth.

We believe that’s needed to keep the focus on those efficiency measures as to be able to provide the cash flow needed to achieve our growth aspirations. I’ll come to the guidance later with a detailed chart. On the next page, you see the longer term development with our new flying altitude post COVID with obviously the normalization that we’ve seen since the peak in 2022, but also that the fourth quarter is in line with the historical share that we have in terms of earnings. The fourth quarter obviously in P and P, but also in Express being particularly strong in those areas where we have fixed cost network, we also then have a higher profitability. So we are quite pleased with the fourth quarter.

And overall we had a good momentum throughout the year. You will remember we started relatively softly in 2024 still with declining revenue in the first half and then started to grow top line in the third quarter and now have achieved also good earnings growth in the fourth quarter. As it relates to 2025, we are off to an okay start. It’s very volatile, so it’s not that easy to see. And we also have Easter later this year, so that will provide a bit of a seasonal drag on the first quarter.

But overall, despite the volatile condition, we are quite confident and especially confident to continue to grow our business in those areas geographically and from an industry perspective where there is growth. Page four sheds a light on the e commerce space quarter on quarter. So to demonstrate that there was a good peak season across Express, Parcel Germany and e commerce, but also in the longer term. I find it particularly noteworthy on the bottom right, the 61% that we have grown volumes in e commerce over the last five years. So whilst the division is still not a full adult, it is getting there and we intend to keep a good growth momentum, especially in e commerce, but also in the other areas where we have exposure to the B2C trend.

Page five is about supply chain, our new member of the billionaires club exceeding for the first time the billion in EBIT and being really on a good structural trajectory. So we’re very pleased with the actions that have been taken over the last years. We have good signings and thereby a good pipeline also for the year to come. So we see ourselves on a good trajectory both from a top line growth perspective but also as it relates to the necessary measures to ensure we are profitable. Many of you will have questions regarding our exposure to global trade and what it means.

I want to spend some time on that starting with Page six and highlighting that obviously trade barriers as we have seen with the Brexit have an adverse impact on volume. That’s what you would expect. Though often trade is more resilient than some people think, finds other ways to still happen. And what is very important, it often means also more activity for us. For the Brexit, that meant more customs filings, which is also true now for the days that the de minimis in The U.

S. Was not in effect. You had 5,000,000 more shipments that needed customs clearance, which led to issues, bottlenecks that then seemingly led to the U. S. Administration changing their mind on it and reinstating the de minimis.

So it is clearly volatile and operationally quite demanding, but that environment also provides opportunities for us. The next point is on Page seven, which is our geographical footprint, which is very much tilted to high growth geographies and those geographies that are currently not impacted as much from trade barriers, especially the new trade policy of the U. S. Administration, we have a higher market share in those fast growing geographies And that’s where we will continue to focus with our geographic tailwind program, where we highlight several countries that have both strong GDP growth, but also strong growth in trade. And we aim to solidify and grow our position, especially in those markets.

And that gives us great confidence that we can also continue to grow in Express. Page eight particularly addresses the question of Express and its relation to the general air freight market. You see historically that Express, the integrated business model has taken share from the carrier forwarder model and we would, as others, expect that to continue. The Express model is suited to handle certain cargo much better than the carrier forwarder model. And it is very perceivable that in sectors like Life Science and Healthcare, you will have more smaller higher value shipments and thereby a natural shift into the sweet spot of the integrator model.

That’s what we see as an opportunity and that we’ll continue to work on, especially with our cross divisional initiative on license and healthcare, which will get us more cargo control and will enable us to leverage our fantastic Express network to a greater extent also in that sector. Page nine puts our actions into the context of Strategy 02/1930, which we presented in September. On the right hand side, several areas addressing growth, and we’ll talk about that especially when we see each other in our Capital Markets Day early April. But then also the set ups of success part of the strategy, which we had highlighted there, which has several profitability levers, which we now bundle in the program Fit for Growth. Page 10 talks about this program and what it aims to do and what areas it addresses.

So we aim to have a run rate impact from more than EUR 1,000,000,000 by end of twenty twenty six. It is really spread over multiple areas in Aviation and Airfreight. We’ll continue to phase in July this year, but we’re also simplifying structures, for instance, with the exit of the Polar JV. We have several other initiatives in place to structurally take out cost and drive efficiencies. In Germany, this unfortunately also leads to the reduction in headcount to a greater extent given that we have structural improvements measures that meet a soft market, a soft market especially due to the structural decline in mail volumes.

And that requires us to do more drastic steps to reduce the workforce and adjust our capacity to demand in that area. In many other areas, we expect that growth compensates for the efficiency gains that we will be able to achieve and thereby will have a more heterogeneous set of actions as it relates to labor. This brings us to the outlook on Page 11, where we have a guidance of more than SEK 6,000,000,000 in EBIT for 2025. DHL should deliver more than $5,500,000,000 P and P around $1,000,000,000 and Group Functions, we lowered to minus 400,000,000 Cash flow at $3,000,000,000 very similar than what we achieved in 2024. Also, the gross CapEx very much in line with what you have seen from us in the past that also applies for the tax rate.

