Release Date: December 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TUI AG (TUIFF, Financial) reported a significant increase in EBIT, up 33% year-over-year, driven by robust customer demand.
- The company achieved strong revenue growth, reaching EUR23 billion, in line with their guidance.
- TUI AG (TUIFF) successfully reduced its net debt, improving its financial profile and leverage ratio from 1.2 to 0.8.
- The company reported outstanding Net Promoter Scores (NPS) and customer satisfaction, indicating high customer loyalty and satisfaction.
- TUI AG (TUIFF) achieved its ESG milestones, including CO2 emission targets and social goals, demonstrating a commitment to sustainability.
Negative Points
- The Western region's performance was unsatisfactory, primarily due to one-time effects such as the valuation of maintenance reserves.
- The company faces headwinds from increased costs related to Sustainable Aviation Fuel (SAF) and Emissions Trading System (ETS) in the Markets & Airline segment.
- The delivery schedule for Boeing aircraft has been delayed, impacting capital expenditure and cash flow.
- Interest costs remain high, with a forecast of around EUR400 million, limiting potential savings despite a favorable interest rate environment.
- The UK market showed weaker summer bookings, down 3%, raising concerns about market share and competitive positioning.
Q & A Highlights
Q: Can you provide details on the impact of the Easter shift and maintenance reserves on the quarterly profit cadence?
A: The Easter shift is expected to impact profits by approximately EUR30 million to EUR40 million, as seen in past years. Most of the 7% to 10% EBIT growth will be realized in the second half of the fiscal year. The maintenance reserve impact in Q4 was significant but is difficult to predict for the future, depending on interest and dollar developments.
Q: What is the outlook for interest costs, and how might a credit rating upgrade affect them?
A: Interest costs are expected to remain relatively flat at around EUR300 million cash, plus non-cash interest. While interest rates are decreasing, much of our interest costs are fixed, and any potential rating upgrade would impact costs in the midterm.
Q: Why are UK bookings down for the summer, and how does this compare to Germany's performance?
A: The UK market is expected to benefit from dynamic offerings, including partnerships with Ryanair, which should improve performance. Germany's strong performance may be slightly overstated due to small booking numbers, but overall, we anticipate positive results for both markets.
Q: Can you elaborate on the free cash flow expectations for 2025 and reconcile them with net debt projections?
A: While EBIT growth and increased dividends from TUI Cruises are expected, investments will also rise, particularly in hotels. Working capital improvements are anticipated, but lease amortizations will remain stable. These factors contribute to a moderate improvement in net debt.
Q: What are the expectations for Markets & Airline EBIT improvements in 2025, and how will international growth contribute?
A: We aim to increase the EBIT margin from 1.5% towards 3% over time, driven by improved contribution margins and distribution cost reductions. International growth, particularly in Eastern Europe and Latin America, will support this, though specific share targets are not yet set.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
