Deutsche Post AG (DHL) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome, and thank you for joining the Deutsche Post DHL Group conference call. [Operator Instructions] I would now like to turn the conference over to Martin Ziegenbalg, Head of Investor Relations. Please go ahead.

Well, thank you, and a warm welcome to everyone out there. Thank you for joining us on what is fairly short notice after last night's release of our preliminary Q2 numbers. I think if you have the presentation we sent out in front of you. And as announced, we're going to have Frank and Melanie taking you through a brief deck, and then there will be time for any of your questions. And with that, I'd like to hand over to you, Frank.

Yes. Thanks, Martin. Welcome, and good morning as well from my side. Thank you for joining us on short notice. What I would like to do with Melanie is that we go through 3 chapters. First, showing that our Q2 was actually in good shape. We improved our operational performance quite a bit despite the corona pandemic. We have also -- Melanie will introduce a new guidance or a guidance for 2020. We also informed today or last night the market that we will hold our AGM end of April and have a clear dividend proposal. And then I finally conclude later on the outlook. So let's go on Page 3. Here, you can see the good operational performance on fully loaded numbers. We go up from EUR 770 million to EUR 890 million, which is a 16% improvement. But if you exclude our announced one-offs already and a new impact, we have some lockdown-related write-up -- or asset write-downs in 2 divisions, about EUR 100 million worth as well, and that, in total, has impacted our fully loaded numbers. We have not any longer include other COVID impacts because it's very difficult to judge what is really COVID impact. And if you take all these one-offs out, and most of these one-offs are noncash, you see that we have improved the year-on-year performance by EUR 220 million. So that, of course, is very pleasing us as well that we could hold the line so well and even improve our profitability in a very difficult economic environment with the pandemic. On Page 4, you see that it's not just based on the performance of the 1 division. It's actually based on the performance of all divisions despite that one went down, but I'll come to that in a second because there are also good news in that. P&P Germany has continued to demonstrate the self-help measures that has led to a very healthy improvement in line with what we have seen in the first quarter. Express has improved as well despite the quite difficult volume situation at the beginning of the quarter. DGFF has a very good performance. There you can see our good connection to cargo airlines. The Express DGF combined, of course, are a very reliable partner for cargo alliance, and that enable us to secure significant freighter capacity, and that helped Express and DGFF. Supply chain is down, but we had a onetime hit from our U.K. business delivering beer to -- and liquor to pubs. And of course, that was closed. If you exclude that, we had a pretty good result actually in that in a moment where many of our customers will report heavy losses in the second quarter. So we were able, despite significant volume drops coming from fashion retailer, from automotive, from these activities we have with the pubs. We have -- we're mitigating that and kept still a profitable business, which is quite encouraging. And e-commerce solutions, of course, is benefiting from the e-commerce boom, and it shows that we have put the right strategy in to do also domestic deliveries in other markets and, of course, create a European business here as well, which is beneficial. And this number has been delivered despite that we had massive lockdowns in countries like Spain and India. So therefore, the numbers are pretty good, I believe. On Page 5, you see the volume development, as we have introduced at the first quarter. You see here the development of volumes. Mail volumes are still down more than we expected due to direct mailings, which are still, of course, the advertising is not to the normal level. Regular mail is more or less normal with a normal expected decline. Parcel volumes are still up, not as much as they were in -- around Easter, but still higher than what we have expected originally. So -- and you will see that now over the summer, how lasting that effect is. In Express, China, we have seen good growth already. Europe is now positive as well. And in June, we actually had global volumes were even up year-over-year. So we really see a recovery of volumes. Of course, at the beginning, driven by B2C, but now we see also that B2B volumes are coming back. On that basis, we felt it would be a very good sign to our colleagues around the world that we give them an extra bonus. Everybody gets the same if you are a full-time employee. They have demonstrating our purpose, connecting people, improving lives. They work extremely hard to keep the world moving. And we felt, as a Board, it's appropriate to reward that by giving everybody a flat EUR 300 bonus around the world. Of course, that's more valuable in the emerging countries than in the rich countries, but we felt that's a strong sign of confidence. And thank you to our people that they have done an outstanding job. Nevertheless, we stay prepared. We are working with the team, and I do that myself with the CEOs of the divisions saying how can we prepare the best way for a potential second wave, even if that's not the most likely case that this happens, but I think it's not over yet. And therefore, we will stay tuned for a potential another outbreak. And with that, I hand over now to Melanie to explain a little bit more what we have introduced last night with regard to the guidance.