In the medium term, we expect to exceed the SEK 7,000,000,000. We are quite confident in our structural growth levers, but we also have to be realistic that the macro environment has a profound impact on our business and our earnings situation. This is why we are not specific on the twelve month period where we achieved those SEK7 billion, but we are confident to see and deliver structural growth in terms of top line, but also in terms of the bottom line. That brings me to our commitment to shareholder returns on Page 12. We keep and propose to the General Assembly early May a constant dividend at $1.85 that’s slightly outside our payout corridor at 64% of net earnings after tax.

But that and we have said that multiple times, dividend continuity is a very important priority for us. And given that we have a balance sheet and we’ve left at least for some rating agencies our target corridor in terms of rating to the upside, we have decided to up our share buyback program by 2,000,000,000 and extend it by a year. Given our current valuation, we see that as very accretive to share the returns also in the long term. And thereby, we use our cash generating capability, but also our balance sheet to provide attractive shareholder returns. With that, I would turn it over to Melanie to give you some more specifics regarding the developments in the divisions.

Melanie Kreis, Group CFO, DHL Group: Yes. Thank you very much Tobias, and good morning to all of you out there also from my side. Thank you very much for joining us this morning. I’m happy to now take you through the key observations on our financial performance in a bit more detail. And I will take a more detailed look at the strong Express performance in a moment.

So I want to concentrate on the other divisions first on Page 13, starting with DHL Global Forwarding. So Forwarding saw, again, a good volume performance in the fourth quarter with volume growth also translating into year over year higher GP per unit and a certain EBIT increase that is excluding last year’s non recurring effects. Just as a reminder, we had a 114,000,000 accounting gain in the fourth quarter of ’twenty three from the 100% acquisition of our joint venture in The UAE. So if you take that out, we actually had nice EBIT growth in Global Forwarding in the fourth quarter. Supply chain, Tobias already mentioned that supply chain continued to deliver also in the fourth quarter with 5% organic growth at a 6% EBIT margin, leading the division to the 1,000,000,000 plus earnings level for the full year.

We clearly have built strong setup to also drive future structural profitable growth in this division. E commerce has taken full benefit of the peak season with a healthy seasonal uplift driving a strong Q4 EBIT. It’s noteworthy that we also applied targeted peak season surcharge mechanisms in this division, which obviously contributed to the very good performance in the fourth quarter. Yes. And with regard to Post and Parcel Germany, we also had a very successful peak season, both on the customer side, the way how the operational colleagues managed this peaky peak season.

However, as you see in the financials, this has not been enough to offset the known headwinds from mail decline and cost inflation in the fourth quarter year over year. And as you have seen in the guidance Tobias just mentioned, we expect P and P EBIT to increase in ’twenty five as we finally get some headroom on regulated mail pricing alongside ongoing parcel growth, even though, just to be clear, we have to work with less than what we had expected on the basis of the new postal law. And due to this combination of accelerated mail volume decline, cost inflation and the regulatory environment, we had to accelerate our cost measures as already mentioned by Tobias for P and P. Let me now turn to DHL Express on the next three pages. Page 14 shows a strong Q4 EBIT contribution that might have surprised some of you.

So I think the question is, how did the DHL Express team actually manage to deliver this strong performance in the fourth quarter? Starting with volume, you may have noticed that overall shipment per day was still down quite notably minus 8%, but that actually includes an unchanged B2B environment, not more dynamic than before, unfortunately, but also not worsening, so minus 1% on the B2B volumes. Year over year TDI volume decline is, hence, primarily driven by B2C, where we had the strong surge in Transpac volumes from e commerce last year, as you will remember. And there was now a conscious management decision that we would approach these volumes in a different way for the peak season 2024. And that takes me to the first important factor for the strong Q4 performance, and that is that we turned the volume decline, the conscious volume management into revenue growth through a combination of usual yield discipline, our demand surcharge as well as active management of the mix of shipments, which we allowed into our network.

And this mix element is closely related to the second driver, which is our capacity management as we were able to increase our weight load factor by more than 100 basis points year over year. And that is, of course, also a very significant factor for our profitability. So the three levers which drove the strong 16% Express margin in Q4 were a combination of pricing, mix and capacity utilization. And these same three elements are also the answer to explain the longer term perspective where we keep hearing the question, why is Express EBIT higher compared to 2019, particularly given that B2B shipments are actually lower? So that’s what you see on page 15.

And the answer from our perspective is shown on page 16. It’s the combination of the before mentioned elements, mix and pricing as key explanations. So compared to 2019, we have lower B2B shipments, but higher B2B rate. That’s what you see in the upper left corner. We have a significantly higher shipment share from the e commerce megatrend, but very clearly, selectively the right type of premium B2C, which makes sense for our premium network.

