Good morning, ladies and gentlemen. Welcome to the PostNL Q2 2025 results. At this moment, all participants are in a listen-only mode, and after the presentation, there will be an opportunity to ask questions. Now, I would like to hand the conference over to Ms. Inge Laudy, Manager Investor Relations. Please go ahead, madam.
Thank you, operator. Welcome all in today's analyst call. PostNL published its Q2 and Half Year Results 2025 early this morning, and with me in the room are Pim Berendsen, our CEO, and Linde Jansen, our CFO, to present these results to you. Pim, the floor is yours.
Thank you, Inge, and welcome everyone to the call. Let's start with an overview of the key developments in the quarter, and then further on in the presentation, you'll get more insights on the key financial KPIs that will follow later. First, the main business drivers per segment: at parcels, revenue was up 2.8%, with volume growth of 2.2%, and different growth rates in domestic and international volume, and we see the trend of further client concentration continuing. From a price mix perspective, it is really encouraging to see that we have, again, a positive price mix driven by regular price increases and our yield measures. Our targeted yield measures are coming into effect, and evidence our strong focus on customer value, and as anticipated, we see a slight loss in market share. The pre-summer peak was a busy period, and we have been able to manage this very well.
When looking at our cross-border business at Spring, revenue from intra-European activities, obviously one of the strategic initiatives that we launched for 2025 and beyond, showed promising growth. For mail in the Netherlands, as you can see on the slide, volumes declined by 8.3%. Linde will explain this later on. I would like to focus on the progress towards a future-proof postal service in the Netherlands. At the end of June, the minister made some announcements on this topic. First of all, we appreciate the minister's comment to the public importance of the postal service and the speed with which he has put forward a proposal for change. At the same time, we had to conclude that his steps show insufficient progress. Let me explain why. The government has rejected our application for financial contribution for 2025 and 2026.
According to European legislation, a provider of a public service is entitled to compensation if the obligations impose a disproportionate financial burden. Given the major impact on PostNL's financial position, we will appeal the rejection and file for preliminary proceedings today, in which we will ask an advance payment and a swift legal decision. Secondly, the minister has released his view on the future of the postal market in the Netherlands. Although both the recent ACM study on the postal market and his letter confirmed the urgent need for change, the proposed adjustments are too little, too late, and are still surrounded by a lot of uncertainty. Surely, also, we have to take into account the elections that are upcoming in the Netherlands. The proposal that is on the table would cause the Universal Service Obligation to remain loss-making until at least 2029.
That's why we have to conclude that insufficient progress towards adjusted postal regulation has been made. The delay and uncertain timings around the adjusted regulation also have resulted in a significant goodwill impairment of EUR 40 million at Mail in the Netherlands and have also led to the decision not to distribute an interim dividend. Bottom line, we are still obliged to maintain an unsustainable network that no longer fits today's demands. We do not rule out further action if nor compensation nor advance payment will materialize. Obviously, in the meantime, we'll continue to make every effort we can to maintain a reliable service and remain committed to an accessible and financially viable postal service for everyone in the Netherlands. If we then move to our key metrics on the next slide, let's start with the key KPIs.
Revenue in the quarter: EUR 807 million, which is 1.5% higher than in the same quarter last year. Normalized EBIT came in at EUR 11 million, supported by some incidental effects at Mail in the Netherlands that will be discussed later. Free cash flow was minus EUR 47 million. That does include some phasing elements. Normalized comprehensive income, that includes, for example, tax effects, was EUR 5 million. We will discuss the results in more detail as we move on to the performance of Parcels and Mail in the Netherlands. To the non-financial highlights and some ESG highlights for the quarter, the share of emission-free last-mile delivery improved by 6% points to 33%. To facilitate growth in Belgium, we have recently opened a new sorting and distribution location in Hooglede, in a building that is completely climate neutral. Looking at NPS, we have kept our number one position in relevant markets.
