Deutsche Post AG Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Muneeba Kayani - BofA Global Research - Analyst : So two questions. Firstly, just on the 2025 guidance, and I want to understand a few moving parts in there. Firstly, am I right to think that when you think about kind of over EUR6 billion, just the P&P EBIT increase gets you to EUR6 billion 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 that -- have you factored that into your 2025 guidance from a policy change perspective? 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, spin-offs or anything at this point?

Question: Muneeba Kayani - BofA Global Research - Analyst : Anything on the portfolio change perspective then at this point and how would you think about it?

Question: Alexia Dogani - J.P. Morgan Securities plc - Analyst : Just firstly, great to see that you're taking action with the Fit for Growth program. Can we expect this to be really about cost mitigation or do you actually think part of that cost saving will drop through to EBIT? That's 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 your 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?

Question: Alexia Dogani - J.P. Morgan Securities plc - Analyst : 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 backdrop that you've benefited from?

Question: Peter Ajose-Adeogun - Morgan Stanley & Co. International Plc - Analyst : 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 US 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 sort of domestic parcel market in the US. Can you confirm where your position is on that e-commerce market in the US? How do 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?

Question: Peter Ajose-Adeogun - Morgan Stanley & Co. International Plc - Analyst : It does. Sorry, go ahead, Melanie.

Question: Cristian Nedelcu - UBS Limited - Analyst : May I ask a couple of questions? Maybe the first one. If we take a step back and think a bit about the EBIT bridge, the growth in I guess, in '25 and in 2027. Could you talk a little bit about your underlying assumptions there around volume growth? You told us about the cost savings than 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 06, 2025 / 8:00AM, DHLn.DE - Q4 2024 Deutsche Post AG Earnings Call And maybe just a quick one, if you allow me, the EUR1 billion savings that you talked about, could you elaborate a bit on the time line for '26 and '27, how much you'll get in? And maybe a bit around the split between the divisions, how much is Express much is Post and Parcel and Others?

Question: Cristian Nedelcu - UBS Limited - Analyst : Okay. And Sorry, just one follow-up, if you allow me, Melanie. Just if I take EUR6 billion guidance for '25, if I add the EUR1 billion cost savings that gets me to 7, 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. So what am I missing?

Question: Andy Chu - Deutsche Bank - Analyst : 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 EUR1 billion in 2027 to kind of forecast or is that sort 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, Melanie, given us a bit of a steer as to the sort of phasing of profitability. How does the EUR6 billion look like Q1 across to Q4, please?

Question: Marco Limite - Barclays Capital - Analyst : Sorry, yes. Struggling with technology. So the first question is on the P&P, outlook on the back of the wage agreement. So for '25, you are reiterating the EUR1 billion on the back of close to 10% price increase and 2% wage increase. But when we think about 2026, are you still confident that you can keep the profitability at EUR1 billion despite much less price increase sequentially and 3% wage inflation? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 06, 2025 / 8:00AM, DHLn.DE - Q4 2024 Deutsche Post AG Earnings Call And then still on the P&P, is the FTE cut that you've announced today something that you have also negotiated with the (inaudible) as part of the wage agreement or is that something that is completely outside that sort of perimeter and it's just up to you and is 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 EUR1 billion cost savings program. But am I right in thinking that this EUR1 billion, if I take basically the medium-term guidance of 7, if I take out the EUR1 billion cost saving program, your underlying assumption or your underlying assumption for the midterm guidance that basically macro is now recovering and you get to the EUR7 billion, thanks to cost savings and therefore, that offers upside in case there is any macro recovery?

Question: Marco Limite - Barclays Capital - Analyst : Okay. Sorry, just to clarify. So in your above EUR7 billion guidance, you are assuming of macro recovery, right? You are not assuming muted macro on the medium term?

Question: Patrick Creuset - Goldman Sachs International - Analyst : Congrats on the strong results, first of all.

Question: Patrick Creuset - Goldman Sachs International - Analyst : And just two questions left from my side. I mean, you're number one in freight forwarding. I think industry where I saw your big peers consistently trade north of 20x PE arguably one of your most valuable divisions and yet it continues to underperform a little bit. I think you have this 35% conversion target, which will put you closer 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 a second question right away, 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, 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?

Question: Patrick Creuset - Goldman Sachs International - Analyst : Okay. So just so I understand, so would you then stick to the 35% target and say, it's likely that in '25, '26 the conversion ratio will go up versus '24? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 06, 2025 / 8:00AM, DHLn.DE - Q4 2024 Deutsche Post AG Earnings Call

Question: Muneeba Kayani - BofA Global Research - Analyst : Two quick follow-up questions. Firstly, just on cost savings. You said you started at the end of 2024, like was there any benefit in the 4Q of '24 from that cost-saving program start? And then secondly, just on supply chain and the signings of EUR8.8 billion, kind of how do I think about that in terms of the duration and the revenue conversion around that?