Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successful acquisition of Staci completed two months ahead of schedule, enhancing the company's 3PL capabilities in Europe.
- Belgium showed resilience with stable mail revenue and higher parcel revenues despite overall group revenue decline.
- E-fulfillment activities in Europe and European cross-border sales continued to grow.
- Adjusted EBIT margin improved year-over-year in the Eurasia segment, driven by productivity gains and favorable mix.
- Refinancing of the maturing syndicated RCF with an increased facility amount and sustainability-linked loan format.
Negative Points
- Group operating income for Q2 declined by 3.8% year-over-year, mainly due to pressures in North America.
- Adjusted EBIT decreased by EUR11 million, primarily due to challenges in North America.
- North American logistics business faced a 15% decrease in operating income, with Radial's revenue down by 18% year-over-year.
- Impact of four-day strikes in Belgium led to a 2% shortfall in parcel volume growth for the quarter.
- Consumer confidence in Belgium deteriorated, impacting overall market conditions and volume growth.
Q & A Highlights
Q: The second quarter for Radial US seemed below expectations. Have there been additional customer losses, and what is the current capacity utilization at your centers?
A: The second quarter results are in line with expectations. There were no additional customer losses in Q2, but we are seeing the full-year impact of 2023 losses. Capacity utilization is lower due to past customer departures. We are rebalancing our customer portfolio towards more balanced verticals and different customer sizes, which will improve capacity utilization and profitability over time.
Q: Can you provide more details on the CapEx front? It seems like you're trending below the EUR150 million target in the first half.
A: The current CapEx reflects decisions made 6-24 months ago. We are now challenging our capacity demand forecasts to avoid adding capacity ahead of customer needs. The onboarding of fewer customers in the US has a direct impact on CapEx spending, which has a shorter lead time.
Q: Can you give some color on the significance of Asian volumes arriving in Belgium and their impact on your network?
A: Asian platforms like Temu are now bypassing consolidators and injecting directly into European hubs, including Belgium. This shift from untracked to tracked products improves customer experience. While there is an impact on top-line revenue, the effect on EBIT is limited.
Q: Are there ongoing discussions with Belgian authorities for improved USO conditions?
A: A new USO agreement is needed by 2027. Discussions with the regulator are ongoing, particularly around tariff adjustments. We expect more detailed negotiations to start by mid-next year, focusing on handling declining mail volumes and maintaining efficiency.
Q: Have you achieved all the cost-saving synergies from merging the mail and parcel networks in Belgium?
A: Some benefits have been realized, but negotiations with unions have temporarily halted further reorganization. We plan to restart these efforts in September, which will yield additional FTE and euro savings.
Q: Can you disclose any cost savings targets for the future?
A: We focus on improving profitability through customer portfolio management and price/mix optimization. Cost efficiencies are important but should be viewed in combination with top-line growth efforts. Recent measures in the US, like renegotiated transport rates, will have a positive impact in 2024 and 2025.
Q: Will Staci contribute to EBIT from this month onwards, and does this include potential synergies?
A: Staci is expected to contribute EUR8 million to EUR9 million per month to EBIT, with very limited synergies included at this stage. Synergies will be gradually implemented and are expected to materialize more fully in 2025.
Q: Can you elaborate on the provision for bad debts at Radial?
A: The bad debt provision is due to one customer going bankrupt. This is an unfortunate but normal part of business operations.
Q: What is the percentage of parcels delivered via the out-of-home channel in Belgium?
A: Over 80% of parcels are still delivered at the door. The majority of out-of-home deliveries are currently in manned PUDO points. We expect the volume of out-of-home deliveries to double in the next two to three years, aligning with neighboring markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