Reduction in physical workload is one of our key strategic initiatives. We invested in equipment and partial automation of processes, and all 13 roll cage tilters have now been installed according to the plan and are fully operational. The out-of-home strategy is gaining momentum, and the utilization rate, defined as the total amount of parcels during the week as a function of the locker capacity, is increasing and is now at 48%. Furthermore, we've announced an intensified agreement with the Dutch supermarket chain Hoogvliet for over 70 lockers at their convenient locations. Now, let's look at mail in the Netherlands in a bit more detail and specifically look back at the recent developments towards a future-proof postal service. Obviously, I've already concluded that progress is insufficient for us. On slide 7, you can see where we are.
The proposal of the minister is a step in the right direction, but it's too little, too late, and still economically unviable. Let me summarize the main elements of the proposal. The extension of the service framework to D+2 for the Universal Service Obligation can come into operation only as of July 1, 2026, with a next step towards D+3 potentially to be made at January 1, 2028. This step is, however, conditional and would require PostNL to show a delivery quality of 90% for D+2 as per January 1, 2027, and at a volume decline of on average 7% annually from base year 2024. There are two conditions to make the step from D+2 to D+3. Obviously, this also means a delay compared to the roadmap that we have presented earlier and also still shown to you in February.
Moreover, the proposal contains a quality condition of 95%, which is simply not feasible in practice. More importantly, the proposal does not include any arrangements for the financing, nor a financial safety net, nor clarity about financial contributions. It is furthermore still a proposal with a lot of uncertainty around timing, as the political process is far from being where it should be. Decisions have to be taken, but first, lower legislation has to be designed and drafted. Early September, there will be follow-up meetings, a roundtable, and then a debate, but lower legislation is not yet at the table at that point in time. Persisting uncertainty remains in a period with upcoming elections. On top of that, our application for financial contribution was rejected.
To remind you, we asked for a compensation of EUR 30 million in 2025 and EUR 38 million in 2026, based on net cost compensation, as PostNL is being asked to maintain a network that no longer fits today's demands. According to European legislation, a provider of this public service is entitled to compensation if the obligations impose a disproportionate financial burden, which is clearly the case at PostNL. All in all, we will take firm next steps, and we have a clear action plan in mind. As financial compensation remains necessary during the period of transition, with amounts dependent on timing and scope of further decision-making. Today, we have launched an appeal against the rejection of the financial contribution and also have asked for preliminary proceedings. We will take further steps should essential improvements fail to materialize on short notice.
In the meantime, we will continue operational preparations towards a financially viable and future-proof postal service. Slide 8 shows, indicatively, the development of normalized EBIT in different scenarios, and it also shows where EBIT should be to cover the cost of capital of mail. The blue lines are based on our projections of early 2025, and without interventions, clearly, the loss will become larger by the year. With our February roadmap, as explained during our full year results publication, under the main assumption at that point in time that D+2 for USO would kick in on January 1, we expected to be able to limit the anticipated loss in the next coming years and then turn back to positive results after the change to D+3.
We have now added the orange line that indicates the development of normalized EBIT based on the proposal of the minister as released end of June, and you can clearly see that it will remain loss-making even up to and including 2029. For us, it's quite clear that an urgent need for reform and swift legal decisions are required. Surely, we're committed to a future-proof postal service, but it needs to be one that is financially viable for PostNL. On that note, I hand over to Linde to dive with you into the quarterly results and the financial position we find ourselves in.
Thank you, Pim. Yes, let me guide you through the financials. Let's start with the segments in a more detailed explanation of the developments there. I kindly remind you that as of January 1, 2025, our real estate activities are reported in the segment parcels. Therefore, the 2024 numbers have been restated to provide a like-for-like comparison. Let's start with parcels on slide 10. Revenue amounted to EUR 604 million, which is EUR 16 million or 2.8% above last year, following volume growth, price increases, targeted yield measures, and mix effects. Overall, our volumes grew by 2.2%. Volumes from international customers continued its strong growth and were up 10% compared to last year. Domestic volumes were flat. In the quarter, we see a further increase of client concentration, like we have seen in previous quarters. We gradually see the targeted yield measures are coming into effect.