That is what you see on the lower left side. And finally, we have constantly raised base prices, but without overdoing it, neither during the pandemic nor in Q4, we always strive to find the right healthy balance, and I believe that we have been successful in doing so. So for these three main reasons, the absolute express EBIT is significantly higher compared to 2019 and sustainably so. The last factor, capacity utilization, for example, in terms of weight load factor, was actually still below twenty nineteen and 2024. This is the operating leverage element where we expect to drive margin upwards once volumes show stronger momentum again.

So that was a bit more on Express, but I guess it’s at the center of your attention today. Let me now turn to another structural improvement, which I’m actually quite proud of, and that’s our free cash flow generation. You see on Page 17 how in the longer time horizon, our free cash flow generation has structurally increased to the new level of roundabout EUR 3,000,000,000 in annual free cash flow excluding M and A. Yes, we had a higher free cash flow during the pandemic when EBIT was higher. But the key for me is that our free cash flow conversion has sustainably improved to a new order of magnitude.

And we reflect this confidence in the yes, sustainability of this improvement also in our 25 and midterm free cash flow expectations as to we have showed in our guidance earlier. We have really seen that stronger cash flow focus in the organization led to a cultural change and eventually a structural step up in the free cash flow performance of the group. And this stronger focus is what we now want to initiate in the same way across the organization with regards to ROIC as introduced with our strategy 2013. You can see on Page 18 that from 2019 to 2022, EBIT growth under the pandemic also pushed return on invested capital up despite continued strong investment. The important thing is that in the years 2022 to 2024, when we saw the EBIT normalization, we have actually been able to stabilize Rohek by bringing down CapEx.

And from this good and healthy starting point, we will now focus on return on invested capital growth and will actually propose to the upcoming AGM to add ROIC into the board’s long term incentive targets to underscore our commitment to this KPI. And that already brings me to the conclusion of my short presentation. Yes, I can’t repeat it often enough. Firstly, a strong free cash flow generation is for us of the utmost importance as it allows us to drive the right balance between investments into the business and return of cash to shareholders. And I think with regard to the letter, we are showing our strong commitment to shareholder returns with both the proposal for the regular dividend and for the enhanced share buyback program.

Secondly, as volatile as the world might be, we actually want to grow our business. Strategy 02/1930 is setting the right priorities for our group on that, and I’m looking forward to our Capital Markets Day next month to talk in more detail about both our group and our divisional plans and expectations. And last but not least, our new cost program, Fit for Growth, completely ties in with that logic as we are making sure that the whole group has the right divisional lean structure to accelerate our profitability as we accelerate growth. So that’s it from my side. And with that, over to your questions, please or over to Martin.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Either way, thanks, Melanie Tobias. And Sophie, operator, please initiate the Q and A. I can see we have a good list of analysts and their questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin our Q and A session. Our first question comes from Muneeba Kayani from Bank of America. Please unmute your line and ask your question.

Muneeba Kayani, Analyst, Bank of America: Good morning. Can you hear me?

Melanie Kreis, Group CFO, DHL Group: Yes. Good morning.

Muneeba Kayani, Analyst, Bank of America: Okay, great. Thank you. So two questions. Firstly, just on the 2025 guidance and want to understand a few moving parts in there. Firstly, am I right to think that when you think about kind of over 6,000,000,000, just the PNP EBIT increase gets you to 6,000,000,000 from the 2024 and then any growth would be on top of that?

And then from what we’ve heard from Germany in the last couple of days, has and then secondly, just wanted to revisit on the reorganization that you talked about that you started in September. What’s the progress on that in terms of to the five reporting segments? And how would you think about any changes from a portfolio perspective, spinoffs or anything at this point? Thank you.

Tobias Meyer, Group CEO, DHL Group: Thank you, Muneeba, for these two questions. So as it relates to the 2025 guidance, it’s built on the momentum we have seen in the business over the course of 2024. It does not reflect the short term changes that we’ve seen in recent days in Germany. Whether that has big impact on us is to be seen. We’re talking mainly about spending in defense and spending in infrastructure.

German’s agility in terms of administrative processes has suffered a bit through the years. So whether some money hits the road in 2025, I have my doubts. So that’s why we have not we don’t see a significant impact for this year. I think that it’s generally good for Europe to spend more on defense and determine its own destiny is something that we would probably agree with. But in terms of impact for this year, we see that rather muted.

In terms of the reorganization or the alignment of the legal structure with the management structure, we see ourselves very well underway. That is something that requires a couple of different things, including system changes, but also changes to certain arrangements on the public side, arrangements that affect the universal service obligation. And we are well underway to execute that within the time line that we have given.

Muneeba Kayani, Analyst, Bank of America: Anything on a portfolio change perspective then at this point? And how would you think about it?

Tobias Meyer, Group CEO, DHL Group: I think we focus on what we have said that we go through this realignment of the legal structure. That’s what we’re currently focused on.

Muneeba Kayani, Analyst, Bank of America: Thank you.