Yes. Thank you very much, Frank, and good morning, everybody, also from my side. Thank you for joining us on such short notice. You will have seen that last night, we introduced guidance for the year 2020, and our new guidance is in a range between EUR 3.5 billion and EUR 3.8 billion reported EBIT for the group for 2020. On Page 8, we have tried to better show you what that implies with regard to the underlying operational performance because we do have a number of one-offs. So first of all, when you look at the starting point, you can see on the left side of the page that, for us, the underlying starting point, 2019 is a bit over EUR 4 billion. When you look at the right side of Page 8, you can see that we expect for StreetScooter around EUR 400 million. Most of that is noncash, in line with what we had said previously. What is new is the EUR 300 million in one-offs we now expect for 2020. Those EUR 300 million include, first of all, the EUR 100 million asset impairments, which we booked in the second quarter. Those were asset impairments predominantly in supply chain and e-commerce solutions triggered by the lockdown consequences, and we don't expect at this point in time any more of such asset impairments. So EUR 100 million asset impairments booked in the second quarter and then EUR 200 million in staff costs related to the onetime bonus payment, which we anticipate to book in the third quarter. So if you take those EUR 400 million and EUR 300 million one-offs out, you will see that our target in terms of operating performance is between EUR 4.2 billion and EUR 4.5 billion. You will have noticed that difference from the first quarter we no longer differentiate between COVID effects on the operating results and underlying operating results because we saw in the course of the second quarter that this distinction became increasingly artificial and less and less meaningful. I don't think anybody would be able to say what the airfreight market would have looked like under normal circumstances in June 2020. So we have abandoned this distinction. The EUR 4.2 billion to EUR 4.5 billion include all operating COVID impact, also the EUR 210 million we showed you in the first quarter. On that basis, we have quite a wide range still for the guidance for the rest of the year, which, again, I don't think is surprising. There is still a lot of uncertainty out there. When you look at the development in the different divisions, we have some divisions where the market is obviously still enormously distorted, like in airfreight, where it is difficult to predict how the second half of the year will play out. But as a Management Board, we feel quite comfortable with this underlying range of between EUR 4.2 billion and EUR 4.5 billion for 2020. Turning to Page 9 and the other elements of our 2020 guidance. When you look at the free cash flow number, EUR 1.4 billion, that's exactly the same number we had given you in our old guidance, but there are, of course, a number of moving parts. In the old guidance, we had included EUR 500 million for the 777 Express re-fleeting exercise. That number has now come down to EUR 300 million because we have been able to do some alternative financing structures for 3 of the 777s which came into service this year. At the same time, we also have EUR 200 million additional personnel expense due to the bonus. So those 2 effects are neutralizing each other. And I think on that basis, the EUR 1.4 billion is quite an encouraging statement, and you will see in a couple of slides what this is based on. It's actually based on the very good cash flow performance we have now seen in the first 6 months of 2020. Looking at CapEx. The old guidance was EUR 2.6 billion underlying core CapEx plus EUR 500 million for the 777. We have now put both things together into 1 bucket. It's EUR 2.6 billion plus EUR 300 million. So our underlying core CapEx guidance is unchanged because given the strength of our balance sheet, the continued growth in the business, we actually plan to carry on with our investment projects, and no changes to the tax rate compared to the previous guidance. Turning to Page 10 and our 2022 guidance. You will see that we have now introduced a wider range of scenarios because, obviously, nobody knows what '22 will look like. If things recover relatively rapidly and we see a V-shaped type of recovery, we are still confident that we will get to the minimum of EUR 5.3 billion in EBIT for 2022. Should the recovery be more slowly, more of a U-shape, should we be in '22 more around the 2019 global economic level, we would anticipate to be more in the order of magnitude of EUR 5.1 billion. And should there be a really slow recovery with setbacks, more of an L-shape type of recovery in the range of about EUR 4.7 billion. On the right side, the cumulative free cash flow and the cumulative gross CapEx guidance that has not changed compared to our old guidance. So also based on the good free cash flow performance we have now seen in the first 6 months of 2020, we are still aiming for free cash flow cumulative between EUR 5 billion and EUR 6 billion. That already takes me to what happened with regard to cash flow and where do we stand with regard to liquidity, Page 12. In the first quarter, we had a reported free cash flow of a bit over minus EUR 400 million. That was actually underlying a EUR 500 million improvement compared to Q1 2019. And we're very pleased that this positive development has now continued in the second quarter. Our free cash flow in the second quarter was more or less EUR 500 million. And on that basis, we have achieved a positive free cash flow for the first 6 months of 2020. Most of you follow us for quite some time. So I guess most of you are aware that this is quite unusual for us. We normally tend to have a negative free cash flow in the first 6 months of the year due to some seasonal effects. So we're really happy that in the year 2020, we managed to get to a positive free cash flow for the first half year. I think no totally surprising news with regard to the rest of the balance sheet. We did the bond issuance with May. That's on a very favorable condition, EUR 2.25 billion as an additional safety buffer. So we felt that at the end of the second quarter, we were really in a very stable and safe position with regard to liquidity. And that was, of course, an important factor when we discussed the dividend again in the Corporate Board and Supervisory Board yesterday. And the proposal is to pay a dividend at the same level as last year, EUR 1.15 per share. This is fully in line with our finance policy. We are honoring dividend continuity. It was very important for us also in the COVID year to pay a dividend to keep it on last year's level. But I think it was also important that we took a balanced decision with regards to the different stakeholders, which is why we are now proposing a dividend on the same level as last year, which corresponds to a 55% payout ratio fully in line with our finance policy. Last important information on Page 13 is that we indeed have a new date for our AGM. We plan to hold it on the 27th of August in a virtual format, and invitation for that will go out shortly. And with that, I hand back to Frank for the conclusion.