As anticipated, these come with a slight market share loss. It is encouraging to see that the total price mix impact, again, was positive this quarter, with the average price per parcel up by EUR 0.02, supported by targeted yield measures and regular price increases. Our portfolio mix is shifting with an increasing share of volumes from large players, domestic as well as international, but also platforms and marketplaces. Furthermore, it's a positive sign that our cross-border activities continue the trends we have been seeing for several quarters, with revenues at Spring up 7% this quarter again, strongly in our intra-European activities. A promising development as international growth is one of our strategic initiatives. Costs reflected significant organic cost increases on the one hand, mainly related to labor. However, we also see the impact from efficiency improvements from network optimization and rationalization of services.
For example, we stopped parcel delivery on Sunday. Furthermore, our out-of-home delivery contributed to the savings. Our network proved to be efficient during the busy pre-summer peak, and when excluding the impact from organic cost increases, average cost per parcel was EUR 0.02 lower than in the same quarter last year. That brings us to the parcels bridge on slide 11. The reconciliation of the EBIT from EUR 18 million last year to EUR 13 million in this year. As you can see, the volume growth strongly contributed to our results, though was fully offset by the less favorable product and customers' mix effect. Organic cost increases amounted to EUR 15 million, following wage increases according to PostNL and sector collective labor agreements and indexation for delivery partners.
As you can see, the impact from our price increases was EUR 12 million, not able to fully close the gap between organic cost increases and pricing this quarter, but that is due to phasing. Other costs were EUR 7 million better, mainly as a result of operational efficiency measures we have taken and the implementation of the strategic initiatives as announced last February. Other results, which are mainly Spring, are down and include mix effects and impact from investing in expanding international growth. On to slide 12. Moving over to this quarter's result of our segment, mail in the Netherlands. Revenue for the mail segment amounted to EUR 311 million, a decline compared to the EUR 318 million in the same quarter last year. The volume decline of 8.3% this quarter was mainly related to modest underlying substitution due to some phasing effects.
This partly compensates for the 19 million mail items related to the elections in Q2 2024. We also noted a further shift to non-24-hour mail, including the impact from our initiative to shift business mail towards a service framework of D+2. Furthermore, revenue was supported by two stamp price increases in July 2024 and in January 2025. Looking at cost, labor costs were up following the CLAs for PostNL and mail deliverers, and sick leave rates remained high. This quarter, the labor cost included an incidental release of the provision for long-term illness, the so-called double GHERD provision. Cost increases were mitigated by cost savings of EUR 10 million from further adjustments in our current business model, such as the transition of business mail towards a standard service framework of delivery within two days.
Altogether, this resulted in a normalized EBIT of minus EUR 2 million, again a step down compared to the previous year, proving that the current business model for mail is not sustainable, as also explained by Pim earlier on. The elements of mail in the Netherlands I just described are reflected here in the EBIT bridge on slide 13. The bridge shows the step down of EUR 18 million from the reported 8.3% volume decline. The stamp prices I referred to before added EUR 10 million to revenue. The organic cost increases of EUR 6 million due to wage increases and other inflationary pressures. We have the cost savings of EUR 10 million. As mentioned, the result was also helped by the incidental release in the double GH provision related to sick leave, and the total of savings and the incidental positive results were partly offset by, amongst others, higher costs in an international mail.
Moving over to the free cash flow components, free cash flow was -EUR 47 million in the quarter compared to -EUR 19 million in the same quarter last year. Overall, the difference is mainly explained by the lower normalized EBIT and a negative working capital development coming from anticipated phasing effects. However, there are a few items to pay extra attention to. First of all, good to note that the impact of the EUR 14 million impairment, which Pim referred to earlier, does not impact free cash flow, as this is a non-cash item. In the line "Changing Provisions," you see, amongst others, the impact of the incidental release of the long-term illness provision, as referred to earlier. The disposal does include the profit of the sale of non-core businesses.