Melanie Kreis, Group CFO, DHL Group: I think we will show also on April 3 at the Capital Markets Day how the portfolio really complements each other and how we really want to use the portfolio for growth going forward.

Conference Operator: Our next question comes from Alexia Togani from JPMorgan Chase and Co. Please unmute your line and ask your question.

Alexia Togani, Analyst, JPMorgan Chase & Co: Good morning. Thank you for taking my questions. Just firstly, great to see that you’re taking action my first question. And then secondly, could you elaborate a little bit further on the cargo mix and the increase in weight that you’ve experienced? Should we see that as you gaining share with kind of or increasing your share of wallet with specific accounts or specific verticals that basically come with higher weights?

And if you can also talk to us a bit more what type of verticals are seeing more growth at the moment? Clearly, we know the automotive sector is weak, but are others gaining share to offset the weakness there? And Tobias, could you just mention if you do have any exposure in the defense sector overall across your portfolio? Thank you very much.

Melanie Kreis, Group CFO, DHL Group: So maybe I start with the first question on kind of like how to think about fit for growth. So it’s a very broad portfolio of measures. There are some where we will see immediately really a change in the cost position. For example, what we do, and express with regard to the partner airline optimization, that will really kind of, like, reduce the cost there. Overall, my way to think of this is it will give us good support to both our current year guidance and our midterm guidance to make sure that also in the continued not that dynamic macro environment, we will be able to solidly deliver on our guidance.

Tobias Meyer, Group CEO, DHL Group: As it relates to the cargo mix, I think you have to see multiple moving bids, especially as it relates to the fourth quarter. There is definitely also the considered choice and I think really the Express team had mastered that from our perspective very, very well to selectively also have a bit of more ACS sales, which is a cost offset for the core product TDI. So that is one factor that plays into that and that also helps in terms of utilization. And we had some also good yielding cargo there. The sector mix in Express obviously is generally pretty broad.

We have some focus areas, Life Science and Healthcare especially, where we have targeted programs. Elsewise, it is a gradual shift that we have seen over time. It’s not something where we can highlight to really one or the other customer or sector. That’s not the case. It goes a bit back and forth.

You’re right. There’s certain weakness on automotive parts. We also carry a lot of spare parts. I think that’s important to see as well because that’s much more stable. Electronics similarly is cyclical.

So that’s a bit the mix that we’re seeing is not really something that we could say hinges on a couple of customers.

Melanie Kreis, Group CFO, DHL Group: So just to add to that, so I think as Tobias says, it’s really a broad based result of the focus in Express. And just to be clear, so we have two phenomena. The first element, which Tobias mentioned, was particularly in the fourth quarter. As part of our yield management, we priced out some lighter weight ecom stuff particularly across The Pacific, and we refilled that with ACS capacity, so a space sold into the forwarding market. The slide I showed on Page 16, the multi year trend, that is with regard to weight, of course, TDI only.

So there we don’t have the ACS element in, just to clarify that.

Tobias Meyer, Group CEO, DHL Group: The last question in terms of defense, we obviously have exposure to that sector in different ways. On the one hand side, many manufacturers, as you know, are on the civil side and the defense side, and that’s something that is part of our normal customer portfolio. And we also have some engagement with government, but that is not anything new. That’s something that we had for a while.

Alexia Togani, Analyst, JPMorgan Chase & Co: Thanks. And can I just follow-up on Melanie’s response on the longer term kind of weight growth? Is that therefore a conscious decision by Express to increase weights? Or is there a structural kind of, yeah, backdrop that you’ve benefited from?

Melanie Kreis, Group CFO, DHL Group: Also, that is always one element in the, yeah, very targeted expressed decision making on what type of business do we want to focus on. There was a period many years ago where we had gotten a bit too heavy on stuff which was not so nicely conveyable, then we had kind of like a pricing push to get the above 300 kilos stuff out of the network. So it is really something which plays into the overall what is good business for our Express network focus in the DHL commercial team.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Thanks, Alexia. Sophie, the next caller please.

Conference Operator: Our next question comes from Sita Abbloom from Morgan Stanley.

Sita Abbloom, Analyst, Morgan Stanley: I’ve got two questions. One is on the de minimis changes. Tobias, I think you said that you only have sort of 1% of your volumes in your network which are exposed to that, and that number sounded quite low to me. So I just want to confirm, if you have a consolidated shipment where the individual items might be below that de minimis threshold, then that is potentially not subject to the changes in rules, just to understand that. And then if you could talk a little bit about how you think the changes in the rules affect your cost base, maybe, think a little bit about any disruptions that might impact particularly the Q1 numbers as we sort of get to the new normal.

So that’s the first question. Just talk about de minimis and impact. And then the other question just on the e commerce business in The U. S. UPS has obviously moved away from USPS.

And we had heard some chatter that DHL was ramping up its relationship with USPS and trying to make a bigger shift or bigger push into the e commerce space. So that’s sort of domestic parcel market in The U. S. Can you confirm where your position is on that e commerce market in The U. S?

