bpost NV/SA (BPOST) Earnings Call Transcript

Ladies and gentlemen, hello, and welcome to the Bnode Second Quarter 2026 Analyst Conference Call. On today's call, we have Mr. Chris Peeters, CEO; and Mr. Philippe Dartienne, CFO. Please note, this call is being recorded. [Operator Instructions] I will now hand over to your host, Mr. Chris Peeters, CEO, to begin today's conference. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us today. As CEO of Bnode, I'm pleased to welcome you to our second quarter results presentation. Joining me today are Philippe, our CFO; as well as Alexandra and Antoine from Investor Relations. The presentation materials were published on our website earlier this morning. We will first take you through the presentation, and we'll then be happy to answer your questions. As always, we kindly ask you to limit yourself to 2 questions each to ensure everyone has the opportunity to participate during the call. Philippe will first take you through our Q2 financial performance. I will then come back to provide an update on the progress of our key strategic and transformation initiatives during the first half of the year and conclude with our outlook for the remainder of 2026. Philippe, over to you.

Thank you, Chris, and good morning, everyone. As you can see from the highlights on Page 3, group operating income for the second quarter amounted to EUR 1.046 billion, representing a year-on-year decrease of EUR 46 million or 4%. Most of this decline was driven by Bpost. In addition to the accelerating structural decline in Mail volumes, which reached almost 17% during the quarter, Parcel volume also contracted by around 9%, reflecting the impact of the 5-week strike that took place through April and which we first discussed with you in early May during our Q1 presentation. At the same time, Paxon delivered solid top line growth of plus 6.5% in Europe, helping to offset both the impact of the previously announced customer churn at Radial U.S. and temporary revenue pressure at Staci Americas. At Landmark Global, revenue was slightly lower year-on-year, mainly reflecting the impact of the domestic strike on inbound flows from Asia to Belgium. Turning to our adjusted EBIT of EUR 29.4 million, with respect to the EBIT strike impact, you can see that our estimate now stands at EUR 25.5 million compared with approximately EUR 15 million when we first communicated on the matter early May, shortly after the end of the strike. Since then, contractual penalties, compensation and other short-term effects have continued to increase the overall impact. Excluding this strike impact, the year-on-year decline was limited to around EUR 3 million, which is better than we had anticipated. Indeed, despite the termination of the 679 activities and the accelerated decline in Mail volumes weighing on Bpost profitability, group's underlying performance remained relatively resilient. This resilience was supported by continued EBIT growth at Paxon despite ongoing top line pressure in the U.S. as well as by the positive contribution from the reorganization and operational measures implemented in Belgium. While these factors were not sufficient to offset the exceptional risk impact, they demonstrate the continued effectiveness of our transformation initiatives and the underlying strength of the business. The strike impact nevertheless has a material effect on our full year outlook and take us below our initial guidance range. Chris will come back to this point in details in a few minutes. Before turning to the performance of our business unit, let me highlight, as shown on Slide 4, that beyond the evolution of EBIT, our adjusted net profit benefited from a EUR 19 million improvement in financial results. This improvement was mainly driven by unfavorable noncash FX effect last year as well as higher net income from our treasury investment this year. These positive effects were partially offset by higher interest expense relating to the bonds issued in June '25. With that, let me turn to the performance of our business unit. I'm now on Slide 5, covering Bpost segment. Revenue declined by EUR 43 million year-on-year to EUR 493 million. Domestic Mail revenues decreased by EUR 29 million or minus 10.4%. Mail and Press volume contracted by 16.8% during the quarter compared to only minus 11.3% last year and 14.3% in Q1 and in line with the mid-teens volume decline guidance we provided earlier this year. The accelerated decline mainly reflects lower transactional Mail volumes following the introduction of the mandatory B2B invoicing (sic) [ e-invoicing ] at the beginning of the year as well as the termination of several advertising contracts. Overall, Mail volume decline had a negative revenue impact of around EUR 45 million, partially offset by a positive price and mix effect of EUR 16 million or 6.4%. Parcel revenues decreased by EUR 10 million or minus 7.9% year-on-year, reflecting a volume decline of minus 9.2% compared to a growth of plus 9.3% (sic) [ 9.1% ] in Q1, alongside with a positive price/mix effect of 1.3%. As discussed during our earnings call in May, Parcel volume declined by around 27% in April as a direct result of the strike. These figures does not include cross-border volume with destination Belgium, which are reported within the Landmark Global that I will comment in a few minutes. Following the end of the strike, we observed a gradual recovery in customer volume with activity improving week after week. By the end of the quarter, volumes were broadly back in line with last year. However, this means that we have not returned yet to the underlying growth trajectory we were experiencing before the strike and particularly in the first quarter. Turning to price/mix. The positive effect during the quarter was driven by a favorable product and customer mix effect during the strike period as large customers did not inject their usual volume as well as a temporary fuel surcharge. These positive effects were partially offset by contractual penalties and commercial claims related to the service quality issue during the strike. Finally, revenues from other activities, including retail, value-added services and personalized logistics declined by EUR 4 million year-on-year. This mainly reflects lower revenue following the termination of the 679 activities at the beginning of the year as well as lower revenue from fines solution, partially offset by higher revenue at DynaGroup. Let's move to the P&L of Bpost on Page 6. Including intersegment revenue from inbound cross-border volume processed through the domestic network, total operating income declined by