Yes. Thank you, Melanie. So on Page 14, what we already said, EBIT is back to growth. In the second quarter, we have introduced a 2020 guidance because we believe we have now more visibility. We have given now a date for the AGM and a clear dividend proposal, which is in line with our policy. So if we now move forward on Page 15, I said months ago already that we are in great shape or better shape than ever before, and we really now see the strength of our portfolio as much as the strength of our workforce. And as you know, we have invested heavily in trainings to become employer of choice. The priorities going forward remain the same: protect our people, provide great service, manage liquidity in the best possible way so that we have the strength to continue to invest into our operations. We are -- believe that with the guidance, we have not given any significant one-offs. If you exclude them, we have a pretty healthy EUR 4.2 billion to EUR 4.5 billion, which would be -- I think without the one-offs of StreetScooter and the others, like the bonus payment, I think that would be a very good result. And our strategy is very robust against the situation. So we have the purpose and the values, and they have worked. And we have, as we can see on Page 16, also a very clear strategy for any scenario regardless if it's L, U or V. We believe that our purpose, our vision and our values are spot-on, and we have [ seen that and experienced ] that from our people in the last months. The Excellence. Simply Delivered. They focus on performance, the execution is the right one. The focus on our profitable core is the right one, and the digital agenda will definitely only accelerate. We have seen that having 150,000 people working from home, and that worked very well. So the digitalization will only accelerate. So to conclude, we believe that we have a pretty solid investment case along all the 3 dimensions, be it earnings, cash flow and shareholder return. And with that, of course, I'm happy to report today that we really had a pretty strong second quarter. And with that, I'm interesting to hear from you, your Q&A. Thank you very much.

[Operator Instructions] The first question comes from the line of Andy Chu with Deutsche Bank.

Three questions, please, if I could. Frank, maybe just for the first question, just to sort of maybe talk a little about your sort of view on how far you can push airfreight rates in the future. I think you made comments, presentations, including Q1, that you wouldn't really want to push freight rates up too sharply. But I wondered why that would be the case. Surely, you want to sort of maximize profitability. It's a sort of around-the-fringes quite a commoditized industry. So maybe just some views around airfreight rates, please. Secondly, in terms of the union negotiations with Verdi. I understand that they sort of kicked off today. So I just wondered what your view was on that process, and importantly, when do you think that process could be concluded. And then just sort of a point on -- the final point on DSC, on the supply chain business. I think you have got quite a big contract that you renewed with the Jaguar Land Rover last year. And then there were some talks in the U.K. about some quite heavy redundancies on that Jaguar Land Rover contract in the U.K., and I just wondered if that was material. Had anything been booked into Q2, and could there be any impact, therefore, in Q3?