How you think about domestic parcel? Do you think the change in the landscape with UPS and UPS means anything for your relationship and your profitability in that region? Thank you.

Tobias Meyer, Group CEO, DHL Group: Yeah. Thank you. I start with the second question. So my understanding is that USPS moved away from UPS, not the other way around. We have been a partner to USPS for many years.

USPS is our delivery fast mile provider for the business that we have there. It’s a corporation that has worked very well. I think for both sides, we provide significant volume to the last mile of USPS. It’s not something that is going through big changes. This business has been gradually growing over the last years.

So there is no discontinuity in that relationship. It’s more business as usual. And we have exclusivity with USPS as it relates to Last Mile, which I think is something that UPS was not willing to do. So there is a notable difference in our relationship to the United States Postal Service and that of competitors. As it relates to the de minimis, this is a complicated matter because you were referring to the new normal.

I don’t know what the new normal is, and I’m not sure whether we’ll know in the coming weeks. The de minimis was off for four days that led to quite some chaos. These are about 5,000,000 shipments a day industry wide, roughly doubling the number of entries required into The U. S. And obviously not only on the side of logistics providers, but also on the side of customs need to have those capacities to handle those shipments elsewise and that is what happened, the entire pipeline clocks up.

It’s not only then affecting e commerce shipment, but it’s also affecting other shipments that require clearance. We generally, the de minimis applies on the single shipment value. So consolidation would typically lead to de minimis not being applicable. For us, this is for Express, this is still a relevant share of volume. But obviously, we are not very much in the business of carrying full planeloads of low value, so de minimis e commerce shipments into The U.

S. We don’t have much exposure to that. We would express focus with a certain share, and that share has reduced in a mindful way over the last quarters. We carry some of those shipments, particularly still on the Trans Pacific, but also on some other routes. And with the minimums not be available, those shipments would convert to dutiable shipments, which creates some more revenue for us, but would definitely create some volume pressure as well.

Again, our exposure to that trade is not that large. We are only a tiny share of these 5,000,000 shipments per day. I hope that addresses your question on the de minimis. Elsewise, happy to follow-up.

Sita Abbloom, Analyst, Morgan Stanley: Thank you very much. Sorry, go ahead, Melanie.

Melanie Kreis, Group CFO, DHL Group: Just one quick additional comment on the USPS relationship. So when we talked about the very good Q4 performance in our e com division, And that really also included a good performance in The U. S, which is for me evidence that we have this very good and healthy relationship with USPS also with the changes in their operating model.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Okay. Well, thank you, Sita, then.

Conference Operator: Our next question comes from Christian Nadelcu from UBS. Please unmute your line and ask your question.

Christian Nadelcu, Analyst, UBS: Hi. Thank you very much. May I ask a couple of questions? Maybe the first one, if we take a step back and think a bit at the EBIT bridge, the growth in, I guess, in ’twenty five and in 2027, Could you talk a little bit about your underlying assumptions there around volume growth? You told us about the cost savings, then maybe the other point would be around pricing versus inflation.

Do you think you can price fully pricing your cost inflation or you can price above inflation? So I’m just trying to get a building blocks on the EBIT growth going forward. The second one, one of your competitors in Express guided revenue per unit coming down in 2025 as they are taking out some surcharges. This is the first time in the last few years when one of the large Express integrator seems to be taking pricing down. How do you think are the potential implications in terms of your pricing for 2025 in Express as well as your market share?

And maybe just a quick one, if you allow me, the $1,000,000,000 savings that you talked about, could you elaborate a bit on the timeline for 2026 and 2027, how much you’ll get in? And maybe a bit around the split between the divisions, how much is Express, XPress, how much is Post and Parcel and others? Thank you.

Melanie Kreis, Group CFO, DHL Group: Okay. So let me start with the volume growth assumptions. So for ’twenty five, we clearly expect more of a continuation of the not so dynamic environment. We do expect that over time, we will get to what we have also shown as part of our 2,030 decks as our kind of like divisional normalized growth expectations. But we also don’t have the crystal ball, which tells us when exactly that will be.

And that is why we have also decoupled our midterm guidance from a specific calendar year. So more of a continued subdued environment in ’twenty five and then eventually development more in line with our guidance expectations from the strategy, 2,030 time horizon. That is then medium term when we expect to get back to the SEK7 billion. In terms of the different building blocks, yes, our fundamental approach is, of course, that on the pricing side, we want to recoup inflation. So for example, in DHL Express, we have our very disciplined annual GPI mechanism.

We are country by country. We go through the local cost inflation development. We look at the currency development. We look, of course, also at the competitive position in the market. And on that basis, we take our GPI decision.

And I think as we have now shown for many, many years, we have a pretty good track record in terms of recovering inflation. And that is also why we obviously don’t have the aspiration that revenue should go down in ’twenty five. That takes me to your last question, the cost savings, a bit more color timeline, how does it spread across the divisions. So in terms of timeline, super roughly speaking, we are targeting the 1,000,000,000 plus run rate achievement by the end of ’twenty six. I would assume that it’s kind of like roughly evenly split between ’twenty five and ’twenty six.