EUR 44 million or minus 7.1% (sic) [ 7.9% ] year-on-year. On the cost side, OpEx, including D&A decreased by EUR 21 million or minus 3.9%, mainly driven by 2 opposing effects. First, we reduced our workforce by approximately 1,500 FTEs and interim staff, representing a decrease of around 6.5%. This reflects the benefits of the ongoing reorganization of our distribution rounds and retail operations. Second, those -- these savings were partially offset by higher salary cost per FTE, which increased by 2% year-on-year following the March '26 salary indexation. This impact was slightly mitigated by unpaid absences during strikes. As a result, the adjusted EBIT declined by EUR 23 million year-on-year. This includes around EUR 24 million of strike impact, which, together with the termination of the 679 contract more than offset the continued productivity gains delivered throughout our ongoing reorganization initiative. Turning to Paxon on Slide 7. As in previous quarters, the performance reflects 2 contrasting trends. At Paxon Europe, revenue slightly increased by 3% year-on-year. Across our European businesses and geographies, we delivered a growth of around 6.5% compared with 4% in Q1 '26, with several activities continuing to grow at high single-digit rates. This positive momentum was partially offset by the performance of Staci Americas, which is reported under Paxon Europe. Following a contract termination announced in the fourth quarter, year-on-year revenues continued to decline significantly during the first quarter, further impacted by adverse FX effect of around EUR 1.5 million. At Paxon North America, revenues declined by EUR 9 million. At constant exchange rate, this corresponds to a minus 3% decrease, driven by 3 factors. First, the expected revenue churn from customers -- from customer contract termination announced last year. Second, low single-digit negative same-store sales, although this is a slight improvement compared to the first quarter of '26. And third, these effects were partially offset by the contribution from recently signed customers, which generated around EUR 23 million of revenue during the quarter. Let's move to the P&L of Paxon on Slide 8. Against this backdrop, total operating income remained nearly stable year-on-year, while operating expense, including D&A, slightly decreased. The development of our cost base reflects the contracting trends across Paxon geographies with continued growth in Europe on one end and lower activity level in the U.S. on the other end. Importantly, despite continued revenue pressure in the U.S., we have maintained a resilient cost structure. Variable contribution margin remained solid, while additional fixed costs and headcount actions continued to support the profitability. As a result, adjusted EBIT increased by EUR 2 million to EUR 23 million in the quarter, driven by top line growth and productivity gains in Europe and cost measures and real estate optimization in North America, helping to mitigate the impact of the continued top line pressure. Turning now to Landmark Global on Slide 9. At Landmark Global, underlying market trends remain unchanged. However, top line performance was flat year-on-year as domestic strike at Bpost negatively impacted Parcel volume from Asia into Belgium. Volumes were lost to competition during April and remained under pressure in May, while operations progressively returned to normal. On a more positive note, June delivered a strong recovery and growth resumed towards end of the quarter. Other European destinations were not impacted by the strike and continue to develop broadly in line with previous quarter. At Landmark North America, revenue was slightly up year-on-year at constant exchange rate. This reflects on one hand, modest volume growth in the context of a macroeconomical (sic) [ macroeconomic ] slowdown and on the other hand, an unfavorable mix effect driven by a higher proportion of U.S. domestic volumes and lower Canada to U.S. volumes. Overall, Landmark Global operating income decreased by 2% (sic) [ EUR 2.4 million ] or 1.6% year-on-year. As shown on Slide 10, OpEx and D&A increased by 3%, primarily reflecting higher transportation costs linked to volume growth as well as higher Corporate and ICT charges. As a result, despite underlying growth across most of our commercial activities, adjusted EBIT decreased by EUR 6 million to just under EUR 17 million, reflecting a strike impact of around EUR 1.5 million, an unfavorable mix effect, both in Europe with higher share of commercial products versus postal volumes and in North America with higher proportion of U.S. domestic volume and lower U.S.-Canada cross-border flows and higher intersegment charges. Moving on to Corporate segment on Slide 11. Adjusted EBIT was slightly lower at minus EUR 10 million, primarily reflecting higher marketing and communication and rebranding investment during the quarter. At the same time, we continue to exercise cost discipline, reducing our workforce by around 2%, while absorbing the annual salary indexation of approximately 2%. Let me now turn to the cash flow slide on -- cash flow on Slide 12, sorry about that. Net cash outflow for the quarter amounted to EUR 90 million compared with an inflow of approximately EUR 480 million in the prior year period, which benefited from the bond issuance completed in June '25. Excluding this financing effect, free cash flow remained broadly stable year-on-year. The main drivers were the following: first, cash flow from operating activities before change in working capital amounting to EUR 107 million, representing a decrease of EUR 27 million year-on-year, mainly reflecting lower EBITDA. Second, changes in working capital and provision resulted in an outflow of EUR 95 million. Compared with last year, this represents a positive year-on-year variance of EUR 29 million, primarily driven by the timing of terminal due settlement and movement in suppliers' balances. Third, net cash outflow from investing activities amounted to EUR 30 million and remained broadly stable year-on-year. Investment continued to focus on parcel lockers and capacity expansion, the renewal of our domestic fleet and further development of our international e-commerce logistics activities. Together, these elements largely explain the evolution of the free cash flow during the quarter. Finally, net cash outflow from financing activities totaled EUR 73 million. Excluding the proceeds from last year bond issuance, the higher outflow mainly reflects the annual coupon payment of EUR 26 million associated with the bond issued in June '25. Chris, over to you.