Yes. Thank you, Andy. So first, on airfreight, what we see at the moment that rates are coming down again, and we have not overstretched the envelope. The demand for cargo space was very tight, and of course, that leads to significant price increases. Now the rates are slowly coming down again. Volumes are increasing because there are some passenger flights coming back as well and even some customer share uplift, which are converted. What we should assume for the second half that rates will remain higher and that there's, of course, an opportunity for forwarders. It's always good if the uncertainty is high and transparency is low. These are traders, and you have seen that with your own trading decks as well. At the moment, it's -- nobody knows what happens tomorrow, and that is, of course, good for people who have potentially better insights somehow. So -- and of course, forwarders have more insights because we know what is happening in the market, and we know what people are willing to pay, but we didn't overstretch that, and we will not follow a different strategy. So this year is not a year to maximize EBIT. What is important is liquidity, but we will not push the envelope. We know that we will see customers later on again. And we will not do the maximum yield management just to disappoint customers because they know that there will be also a normalization sooner or later. So that -- the markets are tight, and that's the reason why customers have to pay for this space if they have urgent needs. And of course, certain stuff has been flown, which is usually on shipping vessels. On the union negotiation, actually, we start only -- the contract lasts until end of August. So it starts later. This year, they are not starting now. And we have to see what is happening in that situation. I'm modestly optimistic that we will get a reasonable approach from the union as well somehow. But the bonus is independent from that because we felt we should appreciate the hard work of our frontline people anyway. And we do that because I think it's a right signal, and we have talked about [ free ] bottom lines now for more than a decade. And that's a moment when you have to demonstrate that as well, and you can only say thank you. You have to let -- participate and what we have so far seen now, the internal communication rooms is very positive. It's very well received. And that's the idea. It's an investment into our workforce. And the last one, maybe, Melanie, you can elaborate about the Jaguar Land Rover situation a little more.

Yes. So I think, as you know, our supply chain is a bit different from our network operations because we have dedicated sites for customers. And so if a customer take the decision to restructure the business, for example, because volumes are down, that also has implications on our sites and our workforce. So on that specific case, we are in negotiations with the social partners, and we're not going to comment on any specific numbers. But obviously, JLR is an important customer of ours, and we will work very closely with JLR to jointly get through the current situation. Have we booked anything on JLR? Nothing material in the second quarter. The EUR 60 million asset impairment in supply chain was related to the pub delivery business in the U.K. where, obviously, we were negatively impacted by the closure of the pubs. That was, of course, for the EUR 60 million asset impairment in the second quarter.

And Melanie, is that the trade team business that you're alluding to when you say the pub business?

Yes. Yes. Yes.

The next question comes from the line of Cristian Nedelcu with UBS.

Three, if I may. Firstly, on your FY '20 EBIT guidance, it seems to imply that in the second half, the EBIT in DHL will be flat year-over-year. Now we do have some tailwinds here. I guess on the one hand, you're seeing volumes recovering. Also looking at the commercial airline flight schedules, it looks like the airfreight market will continue to be tighter than usual. So I guess can you elaborate a bit on the headwinds to EBIT you are seeing in the second half? Is it still concerns on supply chain for the second half or anything else in there that we should keep in mind? Secondly, maybe a question on Express. Could you offer a bit of color on the service levels for TDI over the last few months? I believe, historically, DHL Express was using a bit more commercial airlift in contrast to UPS and FedEx. So I guess I'm trying to get a glimpse of how you're seeing the market share developing these days. And I'm asking this as one of your competitors recently reported a 10% volume growth in international priority, which seems to be a bit better than TDI. And lastly, looking at your Parcel business in Germany, what signs would you need to see to believe that the acceleration in online sales is more structural in nature, and therefore, it makes sense to invest more CapEx in capacity there?

Melanie take the first, and I take the second and third. So on Express, the service quality has been great, and we have covered the shortfall in commercial allied by more ACMI agreements for cargo airplanes, which we actually were able to secure. We also fly more rotations on certain routes and using airplanes for other destinations. But overall, service quality has been outstanding. I have to say the team has done magic stuff somehow if I look into the detail. And I'm really pleased by that, and I hear that from customers as well. You have seen that we have seen a good positive development in course of the quarter. And that is, I think, very encouraging, and I think that we'll go in the second half in the same way. On P&P, I think we need still to see the summer break. We had a lot of new customers, marine consumers who were first time e-commerce customers, the other people, in particular. We're still going to shops, and they started. They probably have put their credit cards now into the machines, so -- and they are now trusting the system. If that is lasting, we have to wait until the summer is over. I think the third quarter will tell us if we see a structural acceleration of e-commerce, or if that's just a period which was just driven by the pandemic. And I think with the 3 quarter -- third quarter numbers, I think we can really say if that's a structural change or the structural acceleration or is that just a temporary effect.

