Good morning, ladies and gentlemen. Thank you for holding and welcome to the PostNL Q3 2021 results call. At this moment, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. I would now like to hand over the conference to Mr. Jochem van de Laarschot. Please go ahead, sir.
Thank you and good morning. Thank you for joining us in the third quarter results presentation, which will be given by Pim Berendsen, our CFO, and afterwards we will open Q&A with Herna Verhagen, our CEO, and Pim as well, of course. Pim, over to you.
Yeah. Thanks, Jochem, and welcome to you all. Thank you for joining us today. Let's start with the key takeaways. First, foremost, the full year 2021 outlook has been confirmed with normalized EBIT at EUR 280 million-EUR 310 million, and a free cash flow of EUR 250 million-EUR 280 million. If we then look at the third quarter, normalized EBIT came in at EUR 23 million, and it's driven by a few key points. Volume growth at parcels was 1.6%. If we correct that for the non-recurring COVID effect in Q3 2020, that is actually 6.4%. If we exclude the negative consequences, partly temporarily, of the change in value-added tax, that would have been actually around 9%.
If we stretch the horizon and look at the growth from Q3 2019 towards Q3 2021, we're looking at a, roughly speaking, 19% growth. Still attractive growth in our parcel segment. If we then go to mail, volume growth at mail was 0.5%, obviously supported by non-recurring items related to COVID, but also with an improvement of the underlying substitution rate. As said, stronger than expected, temporarily negative impact from change in value-added tax regulation for small non-EU goods and other regulations in China. We'll come back to that later on. Happy with the cash flow performance and also very positive about our ESG and transformation acceleration programs, and all of those are progressing well. Positive on the pace of our transformation.
Before we go into the business development and financial performance, I want to spend a few words on a few of our strategic business drivers. You'll find them on slide four. Let's start by repeating our value creation model, which aims to generate attractive total shareholder returns. Our ambition is to be the leading logistics and postal solutions provider into and from the Benelux. In order to live up to that ambition, we've defined five strategic objectives. We help our customers grow their business. We aim to secure sustainable mail business. Our objective is to attract and to retain motivated people, and we set ambitious targets to improve our environmental impact. Last but not least, we intend to generate profitable growth and a sustainable cash flow. We aim to reach these objectives through our business segments.
As you know, we'll manage parcels for profitable growth and mail in the Netherlands for value. Furthermore, we accelerate our digital transformation, which is aimed to strengthen our competitive position by further building on our platform and connecting customers, consumers, and solutions through simple and smart digital journeys. Let's move to our ESG driver. That's on slide five. We focus on all three factors of ESG and have embedded these fully in our strategy. We aim to improve our environmental impact and deliver all parcels and letters in the Benelux emission-free in the last mile by 2030, to be a socially responsible employer and to act in transparent, aligned, and accountable manner. In the third quarter, we've improved our carbon efficiency by 17% compared with the end of 2020. What we've also announced is that we will have fully electrified our fleet.
Until we fully electrified our fleet, we'll offset any remaining carbon emissions from both our own transport as well as that of our delivery partners. We'll be doing this as of January 1, 2022, and as such, cutting our footprint to net zero as of then. Clearly, without any doubt, our people are a key factor, key success factor, actually, in our success. Health and safety continues to be top priority in these days of pandemic. We also continue to focus on strengthening employee engagement as well as workforce optimization and capacity management. This includes having the right people in our overall delivery model. We closely monitor and where we can anticipate developments in the labor market, ensuring we continue to offer our customers the necessary capacity and high-quality service, particularly moving into the important fourth quarter of the year.
Furthermore, negotiations on the new collective labor agreement for our postal deliverers have recently been starting. From ESG towards our digital transformation. As you know, within our Digital Next program, we'll further digitalize our commercial engine, transform our core logistics operations and scale platforms and find new disruptive business models. All of that is supported by strong IT and a data foundation, and driven by our digital DNA. We continuously look to enhance our services and information in the supply chain. Two important examples of that in the third quarter of this year. By now, we've outfitted 90% of our roll cages with digital trackers, and obviously that leads to a lot of data and insights that we can use to optimize our networks and operations on a real-time basis that will enable us to improve the quality of service even more.
Next to that, we're very proud and happy that we've opened a robotic small parcels sorting center early October in Nieuwegein, which is highly innovative, equipped with very many different robots and is unique in its nature, which creates more capacity in our other regular parcel sorting centers. Now let's look into our business developments and financial performance. We're at slide eight. Let's start with the overall results. Revenue came in at EUR 729 million, which is a 2% decline in comparison to last year. There's a few important elements to note there. Within that comparison, we obviously last year we've sold Cendris. There's negative impact also on the revenue side of value-added tax, and less non-recurring COVID impact. Roughly speaking, EUR 50 million is caused by those three elements together.