Please note that the line "Interest Paid and Income Tax" is significantly worse than last year due to the EUR 14 million payment of the annual coupon of the sustainability-linked Eurobonds, which was issued in June last year. This brings us to slide 15, where you find our balance sheet and development of the adjusted net debt position. Here you see the impact from the impairment on the mail in the Netherlands on our financial position, with, in the end, being a significant hit on our equity. Next to that, in June, we placed a EUR 100 million Schuldschein loan. The proceeds will be used for general corporate purposes, including refinancing. This transaction comprises maturities of three and five years, with mainly floating interest rates, supporting the optimization of PostNL's capital structure and funding profile. For the good reader, we reclassified part of cash and cash equivalents to short-term investments.
No impact on adjusted net debt or other key metrics, just a reclassification. That brings us to our adjusted net debt position in the second quarter to EUR 562 million, which is an increase of EUR 88 million compared to year-end 2024, being mainly explained by the negative free cash flow. We continue to manage our cash flow, balance sheet, and net debt position carefully, following our aim to be properly financed. Over to the split of normalized EBIT over the quarters. As mentioned before, in 2025, normalized EBIT has to be earned in Q4 even more than in 2024. The impact of pricing will be larger in Q4 than in the other quarters. When looking at our half-year results, overall results came in in line with our expectations.
For the remainder of the year, for parcels, you should take into account that the announced yield measures are expected to come into effect gradually. For mail in the Netherlands, we will have election mail in Q4, not included in our base plan for the year. As you know, this is not the mail that brings in the highest contribution. Please also note that the underlying volume development in Q2 was helped by some positive phasing effects that will revert in Q3 as well. In this quarterly split of EBIT, the impact from structural cost savings for both parcels and mail in the Netherlands is included. In the right graph, you can see the indicative phasing for the savings, not fully divided evenly over the year, but a bit more back-end loaded for both segments. Obviously, that is related to the timing of some of the underlying measures.
For example, in the course of the year, we adjusted the process of collection from our orange mail boxes. These kinds of changes in processes need some time to fully settle. Some of the savings are a bit more tied to the absolute volumes, which also explains why the amount of savings is, as usual, expected to be slightly higher in the fourth quarter. Over to our outlook. We have to acknowledge that the external environment remains challenging and volatile. As said before, the pace of client concentration due to changing consumer behavior is difficult to predict. We reiterate our outlook for 2025. We expect normalized EBIT to be in line with 2024 performance. Free cash flow is expected to be negative, as for example, CapEx will be above the level of 2025, including around EUR 15 million cash outflows related to the strategic initiatives announced earlier this year.
The ongoing uncertainty about progress towards a future-proof postal service has made us decide to not distribute an interim dividend. Having said this, I emphasize our intention to pay a dividend over 2025. We hold on to our aim to be properly financed, taking into consideration the anticipated improvement in performance going forward and the progress towards a future-proof postal service. It is good to add that normalized comprehensive income, which is the base for the amount of dividend, is expected to follow a pattern that is more or less in line with 2023. In 2024, this includes some incidental positive effects. Lastly, before we close our presentation and open up for questions, we would like to announce our Capital Markets Day this year. The date has been set, and we would like to welcome you on Wednesday, 17 September. The program will start around 2:00 P.M. Central European Time.
Please save the date. A formal invite will follow soon. We will launch our new company strategy and provide a medium-term financial guidance. You can expect us to elaborate on how we see the e-commerce market going forward, based on market dynamics that we have seen and will continue to see, challenging but also offering opportunities. Key areas to be discussed are, amongst others, targeted yield management to enhance customer value, the important role that out-of-home will play going forward, and our plans for international growth. We will also update you on the progress towards a future-proof postal service. There will be more, of course. Together with Pim, I'm looking forward to meet you all then and have the discussion with you at that point in time. For now, I would like to conclude and hand back to Inge.
Thank you, Linde. That was the presentation. Let's open up for Q&A. Operator, can you please explain the procedure to ask questions, please?
Thank you. If you wish to ask a question, please press star one, one on your telephone and wait for your name to be announced. To withdraw your question, please press star one, one again. We will take our first question. The first question comes from Michiel Declercq from KBC Securities. Please go ahead, your line is open.