So if you say that towards end of twenty five, you want to be at the kind of like 500 run rate, it ramps up in the course of the year. There will be some cost of change in the course of that year. So we should have for ’25 at least a neutral to slightly positive impact. It is really something which is supported by all divisions, but we are not going to do a divisional breakdown of the SEK1 billion.

Christian Nadelcu, Analyst, UBS: And sorry, just one follow-up, if you allow me, Melanie. If I take SEK 6,000,000,000 guidance for SEK 25,000,000,000, if I add the SEK 1,000,000,000 cost savings, that gets me to SEK 7,000,000,000, if I assume what you said that pricing will offset inflation. So I guess this is maybe the part that I’m missing a little bit. I can calculate that you’re already getting to 7 just from this without any meaningful volume growth. What am I

Melanie Kreis, Group CFO, DHL Group: missing from Thank you for the question and for giving me the chance to clarify. So we are targeting the 1,000,000,000 plus cost benefits with a full run rate by the end of ’twenty six. So not by the end of ’twenty five, but by the end of ’twenty six. If we now assume that in terms of ramping this up relatively stably across the two year period, we should get to order of magnitude run rate of about 500 by the end of ’twenty five. But of course, it’s ramping up in the course of the year.

So if you then say, hey, average for the year ’twenty five is about 250, but there is cost of change, associated with that. The statement for ’25 is that the net impact from the program in ’25 will be at least neutral to slightly positive. But of course, it’s not going to be the billion full impact in ’twenty five.

Christian Nadelcu, Analyst, UBS: Thank you very much.

Melanie Kreis, Group CFO, DHL Group: Yes. Thank you.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Thanks, Christian.

Conference Operator: Our next question comes from Andy Chu from Deutsche Bank.

Andy Chu, Analyst, Deutsche Bank: A couple of questions for me, please. Just following on from Christian’s question on the Fit for Growth cost program. So to be clear, is it just adding the $1,000,000,000 in 2027 to kind of forecast? Or is there some of that cost saving that’s going to be reinvested? And then secondly, around the maybe the phasing of profits.

I think in the past, you’ve Melanie, you’ve given us a bit of a steer as to the sort of phasing of profitability. How does this $6,000,000,000 look like Q1 across to Q4, please? Thank you.

Melanie Kreis, Group CFO, DHL Group: Yes. So again, for me, the $1,000,000,000 is something which will support us, ensuring that we solidly deliver the 6,000,000,000 for the current year and then also get back to 7,000,000,000 plus on track for our 02/1930 aspiration. Ultimate net impact and how much is reinvested or not, I think that will really depend on how the situation evolves over the next four years. It is, as I said before, a combination of measures like, for example, hard rejigging also expressed. So that is a real cost saving element.

It is what we announced with regard to PNP, this headcount adjustment. There are other measures where it’s, hey, if there’s good volume growth, we will probably grow into it, and it will be more of a cost avoidance in our upswing type of game. So it is really a broad mix. For me, it is important that this program, which we control entirely ourselves, gives us the opportunity also in a still not so dynamic macro environment to solidly move forward and, as we have indicated with our guidance now, get back into EBIT. Growth.

I think that’s a good segue to your second question, Andy, how should we think about phasing. So I mean, we’re not giving a quarterly guidance, but similar to what we saw last year and in the years before, Obviously, the fourth quarter will be by far the most important quarter for us, so it will be back end loaded due to the seasonality elements in our business. With regards to q one, I mean, obviously, there are many moving parts. The world is very dynamic around us. Tobias briefly talked about what happened in the February.

The one very clear impact we see is that Easter is quite late in the year, so it’s completely in April. It’s an important volume driver for us, for example, in Parcel Germany. So Q1 will not be the most dynamic quarter also in the year over year comparison.

Conference Operator: Our next question comes from Marco Lemaitre from Barclays. Please unmute your line and ask your question.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Marco, can’t hear you

Marco Lemaitre, Analyst, Barclays: yet.

Melanie Kreis, Group CFO, DHL Group: Marco?

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Okay. Sophie, maybe we give Marcus some time to figure out.

Melanie Kreis, Group CFO, DHL Group: Thank you. Of course.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Good morning, Marco.

Marco Lemaitre, Analyst, Barclays: Hey, Minau?

Melanie Kreis, Group CFO, DHL Group: Yes.

Marco Lemaitre, Analyst, Barclays: Hi. Sorry. Yes. Sharvin with technology. Yes.

Thank you very much for taking my question. So the first question is on the PNP, outlook on the back of, the wage agreement. So for ’25, you are iterating the 1,000,000,000 on the back of, close to 10% price increase and 2% wage increase. But when we think about 02/1926, are you still confident that you can keep the profitability of PNP at 1,000,000,000, despite much less price increase sequentially and 3% wage inflation? And then, still on the PNP, is the, FD cut that you’ve announced today something that you have also negotiated, with the year as part of the wage agreement, or that’s something that is completely outside that that sort of perimeter and is just up to you, and it’s your basically business decision.