And then with regard to the 2020 guidance. So when we look at the state of affairs in the different DHL divisions, we have some very encouraging trends at the end of the second quarter, but there's also still a lot of uncertainty out there. So when you look at the Express volume development, as Frank showed earlier, we really saw that we are back in growth territory in June. That is driven by e-commerce to a very large extent, but we also see the B2B volumes slowly getting out of the very depressed state we had in April, May. So if that trend continues, that should clearly be very positive for the second half of the year. But that obviously depends on how the pandemic is going to play out. On the forwarding side, the market is hugely distorted. Demand is still down. Capacity on the airfreight side is down even more, which led to an extreme situation in the second quarter. How that is going to develop in the second half of the year is difficult to predict. So I think it's better to be a bit on the conservative side here. With regard to supply chain, we don't expect a very fast recovery here because we have a number of customers, a number of industries like automotive, where there's still not too much good news. So we are more on the conservative side with regard to supply chain numbers for the second half of the year. And last but not least, e-commerce solutions, very encouraging development in the second quarter. They achieved breakeven despite the EUR 30 million asset impairment, and we clearly see e-commerce as a structural growth driver in the second quarter. Here, as Frank just mentioned for the German Parcel business, we probably have to see in the course of the third quarter how much of this acceleration is going to be there for the longer term and how much was temporary. And I think given all those moving parts, we had a quite wide range now for the DHL divisions for the rest of the year.

Great. And for the macroeconomics, I think -- so despite that, we feel comfortable with the guidance we've given here. There is still significant uncertainty. So if the consumer demand is not coming back, that will definitely will impact as well us as many others. If a massive second wave of lockdown comes back, that will undermine the trust citizens have in their respective governments because they say -- they said it's getting better now, and that will lead to significant increase in unemployment. We probably see that as well, but the second wave will impact that even more, and then my people say, okay, we better keep the money in our bank account instead of spending that at Christmas. So that's the uncertainty we are living in. I'm not saying that this is very likely. But if we say, in 3 months, we gave you a higher number, and now these things are happening, you say 'Why you have not participated that before?' Yes, you're right. We had better anticipated that this could happen, how likely as we will see. So that's the reason I think we have to stay prudent in what we are doing. And I think we are doing that with our guidance we are giving today for 2020.

The next question comes from the line of Neil Glynn with Crédit Suisse.

If I could ask 3 quick ones, please. The first one, with respect to Express. I think this year, you had expected about 30% of your volume to be B2C. Just interested, given the dynamics in the second quarter, could you help us understand how big a proportion of the second quarter B2C actually was for Express? Then second question. As obviously, airfreight rate strength has been a key feature in the second quarter. And I think with capacity on the passenger jets, on the wide-body side remaining pretty scarce through the rest of the year. I wonder to what extent you're getting feedback from customers about shifting from air to ocean as they plan the second half of the year leading up, for example, towards the Christmas period. And then a third question, on disposal proceeds within your cash flow guidance for the full year. Usually, we have around EUR 200 million plus of disposal proceeds annually. I guess it's not a great time to be selling assets, even if they are small assets within the portfolio at the moment. So just interested, do you have anything significant in mind for disposal proceeds for the rest of the year?

Yes. So I start with the second, and then Melanie answer the first and third. So on -- in -- what will -- the tightness of the airfreight market due to the missing intercontinental flight will remain tight. Even if customers are now starting to divert volumes to ocean, there is still -- there will still be a very tight market. Certain stuff has to be flown. Certain products have too much high value that people say to have them 4 weeks on vessels is not a smart way to finance my supply chain. So they will pay the price without a doubt. And therefore, what we will see is we will see a pretty strong demand for capacity in Express and DGF in the air, and prices will stay higher than they are normally. So that's what -- despite that -- we tell even customers, you have to be smarter in preparing for the Christmas season. We see that now that ocean volumes are coming back now. Replenishment of warehouses needs to happen. So we see that coming back. I still think that we see in the second half definitely a very strong price or very high price level or relatively high price level for Express product as much as for forward.