Yes, hi, thanks for taking my questions. I have two, please. The first one would be on the mail volumes, quite some low substitution, and you mentioned that there was a bit of a phasing impact. I understood that it was mainly related to some marketing campaigns, but can you maybe quantify the impact of the phasing in terms of volume terms as you expect this to reverse again in the third quarter? Because maybe referring a bit to your quarterly EBIT outlook, I didn't see any changes on that, whereas I would expect maybe some negative impacts from that phasing in Q3. That would be the first question. The second one is on the graph that you showed with the USO and the new impact.
I understand, of course, that there is a bit of a delay in the timeline, as you were anticipating January 26, now it's July also. 2028 is a bit conditional. If I look at the last tail in 2029, I don't see an improvement, whereas it's just a delay. I'm just wondering what the gap is. Is that basically the quality level that drops from 95% to 90%? Is that how I should interpret it? If you can say anything about the timeline, you already mentioned a parliamentary debate in September, but what would be your best guess on how we should see these negotiations going in the upcoming months? Those would be my questions, please.
Yes, thank you. Let me start with your first question on the volumes for mail. You are correct, the positive phasing effects are related to direct mail or marketing activities from our business customers. Of course, that depends on when certain marketing activities take place and also then consequently when the volume will take place. This time it was in this quarter, so that will revert in the third quarter. We will not quantify the amount, but obviously, as you may know, the vast majority of the volume and results are made up in the fourth quarter. Overall, this doesn't change our outlook, and that's why we reiterate the outlook to be consistent with the beginning of the year. Maybe the second question?
Yeah, I'll pick up the second question. Thank you for the question, which I think is actually three questions. I'll take them one by one. If you look at the graph on slide eight, and if you talk about what drives the gap between the PostNL roadmap and the proposal of the minister, there's a couple of elements that come into play. First and foremost, delay on the moment in which we can go to D+2. As a consequence, also in the phasing of the operational changes that you can make, a big element is indeed that our plan didn't assume a 95% quality standard, which we also believe is impractical, but also financially not viable. That is a big explanation of the gap between the lines. Furthermore, there's still that conditionality in the proposal of the minister at what point you can go to D+3.
Those elements basically determine the gap between the lines. To the point of timelines, let's say those timelines are split in the political process and the legal process. There's a roundtable that will be organized within Parliament on the 3rd of September, setting up the parliamentary debate in Parliament on the 9th or 10th of September that will really talk about the changes of postal law and will not necessarily talk about the proposal of the minister because that needs to be captured in lower law, which is not yet drafted, still not drafted by the Ministry of Economic Affairs. That's also one of the reasons why we say that the proposal is not only too little, too late, but also highly uncertain as to when that lower law will be drafted and can subsequently be discussed in Parliament.
On the legal side of things, we've launched today a general appeal and a preliminary proceedings in which we hope to get a day in court before the end of August. At least that's what we've asked for. Hopefully an outcome somewhere during September. Of course, timelines are a prerogative of the courts themselves, but that is roughly the timeline that we can think of given the procedures at hand here. Hopefully, that clarifies your second question, Michiel.
Yes, very helpful. Thank you.
Thank you.
Thank you. We will take our next question. Your next question comes from the line of Marco Limite from Barclays. Please go ahead, your line is open.
Hi, good morning. Thanks for taking my question. Just a follow-up question on the same chart my colleague was referring to in the previous question. The proposal, the orange line, the one that refers to the proposal as of June of 2025, shows that you don't expect the USO to be break-even, not even break-even in 2029, while in the press release, you were mentioning that you might expect EBIT to be break-even, not be break-even up at least 2029. I just want to understand better if you think that with the current proposal, do you expect the USO to become break-even at all at any point in time or not? Just to clarify on that. The second question is on the dividend for 2025.
You're not paying the interim dividend, waiting for more clarity, but my understanding is that your 2025 dividend is subject to improvements into the USO proposal. If there is no improvement in the USO proposal, am I right in thinking that there is risk to the dividend for 2025? Maybe just as a question around how the parcel volume growth has developed in July. I think in Q1, parcel volume growth was + 5% if adjusted by the one working day. Now in Q2, it's down back to 2%. Is there any adjustment we should make to the Q2 number and what's the exit rate for Q3? Thank you.