And shall we expect therefore any problem or strikes on the back of that? And the second question, sorry to come back again to the same topic of the 1,000,000,000, cost savings program. But am am I right in thinking that, this 1,000,000,000, if if I take basically the medium term guidance of seven, if I take out the 1,000,000,000, cost saving program, your underlying assumption or your underlying assumption for the midterm guidance is that basically macro is not recovering, and you get to the 7,000,000,000 thanks to cost savings and therefore the offers upside in case there is any macro

Melanie Kreis, Group CFO, DHL Group: recovery? Okay. So starting with the first question, I mean, we’re not going to give a detailed guidance for ’26 for PNP. But obviously, ’26 will be a more challenging year for PNP because it’s year two of the price increase before we then will hopefully get a reasonable increase in ’twenty seven. And that is actually one of the reasons why we are now initiating this action of reducing headcount structurally by 8,000 to really safeguard the profitability of that division.

We will do so in a socially acceptable way, but we have enough measures which are in our control so that we don’t expect a conflict with the union or strikes as a result of these activities. With regards to the 1,000,000,000, so this is something where we will see support independent of the macro to our numbers. It’s important for us after two years of EBIT normalization to now get back into EBIT growth mode. And here, our cost program fit for growth will really support us in ’twenty five, ’twenty six, and beyond. But of course, you can’t shrink yourself to greatness forever.

That is why also the growth component in our strategy 02/1930 is so important. So for me, macro timing, fit for growth, how they come together will determine a little bit the timing on when we get back to more than SEK7 billion. But this cost element is giving us a confidence solidly we will get there.

Marco Lemaitre, Analyst, Barclays: Okay. Sorry, just to clarify. So in your above $7,000,000,000 guidance, you are assuming a bit of macro recovery, right? You are not assuming muted macro on the medium term?

Tobias Meyer, Group CEO, DHL Group: Yes. I think it depends what you mean with recovery. We do expect moderate growth of the world economy. So but we do not expect in that guidance a big revival from the current trajectory that we are on. We learned over the last two years to be quite conservative on that.

Maybe also quickly to the P and P situation. I mean, 8,000 jobs is a significant number, but it’s about a bit more than 4% of entire workforce of P and P. I think you have to see that imbalance. And that also gives an indication that, obviously, fluctuation, natural attrition is the lever that we can use here for this amount of reduction. For twenty twenty six, we don’t only have it’s not that all prices are regulated and we also have to see how that evolves.

The current trajectory in terms of volume is clearly below of what the network agency has assumed. So there are a couple of moving bids on that as well. But as Melanie said, with what we are seeing currently in the business, it seemed prudent to do now intensify the work on the cost side that applies for P and P, but also the rest. It’s not that we haven’t done anything. We have initiated a lot of these measures already in the last months.

But now we want to bundle them, put more focus on them and also communicate them as such.

Marco Lemaitre, Analyst, Barclays: Thank you very much. Very clear.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Thank you. Marco, I think we’ve got one more caller on the line.

Conference Operator: Our last question comes from Patrick Kruszat from Goldman Sachs.

Melanie Kreis, Group CFO, DHL Group: Patrick?

Martin Ziegenwerl, Head of Investor Relations, DHL Group0: Hi, Tobias.

Melanie Kreis, Group CFO, DHL Group: Now we can hear you.

Martin Ziegenwerl, Head of Investor Relations, DHL Group0: Great. Congrats on the strong results, first of all. And, you know, just two questions left from my side. You know, I mean, you’re number one in freight forwarding. I think, you know, an industry where where some of your big peers consistently trade north of 20 times PE, arguably one of your most valuable divisions, and yet it continues to underperform a little bit.

I think you have, you know, this 35% conversion target, which would put you, you know, closer to to where the peers operate. So when we look at this cost saving program you have, how close to the 35% does the cost cutting get you in ’25 or maybe ’26 in forwarding? And I’ll give you the second question right away. It’s, just to come back to the legal structure. Simplification is underway.

Just to better understand your thinking here, whether you’re pursuing simplification just for its own sake, it’s the right thing to do, it might save a little bit of cost. Or do you also think this will basically put you in a position to at least explore strategic options once you’re ready?

Tobias Meyer, Group CEO, DHL Group: Well, on that part, Patrick, we talked about that quite extensively in September and that hasn’t changed. It has operational reason, it has strategic reasons. So that’s both what we recognized as it relates to the legal restructuring, but there are also strong operational reasons. If you look at what the EU puts us through in terms of reporting our mingling with cross divisional interim holdings in some countries is just not something that we think is the right setup going forward. So it has both elements.