Thank you, Philippe. I'm on Slide 13 with the strategy and transformation highlights. At Bpost, overall, the April strikes created significant operational disruption during the first half of the year. At the same time, execution of our transformation agenda continued with strong progress across the majority of our transformation initiatives translating into concrete results. Importantly, these results further validate the strategic direction we have set for the group. Despite the April strikes, the transformation towards a parcel-led operating model remains firmly on track. Following successful pilots, we're now moving into the scaling phase. September marks an important milestone as we roll out later distribution start times and expand the new dynamic distribution model from 4 to 23 distribution offices. We are further strengthening our leadership position in out-of-home through Belgium's densest locker network. We're well on track to reach our accelerated year-end target of 3,500 lockers (sic) [ locations ] with only around 100 locations remaining. At the same time, locker utilization continues to increase strongly, further reinforcing our multichannel proposition for both consumers and businesses. Our retail network transformation progresses further through the introduction of new products, services and partnerships. Over the past months, we successfully launched nationwide partnerships with DIGI, a telecom operator and the home security provider, Verisure, strengthening the relevance and value proposition of our retail network. Nevertheless, progress has been somewhat slower than initially planned due to the ongoing discussions on the 8th Management Contract. And finally, our transport activities continue to gain momentum as a new growth platform. We are steadily expanding the pilot now serving more than 20 internal and external customers with over 150 volunteer drivers. This allows us to further validate and refine the operating model under real operating conditions while preparing for future scaling. Turning now to Paxon and Landmark Global on Page 14. Across our international business, we continue to make progress against our strategic priorities, while each business faces a different set of challenges impacting the pace of progress. At Paxon, commercial development has progressed more slowly than initially anticipated and accelerating top line growth remains a key priority. At the same time, our commercial pipeline continues to strengthen, particularly at Paxon Europe and disciplined cost management has helped protect profitability at Paxon North America. At Landmark Global, our business demonstrates strong resilience, maintaining volumes and defending our key trade lanes despite increasing trade barriers and the temporary disruption caused by the new EUR 3 EU import fee. We're not yet delivering the top line growth ambition embedded in our plans. Hence, protecting profitability remains our immediate priority. To do so, we continue to implement structural cost measures, including workforce reduction and real estate optimization. In parallel, we further execute our mid-market penetration strategy, diversifying our customer portfolio and reducing our dependence on a limited number of large customers. At Paxon Europe, the commercial transformation is progressing more slowly than initially anticipated. Nevertheless, the commercial action plan introduced by the new BU CEO early this year is beginning to generate encouraging momentum with increased commercial collaboration and cross-selling across the organization, yielding a sustained strengthening of the commercial pipeline. In parallel, we are leveraging proven Staci capabilities to accelerate the turnaround of selected legacy sites and customer contracts. And finally, at Landmark Global, we demonstrate a strong resilience despite increasing trade barriers and the temporary market disruption following the introduction of the new EUR 3 EU import fee. Through targeted commercial actions, we successfully restored China-Belgium volumes following the April strike and largely mitigated the impact of the new EUR 3 EU import fee. We did so by increasing our volume share with leading Asian platforms and marketplaces, further strengthening our position in one of our most important cross-border trade lanes. So as you can see, our Reshape2029 strategy continues to advance across all pillars. Let me now translate this operational progress into financial performance. Philippe has just walked you through our Q2 results. Taking a step back and looking at the first half as a whole, 3 key observations that stand out in terms of revenue development. First, a significant portion of the group's revenue decline of around EUR 100 million is attributable to our U.S.