Yeah, three questions, Marco. On the graph, as I said, we don't expect with the current proposal to see the Universal Service break even until after 2029. That's still uncertain depending on exact quality standards and the phasing. That's also why we say that some elements of the letter of the minister are unclear. At least until 2029, we do expect the Universal Service not to be break-even or better. That's what is highly unacceptable to us, clearly. On the dividend, yes, because of where we are today, together with the impairment, we've decided not to pay the interim dividend, but we reiterate exactly and in the same words as we've done so in the beginning of the year, our intent to pay a dividend over the book year 2025 with the conditions to be properly financed, with more clarity on the postal side of things.
We need to see the materialization of the business performed improvements that are part of the outlook as well. Those are the kind of conditions towards the intent to pay our dividends, which are exactly the same as in the beginning of the year. We certainly strive to get to more clear positions on the postal side of things prior to year-end so that we can take that into account when taking the final dividend decision. Probably Linde can take the third question on parcel volume.
For the parcels development for Q3, in general, it is too early to comment on this. However, we reiterate our outlook for the remainder of the year, and that being said, we expect it to be in line with our expectations. At this point in time, we cannot give further color on that.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one, one on your telephone. We will take our next question. The next question comes from the line of Henk Slotboom from Kepler Cheuvreux . Please go ahead, your line is open.
Good morning all, and thanks for taking my questions. A couple of small ones. Shall I take them one by one?
Yes, that's fine.
Whatever you prefer, Henk.
I would prefer to take them one by one if possible. Linde, let me challenge you a little bit on what you said about volumes. If I look at the Dutch retail sales figures, I see a gradual improvement in the second quarter. We're doing our own channel checks as well, and it looks as if the favorable trends we've seen in June have continued in July. Is that something you're seeing as well?
Of course, you can imagine it's difficult to confirm this at this point in time, but we see the pattern continuing as we have seen over the past quarters. If that gives some color to your answer.
Maybe going back to the facts, a more negative number was reported in Q1 than the flat line in Q2, which assumes an improvement of the domestic volume growth. That is where we are today. That kind of follows the logic of your question, Henk.
Okay, perfect. On international volumes specifically, volumes from international clients. I listened into the conference calls of Kuehne + Nagel and of UPS last week, and they were quite clearly saying that since the abandoning of the de minimis rule in the U.S., China has been transporting more goods to Europe. UPS, I believe, was even mentioning something like a gross figure of 24%. Is that something you're seeing? Is it front-loading? Is it real demand? How should I see this in connection with the 10% growth you're recording? I realize that the comparison basis is slightly different, but given the fact what I just said about volumes coming from China, the American market is more or less closed for the Chinese platforms. Are you seeing indeed more activity from that side? Why don't I see that in your case?
Is it part of the deliberate attempt to steer on yields instead of volume?
There's a combination of these elements. What have we seen and what have we not seen? Just to be clear, only last week did the de minimis on postal route to the U.S. by an executive order get announced with flat fee surcharges, which makes the postal route significantly more expensive as of August 28 or 29. Up to the point of the Q2 numbers, we've not seen a material change in volume from international compared to our own expectations. What we truly see is that the growth rate of Asian clients at large is much more driven by the availability of airline cargo capacity than on other elements. Our own development is definitely a case of our value over volume strategy, which we also clearly indicated in the beginning of the year.
Of course, maybe the volume streams of Kuehne + Nagel and UPS are much more in the commercial trade lanes and not so much in the postal lanes. I don't know. We've not seen, nor have we reported in Q2 numbers, a material step up in Asian volumes because of tariff consequences.
Okay, that's clear. On the dividend, Pim, you just made a couple of remarks about dividend payments. I assume that the traditional conditions, like the net debt to EBITDA ratio, net debt adjusted EBITDA ratio being below 2, is still intact?
It's properly financed in the dividend policy, and that gets roughly translated to the metrics that you talked about, but it's not precisely that. The criteria is properly financed, translated as investment grade, roughly two times EBITDA.