As it relates to freight forwarding, the division has made great progress also in terms of its cost efficiency. But obviously, the conversion rate is also driven by the GP per unit level and that has been very volatile. So we need to continue to work on that. We will have industry volatility impacting it. I think we have made progress in terms of catching up with some competitors.

Now whether that’s due to us running faster or them breaking a leg, I think we have to understand over the coming quarters, catching up with DSV. We also said that will be more in the longer term. Their business structure is quite different from ours and that’s not that easy to change. But also with the volume and margin development in the fourth quarter, we see ourselves on a good trajectory with Global Forwarding, especially in Ocean Freight. I think it was really a good relative performance that the team delivered, and I expect us to continue to on the trajectory to close that gap towards the peer group that we’re aiming to be part of and ultimately, exceed in terms of the balance of volume growth and conversion rate.

Martin Ziegenwerl, Head of Investor Relations, DHL Group0: Okay. So just as I understand, so would you then stick to this 35% target and say it’s likely that in 2025, ’20 ’20 ’6, the conversion ratio will go up versus 24?

Tobias Meyer, Group CEO, DHL Group: So structurally, yes. Yeah. We keep that ambition and structurally, we expect it to go up. I expect some volatile quarters also for DGF up and down. I think it will be unrealistic to assume that this will be a development of a straight line.

Some of that volatility is typically good for us, but rates will be different when the Suez opens. And the market will need some weeks to readjust for that. Whether that’s good or bad for us, we’ll have to see. So it will not be a straight line.

Martin Ziegenwerl, Head of Investor Relations, DHL Group: All right. Well, we’re just receiving one follow-up question from Nabil, I think.

Conference Operator: Our next question comes from Namibah Kiani. Please unmute your line and go ahead.

Muneeba Kayani, Analyst, Bank of America: Thanks for taking my two quick follow-up questions. Firstly, just on cost savings, you said you started at the end of twenty twenty four. Like, was there any benefit in the 4Q of ’twenty four from that cost saving program start? And then secondly, just on supply chain and the signings of 8,800,000,000.0, kind of how do I think about that in terms of the duration and the revenue conversion around that? Thank you.

Melanie Kreis, Group CFO, DHL Group: So maybe I start with the first question. So, I mean, it’s not that we didn’t focus on cost before, right? So, in the summer of, when it was clear that the normalization was coming, he went into what we call EBIT protection plan and also took a lot of short term action. I think what we have now increasingly discussed in the organization is we have to kind of like go from the short term diet stage into kind of like the more healthy lifestyle, making more longer term and structural adjustments to our cost base. And there are a number of activities where, yes, we had already worked on them for a while.

For example, to use the buzzword AI in customer service, that’s a scene which is not totally new, but it has now reached a maturity level where as part of the Fit for Growth program, it will really drive substantial savings going forward. So it is a combination of known elements and new elements. And what we are now saying was the 1,000,000,000 that is really kind of like the run rate building up in ’twenty five, ’twenty six. So to come to your specific question, there were, of course, cost management elements also in the good q four performance. I highlighted the capacity adjustments in Xpress, which also helped us with a good weight load factor.

But with regard to fit for growth, this is a program where we now really expect the 1,000,000,000 run rate support building up in the course of ’twenty ’5 and ’twenty six.

Tobias Meyer, Group CEO, DHL Group: And as it relates to the supply chain contract value, what we actually track internally but don’t publish is the annualized GP that we win. And this is at a record high now, and that’s why we put the number on because also the contract value is just a very good value from where we come from, which gives us confidence that the year 2025 is also going to be a good year for supply chain.

Muneeba Kayani, Analyst, Bank of America: Thank you.

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

Martin Ziegenwerl, Head of Investor Relations, DHL Group: Okay. Well, thank you, first of all, for your focus and disciplined participation in the Q and A round. We are just above one hour, so I think we made good use of the time to see you over the next weeks in roadshows conferences and then, of course, in our Capital Markets Day. I want to close the call by handing over to Tobias for his wrap up.

Tobias Meyer, Group CEO, DHL Group: Well, first of all, thank you for your great questions. I hope we were helpful in addressing them. Again, we see the year 2024 with a good momentum, a soft start but a strong finish, especially also on quality. We don’t talk about that so in detail here, but it’s obviously important for us as well because only good quality makes customers loyal customers and that’s the basis for future growth. We are in a very volatile world.

I think we all recognize that and logistics is not excluded from that. But we are very confident in terms of our structural development. There are some divisions where we’ll see that in a continuous way, especially supply chain. We see it in other divisions with a more stronger volatile overlay of the macro factors that will be the case in Global Forwarding. And the other divisions are somehow in between.

We got off to a good start into the year. Also, it relates to the operational factors despite that volatile influence on our industry. And therefore, we continue with confidence to deliver also a good year of 2025. With that, again, thank you, and have a great day.

Melanie Kreis, Group CFO, DHL Group: Thank you. Bye bye.

Conference Operator: This concludes today’s call. Thank you everyone for joining. You may disconnect.

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