-based 3PL activity at Paxon. Combined, Radial U.S. and Staci Americas saw revenue decline by around EUR 62 million year-on-year or minus 14%, including a negative foreign exchange impact of approximately minus 6%. This decline was only partly offset by the strong performance of our European 3PL businesses, which delivered growth of more than EUR 20 million or slightly above 5%. Second, at Landmark Global, we continue to grow volumes despite a demanding market environment. Revenue growth was more modest due to product mix effects, but overall activity levels showed resilience. Third, at Bpost, the anticipated acceleration in mail volume decline to approximately minus 15% resulted in a revenue reduction of around EUR 50 million. Under normal circumstances, part of this impact would have been offset by continued parcel growth. However, the 5-week April strike disrupted that trajectory. Despite a strong first quarter and a gradual recovery in volumes following the strike during which parcel volume fell by 27% in April, first half parcel revenue ended slightly below last year, resulting in an overall parcel revenue decline of around EUR 3 million. Turning now to EBIT. At Bpost and adjusting for the February 2025 and April 2026 strike impacts, EBIT declined by EUR 15 million year-on-year while profitability continued to be affected by the structural decline in mail volumes and the termination of the high-margin 679 contract, a meaningful part of these headwinds was offset by the benefits delivered through our ongoing reorganization initiatives and efficiency measures. At Landmark Global, EBIT declined by around EUR 10 million, excluding strike effects. This was despite resilient top line performance and was mainly driven by an unfavorable business mix evolution, both in Europe and in the U.S. The positive highlight comes from Paxon. Despite a revenue decline of approximately EUR 40 million or minus 5%, largely attributable to the U.S. activity, Paxon delivered EBIT growth of around EUR 6 million, together with a margin improvement. While commercial momentum remains below our ambition, and there is still work to do, this performance demonstrates that the action implemented over recent quarters are moving the business in the right direction. This overview of our first half performance brings me to the outlook update for 2026. I am on Slide 15. Based on our first half results and our current view of the business, we are today revising our full year '26 adjusted EBIT outlook to approximately EUR 140 million. You will recall that earlier this year, we communicated an initial EBIT guidance range of EUR 165 million to EUR 195 million with a midpoint of EUR 180 million. So what has changed since then? The first element is the April strike impact, which we could not anticipate and is now estimated at approximately EUR 25 million. Mechanically, this brings the midpoint of our guidance range from EUR 180 million to EUR 155 million and implies a strike adjusted range of EUR 140 million to EUR 170 million. The second element mainly relates to Paxon. As I have just discussed, commercial development at Paxon is progressing more slowly than initially anticipated. While our first half performance at group level was broadly in line with our expectation, excluding the strike effects, a meaningful portion of our EBIT plan for the second half relied on new business ramp-ups and commercial initiatives that are now expected to materialize later than initially planned. We estimate the resulting EBIT shortfall at approximately EUR 20 million to be mitigated by around EUR 5 million of additional corporate cost-saving initiatives, resulting in a net EBIT impact of around EUR 15 million. So if you think about the guidance revision, there is really 2 distinct steps. First, the mechanical adjustment reflecting the update strike impact, and second, the lower-than-expected contribution from commercial development at Paxon, consistent with the trends we have observed during the first half of the year. Put differently, our current expectation of around EUR 140 million corresponds broadly to the lower end of our initial guidance range adjusted for the EUR 25 million strike impact. With this, we are now ready to take your questions. Again, 2 questions each, please, so that everyone gets the chance to be addressed during the session. Operator, please open the lines.