There is some flexibility there.
Yes.
If the circumstances prevail.
I agree.
Okay. A clarification question. In the introduction, you said about the proposals by the Ministry of Economic Affairs that the USO mail would remain loss-making well into 2029. The picture I see on page eight relates to the mail division as a whole remaining loss-making. I presume the picture on slide eight is correct.
Both are correct. Indeed, the picture on eight is the results of the entire mail business, and as part of that, the Universal Service remains loss-making.
Okay. A final question, if I may, relates to Spring. There is an increasing discussion going on at an EC level on Chinese imports, the safety of products, and that sort of things. Is that something, if the EU will do something against the Chinese volumes, is that affecting Spring's business as well? I mean, most of the products from China are being flown into Belgium and the Netherlands. To what extent is Spring vulnerable for any measures in that respect?
Not that vulnerable because the business model of Spring is an asset-light business model, which means that they don't operate very big networks with very low capital commitments. If the volume is no longer there, then there's limited downside risk. First and foremost, what we've launched in February is growth in Spring, predominantly in mainland Europe. We see great opportunities for growth in Europe on intra-Europe trade lanes and as such, not dependent on the flows from Asia to the Netherlands or Asia to Europe. Clearly, we also service Asian clients into the Netherlands, but also to other destinations. At some point in time, if there's regulations that would avoid those clients to ship those products to Europe, it could at that point impact Spring's volume. As I said, margin profile is different. Capital employed is significantly different.
The cost base is much more flexible than in a high fixed cost environment of the domestic networks.
Okay. I have claimed enough time already, so I will leave it with this. Thank you very much.
Thank you, Inge.
Thank you. We will take our next question. Our next question comes from the line of Mark Schwarzenberg from ING. Please go ahead. Your line is open.
Yes, thank you very much. I'll also go one by one. Pim, can you repeat because I didn't get that clearly? The step to D+3 as from the 1st of January 2028 was conditional on two things. Can you repeat them because I'm not sure if I noted them down correctly?
A quality performance by January 1, 2027, of 90% or better, and a volume decline that is not better than 7% year-over-year compared to 2024.
I'll get that as well.
Yeah.
Versus 2024. Should I read that the volume decline of at least -7% in 2027 versus 2024?
Over the period, that is exactly one of the points that is also not very clear in the letter of the minister. How we interpret it is, let's say, as long as the CAGR is not, as of 2024, significantly better than 7%, you would fulfill the condition and can go to D+3. That's the interpretation because the letter in and by itself is not very clear on this point.
Okay. I also want to go back to slide eight because that orange dotted line, it raises some questions that it bends off a bit, again, more negative in 2029, while you're basically saying after 2029 we go to break even. I'm a bit puzzled why it's bending off from 2028 to 2029 negatively. If you looked at 2027, for instance, versus your roadmap, your roadmap already seemed, that seems to suggest already something like EUR 30 million, EUR 40 million, EUR 40 million negative. If you ask for a compensation of EUR 38 million for 2026, then the blue line should be EUR 38 million-ish for 2026. It gets even a bit more negative in 2027. If you then take the orange dotted line, it's twice as deep. It could be EUR 80 million. Is that really how I should read this graph?
No, don't forget the answer that I've given to Henk. This is normalized EBIT Mail in the Netherlands, which is not the same as net cost of EUR 38 million for 2026. That's one. Don't forget that there are phasing elements in it because the blue line assumes at some point also maturity of cost savings of D+3 kicking in. If you postpone those further out, which is in the orange line, that could lead to phasing elements in when costs are made, preparation costs are made, and how you get to the max run rate, contribution of the steps that you can make. The most important element between the lines, and that you really talk about tens of millions, is the difference in quality, as I tried to explain based on the question of Michiel, the first question.
Yeah, your first argument is still a bit puzzling, I have to say. This is normalized EBIT Mail Netherlands, yeah, but not.