And with regard to the first question, B2C share and Express, 30%, it was clearly higher than that in terms of volumes in the second quarter. When you look at the overall volume development, and we will give you the usual set of details when we come out with our regular set of figures on August 5, but just directionally, in April, shipments were overall down in Express. [ By May, it was relatively on last year's level. In June, we were back in growth territory. ] [ What happened in May and June was really driven by B2C. ] So B2B was in decline in the course of the second quarter, less so in June than in April, obviously. But the growth element now in June towards the end of the quarter was driven by B2C. And as a consequence of that, the share of B2C in the second quarter will be more than 30%. And we will provide some more color on that on August 5. With regard to the disposal proceeds, yes, so I mean this normal, around about EUR 200 million between gross CapEx and net CapEx in the cash flow statement. This is a lot of small stuff. A big chunk of that is disposal of vehicles. We expect that number actually to be lower this year. So for example, here in Germany, we are holding on to more vehicles, a, because of the market; but b, because we need them to cope with the parcel wound. So the number will be lower than the average trend over the last years, and we don't plan any significant disposals at this point in time.

The next question comes from the line of David Kerstens with Jefferies.

Also 3 questions from my side, please. First of all, with -- on mail volumes, with mail volume may be coming back a bit slower than expected. Do you see a risk of accelerated e-substitution with everybody working from home and digitalization picking up as you indicated? Then secondly, I was wondering if you could provide maybe a bit more color on the drivers for the much-than-expected turnaround in earnings momentum in DHL forwarding and freight, and particularly, what you did see in terms of airfreight yield development. And then finally, with regards to the 2022 guidance, the difference between the V-shape and the U-shape recovery is only 4%. I was wondering what businesses do you -- would you expect to be most affected on the U-shape recovery? And are there also offsetting factors elsewhere that explain a relatively small difference of only 4%?

So with regard to the mail substitutions, so currently, the volume drop, which is faster than we anticipated, is coming from direct mailings, which is not -- that is a situation we have seen for a while. That doesn't come from retro mail. I think it's too early to say. We will see that in the third quarter as much -- as I said earlier about parcels, if that is a structural acceleration of the decline. But on the other side, you're right, the second and the third quarter are also a good stress test for how well we can mitigate a faster deceleration, the faster -- the capacity decline in mail volumes potentially because we have seen that in the second quarter and we might see that as well in the third quarter, not knowing yet. But at the other side, we see a significant faster increase in parcels. So the conversion from a mail business to a parcel business is potentially accelerating. And therefore, it's a good stress test for the longer-term outlook, which I think is good news actually for investors to see. We are testing already something at the moment, which mean we had anticipated more in 2 or 3 years' time. But as I said, we don't know yet. Maybe volumes are coming back to the normal level. On the airfreight, yes, the yield has been better, of course. We don't know the final numbers yet. It's preliminary numbers we are communicating, so I can't say too much in detail. I have not seen the final numbers either, but I would assume that we had a pretty good yield in airfreight, and that's driven by, of course, by the market. But just -- if you -- that's the old problem. If the rates are very much down, the markup is not much higher. And of course, the markup might be the same, but relatively, if the rate is higher, the markup is higher. So that's somehow where we're benefiting as well from that situation. And that's true for both, for air and ocean, somehow. So with that, I hand over to Melanie for the third question.

Yes. So I mean, of course, we have done a lot of internal scenario planning and modeling and stuff. But I think what it boils down to the fundamental essence is that a lot of the improvement we see for the next years is still driven by our self-help agenda, which is, of course, easier in an environment where you have better volume growth. So for example, getting the GP to EBIT conversion up in Global Forwarding is easier when you have better volumes. But a big chunk of the road map for '22 is driven by our internal improvement agendas, and that explains the relatively small difference between the V- and the U-shape scenario.

The next question comes from the line of Muneeba Kayani with Bank of America.

A number of my questions have been answered. But on free cash flow, so you've maintained the EUR 1.4 billion guidance for this year. But your EBIT guidance is lower versus what you had earlier this year. So can you explain the moving parts here, and specifically, what you're seeing in terms of customer payments, and if you've seen any impact from that yet and how you're seeing that going forward? Secondly, on the airfreight benefit, can you explain how it's impacted the Express or the portion of the benefit on the Express versus the DGFF businesses in terms of rates and yields, please?