[Operator Instructions] The next question comes from Michiel Declercq from KBC Securities.

Yes. I have 2 on the Paxon business, please, one on Europe and one on the U.S. The first, on Europe, if we filter out, of course, the customer loss that you had in the U.S., your growth improved to 6.5%. But then if I look at the guidance, you mentioned that you expect some slower, yes, development of business activities in France. What do you mean with this exactly? Is it new customer onboardings or new pillars? If you can elaborate a bit on that because it's a bit different than what we've seen in the second quarter? And then the second question is on Radial U.S. So during the Capital Markets Day, you were quite positive on these new customer onboardings, these smaller customers. Now that seems to be trending a bit below your expectations, can you tell me a bit what the pushback or what the reasons are for this? Why is it more difficult than you originally expected? Or is it just a bit of a delay of a phasing that you just see that some contracts are being postponed into 2027? So if you just can comment a bit on those topics, please.

[ Philippe, you take yours ].

Yes. So on Europe, indeed -- so thank you for your question first. Indeed, your analysis is perfectly right. Despite a growth of 6.5% in Europe, we are seeing that in France, particularly, the development is not at the level that we're expecting. You know that we have a point-of-sale activity, which is not growing -- the sector in general is not growing very fast. But we are experiencing some delays in onboarding new customers on -- for new services. So it's not that it will not happen. It's I would say it's a delay in onboarding those customers.

On the U.S., so indeed, when we launched the Fast Track product, we had a very good traction in the initial part of that. If we now take back the analysis, a part of that was actually due to the fact that the tariffs inclined a number of retailers from outside of the U.S. that were importing directly towards consumers and a couple of fashion brands that started to do local fulfillment. And we could benefit from that momentum that was there at that moment. And we estimated based on that, to some extent, let's say, overexaggerated the growth curve that we could expect going forward. That rebalanced in terms of tariff later on, which means actually that the pipeline was less filled with these kind of opportunities, and therefore, it's developing a bit slower than our expectation that we had at the moment that we made at the Capital Markets Day announcement.

Okay. If I can quickly follow up again on Europe. So you mentioned some delays on new customer onboardings. If you look at the growth of existing customers, the 6.5%, can you break this down a bit? I mean, what part is maybe Radial Europe fulfillment and which part is Staci? And based on your comments, I would expect this growth rate to come down again in the second half of the year. Is that correct?

So in fact, when we're speaking about operating in Europe, now we operate as one. All the activities we told you, we moved from an organization just post-acquisition where in every country, we had former Staci, former Radial, for Active Ants. Now since the beginning of the year, we're really operating those countries as one and all the sales force, all the warehouses are operated as one. So it's very difficult to make the split. And frankly, it would to our -- for us, it does not make much sense to continue looking what is -- what was for the Staci customers versus for the Radial customers. We made that acquisition to reinforce our presence in Europe in all the geographies where we are present, and we added some, and it's exactly what is happening. Particularly to France, what is really -- in fact, there are 2 elements that are penalizing us. As I said, there, there were no former activities from Radial or Active Ants despite the fact that we want to bring that knowledge on e-commerce into France, which is a competence that Staci did not have. There, it's a bit more difficult to penetrate that market of e-com in France so far. While at the same time, the POSM, which is the core of the business of -- we're still having in France, which is really not a growing business. The business as a whole is at best stable. So there is limited growth coming from that kind of activity.

The next question comes from Frank Claassen from Degroof Petercam.

Yes. My first question is on the strike impact, the EUR 25 million negative. Is this it? Or is there any risk of a sort of delayed impact from maybe penalties or loss of market share? So could you elaborate on that? And my second question is on the parcel volume growth. We are back to flattish in May, June. What have you baked into your guidance? What do you assume for the second half? Do you expect to return to growth? And how much growth?

Okay. So on the EUR 25 million, more or less everything that we had to include is included by now. So if we look at the effects that we had was, of course, the direct strike impact during the period itself, then you had a strong decline on the number of clients, of which for most of them, we could regain their trust and they are in a normal operating mode again. Some of them took a bit of time because we had 2 effects there. One effect was that some said, first, you have to fully clean up the backlog before we start to reinject with you, and that took some time. And some other ones had contracted with other players for a certain period of time, an agreement to do for them the last mile. And so it took before that contract ended before they came back. But at this point of time, we have fully recovered of that. Second thing that you mentioned there in terms of penalties, most of the negotiations are in the final state, meaning that legal documents has to be finalized, but I think that the agreements are more or less finalized for most of those penalties and we don't expect new penalties to come in.

When it comes to Parcels growth for the second half, we expect in line with our initial guidance, a low single-digit growth.

Low single digit for the second half as of...

Yes.

So not for the full year, but for the second half, right?

No, no. For the second half.

Okay. Yes.

For the second half.