Which is not the same as the projected USO result. The USO result is obviously defined as the result specifically with all the mail and parcels we distribute from the USO. The financial contribution, depending on how you structure it, and that there's also a difference in how we position it first, but on net cost compensation, it's all about the net cost. What type of cost do you make as a universal service provider that are not covered and basically constitute what type of network would you have with which costs less if you were not having that Universal Service Obligation, which is different, of course, than the result with the total mail operations that we run. Those include business mail, those include specific services that are not related to universal service, but still contribute to the overall result.
Yeah, I understand that the result of the Mail division in total is not the minus EUR 30 million or minus EUR 38 million. This is a graph, simply the Universal Service Obligation, how it develops without all the other.
No, this is how the normalized EBIT of mail in the Netherlands develops, given the current proposal of the minister. It's a graph explaining the segment mail in the Netherlands.
Okay, that's sorted out. Thanks for that. On the outlook, currently what is not included, as I understood it correctly, is the election mail expected for Q4. If you take, let's say, the 2% you had last year in Q2, that would be, let's say, EUR 5 million extra plus. Is that correct?
To comment on the election mail, as mentioned before, election mail is absolutely not the volume with the biggest contribution. In specific, also for this year, we will have to deliver the election mail in an already busy period, namely in Q4. That means it will cost more to operationally execute it. All in all, that will not have a meaningful impact to adjust our outlook. That is smaller than the amount you are referring to.
Yeah, it's not in line with last year's second quarter election impact.
Yes, correct.
In the outlook, what is now, what was formerly not included but what is now included is the EUR 5 million of professional releases. Is that correct?
Yes, that is correct. Of course, our Q4 is the most important quarter in which we will make our performance and results. As the speed and rate of client concentration we see on the e-commerce side is difficult to predict due to the changing consumer behaviors, we hold on to our outlook for 2025 as announced earlier.
Okay, now that I understand, you have the EUR 5 million as a bit of extra support in the outlook, which we did.
Yeah, we said more or less in line. That is also how to look at it.
If I understand correctly, if you're talking about outlook, there was this price mix effect for parcels that was guided at EUR 50 million, EUR 55 million to EUR 60 million positive. If I look to the first half, it's actually zero, roughly. Should we still see that full impact in the second half, or should we assume it's a little bit less?
Of course, it's always a combination of elements. You also have the element of volume. In that sense, it is a combination of both the volume and price mix. If you will have more volumes, for instance, on the international side, that also can play a part. You have to look at both elements.
Yeah, I'm taking the price and the mix together in Q1, in Q2. If you then add it all up, it's roughly zero. That means that we have to have EUR 55 million in the second half, which.
If you do that, Mark, you also know that it's positive in Q2. What we said in the beginning is that, given the vast majority of those measures have been taken gradually over time, you can still expect a material contribution by year-end, given the fact that a big part of volume still comes our way in the second part of the year. I think that's one. Two, there's clearly, as part of yield management measures and discussions, sometimes trade-offs between volume and price points. That's the point that Linde makes, that can impact also your volume line in the bridge as being slightly more positive, with maybe a price mix that might be slightly more negative than the EUR 50 million that you allude to. The balance is still correct in terms of how we phrase the outlook to begin with.
Yeah, because it would suggest almost high single-digit price mix effects. That's, I've never seen that before.
You can truly see the impact and the positive signs on the price mix clearly, and as I said, take it into account in line with also the volume line of the graphs.
All right. The last one on the, coming back on the dividend. Pim, is it fair to say that if the leverage ratio is below two times, like being properly financed and the investment grade is there, that you would still pay the final dividend?
Yeah.
It seems now that you added a bit of condition, like we need also a bit more clarity on the proposal from the government. That's more like if it's slightly above two and you get the compensation, you might say the future looks a bit better. We will still pay it. I would see that as a positive.
Good summary.
Yes. Okay. That is very good. Those were my questions. Thank you very much.
Thank you, Mark.
Thank you.
Thank you. There seems to be no further questions. I would like to hand back to Inge Laudy for closing remarks.
Thank you all for listening in and speak to you this time, not in November, but already on the 17th of September. Hope you will all join in our Capital Markets Day. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.