Yes. So first of all, thank you very much for this question on the free cash flow because I think that is indeed one of the encouraging messages we wanted to share with you that we are sticking to the EUR 1.4 billion despite the lower EBIT guidance. What is that based on? I think it's based on the fact that we have now also seen in the first 6 months of the year that we are able to really get the EBIT performance converted in a much better way into free cash flow than what we did in the past. That is really based on the work we have done over the last year to drive up our cash flow performance. And it is also based on the fact that we have extremely focused on the whole working capital and particularly on the receivables side. Since the beginning of the crisis, Frank has led the operational task force, and we have had a finance task force focusing on the receivables side. So far, we have not seen a material deterioration in customer payment behavior. We are watching this like a hawk because, obviously, we are still concerned that there may be some customer insolvencies in the third quarter. So I wouldn't say that we are out of the woods yet. But looking at what we have seen in terms of aging and receivables developments so far, it has been amazingly stable. To the airfreight Express question. So in airfreight, with us being a broker, we have obviously passed on the increased freight rates to customers. I think what has really helped us here is that we secured capacity quite early on. And given our size as a forwarder, our good relationships with the carriers, we have been in a position to get capacity in this extremely tough market, and that has really helped us on the forwarding side. In Express, we always sell off excess capacity into the forwarding market. The Express colleagues think about that as a cost offset. And that is also how we think about it in the second quarter, where we actually had additional costs on the flying side. We had to compensate for the nonexisting passenger flights on certain routes. We had to deal with the extra demand outbound from Asia by putting on extra carriers in the Express dedicated network. And here, we have then been able to offset part of this extra cost through ACS sales into the forwarding market.

The next question comes from the line of Alex Irving with Bernstein.

Two questions from me, please. So first on P&P, the EBIT growth is quite strong year-on-year. By the fact that in Parcels, you will have had a B2B to B2C mix shift. Would be interested to know what actions you've been taking to offset this margin dilution, please. I know you experimenting with, starting for or making any longer-term changes to your operations and whether it's for a different profile or demand profile in the years ahead. And then secondly, on DGFF. So I'm just trying to understand it a little bit better, we had EBIT up year-on-year while market cargo volume is down, what looks like, call it, 20%-ish but less than EBIT, more on air. Be interested to know what contributed to the better performance were, please, and how much of this was due to gross profit. Are you taking volume share? Do you expect this to continue? And how much is any cost savings or conversion improvements? Basically trying to get a feel for what are the sustainable in the better DGF performance, please.

Yes. Mail on P&P, the effect we see here is the consequence of all levers we have established in the last 18 months. It starts with proper pricing. And of course, we have seen a good, healthy development as well from many small customers who are new as well because they -- their stores were closed, and they started to go online as well. We have seen and we helped even some of them to get connected to some websites where you can really sell your products that helped as well somewhat. Then the indirect costs are coming further down. The operational performance is -- productivity improvements that has many different aspects, one is, for instance, that we have transferred the light products from parcel delivery to joint delivery or even to mail delivery, which helped to keep productivity up. So it's a whole range of activities. So in P&P, despite the changes in the mix, we have seen exactly what we have expected as well, and you can see that in our guidance. EUR 1.5 billion is a logical consequence despite that we are paying a bonus that is very close to the original number we have given you. Then we had -- the old guidance was [ EUR 1.6 billion ]. So that's a consequence of a great performance Tobias Meyer and his team is doing here. On DGFF, these have several factors. We have not seen the final numbers. If we have really gained market share, we don't know. We believe that we are well-equipped, and some smaller forwarders will suffer by having not access to cargo airplanes. As I said, we have a very good relationship to many of them due to the scale we have and the DHL Express operations we have. And therefore, we believe that we have better access and more capacity than many of our competitors because we have more control of more cargo airplanes. And that's the reason why we believe we had probably pretty good yield in comparison to others. We had good capacity, and that's -- and we, at the same time, have improved conversion as well without a doubt, I would guess so. But I have not seen all these detailed numbers because when we saw the number -- preliminary numbers yesterday, we felt, okay, they are so good that we have to say something. And the detail has to -- we have to wait until early August. But from looking into the monthly numbers, this is what I've said is probably what had happened. But more detail, please wait until early August.