As a consequence, the underlying business developed positively with a EUR 37 million revenue up. The normalized EBIT came in at EUR 23 million, of which EUR 5 million is assumed to be non-recurring and related to COVID. The impact of value-added tax regulation, the changes thereof is -EUR 8 million, which is both visible at parcels and mail segments, EUR 3 million in the parcel segment and EUR 5 million within the Mail in the Netherlands segment. On slide nine, we've made a comparison with the normalized EBIT reported in the third quarter of 2020 of EUR 36 million, and the realized EBIT of EUR 23 million in this quarter. There's three main buckets that I want to talk about. The first one is the non-recurring impact of COVID, which is EUR 3 million in the quarter positively, but the split between the segments is quite different.
In comparison to last year, parcels did not have any positive non-recurring COVID implications, and last year there was a positive of EUR 11 million. The change within mail is EUR 14 million more favorable within this quarter. If we talk about the value-added tax impact of the changes in regulation, that has had a negative impact of EUR 8 million. As said, EUR 3 million within parcels, EUR 1 million in parcels, EUR 2 million in Spring, and EUR 5 million within mail in the Netherlands. We believe that is partially temporarily because, let's say, what we see quite clearly is that both consumers and selling web shops have had to adopt their way of ordering their connections with customs after the first of July.
We see them making the changes and, throughout the period from July onwards to the end of the third quarter, we gradually saw an improvement in the volumes. Partially it will be structural because also, the regulation in China in relation to fake goods, intellectual property, will lead to shakeout on some of the volume. But what we do expect is a gradual improvement of the cross-border volume. But certainly in the fourth quarter, we still do expect a slightly slower volume contribution than before. We move to the parcels segment. Continued growth in the third quarter, 2021. EUR 505 million revenue in comparison to EUR 490 million last year. That also includes EUR 25 million less revenue from cross-border, driven by the same topics we just discussed.
Normalised EBIT came in at EUR 27 million in comparison to EUR 49 million. If you wanna discuss the breakdown of those elements, it's basically EUR 11 million related to non-recurring COVID in 2020, EUR 3 million negative consequences of the value-added tax change in regulation, and EUR 5 million less driven by other business effects. The most important ones relate to our step-up in costs and step-up in capacity to prepare for the very important peak period in the fourth quarter. If we then go back to the volume growth, 1.66% growth. Four percent excluding the non-recurring COVID impact, and around 9% when we exclude the international volumes impacted by adjusted value-added tax regulation. The stronger than expected negative impact from adjusted value-added tax regulation, we did expect volume decline, but it was roughly speaking two times bigger than our own expectations.
Positive price effects offset by less favorable mix, growth in Spring in Europe and logistics offset by lower revenues in Spring Asia, which basically accounts for EUR 17 million less revenue, which is part of the 25 in total less revenue from cross-border. The normalized EBIT and the key components of the bridge I've just disclosed, the increase in costs are in line with expectations. It's all about rebalancing our network to accommodate the volumes within the current infrastructure. You know that we've added new capacity, including the small parcels sorting center and a regular depot in Westzaan. In preparation of our peak season, we've increased the number of people, increased the costs, to offer the necessary sorting and delivery capacity in order to accommodate our clients to grow, obviously with a high-quality service.
There's other indirect cost developments, the most important ones driven by a step up in IT and Digital Next cost, also in line with expectations. Better result at logistics offset by Spring, of which minus two relate to the value-added tax changes as well. On slide 11, you'll find our regular parcels bridge from Q3 2020 towards Q3 2021, EUR 49 million towards EUR 27 million, with the buckets that you certainly will recognize. EUR 7 million volume effect, minus 6 on organic costs driven by sector CLA and indexation for delivery partners.
Volume-dependent cost of -EUR 2 million, the big cost development that has influenced margin in this particular quarter, driven by the changes in the network, the addition of new capacity, EUR 6 million, rebalancing the network of EUR 3 million, preparations for our peak season, another EUR 3 million, as well as other indirect cost developments, including EUR 5 million for IT and Digital Next. In other results, a -5, positive performance in logistics, offset by cross-border decline, also driven by the value-added tax regulation. Let's dive into two main drivers under parcels performance, and the first one is the growth trend on slide 12. We basically see the reconciliation of the growth numbers we already discussed. A 1.6% growth, 81 million parcels delivered in the third quarter, excluding international, that accounts for 9% of growth.
If we take the horizon from Q3 2019 towards 2021, we see a growth of roughly speaking 20%, excluding the international volumes impacted by value-added tax. Within the quarter, we saw a slow start in July, clearly as part of, let's say, going back slightly to more normal circumstances. People went on holiday, which has caused, let's say, the volume to drop in July, but was picking up later on in the quarter, particularly in August and September and continuing in the first weeks of October. We're not insensitive to global supply chains, so we do see some impact on shortages of raw material. We also see that our clients are sometimes impacted by those, and that impacts the
Well, their robustness if it talks about volume development and volume expectations, which creates a bit more uncertainty about the volume growth. Nevertheless, we stick to our assumed growth rate expectations of 11%-13% CAGR. That is starting point on the reported volumes 2020. After we've discussed the growth driver within the parcel segment, I think it's good to spend a few words on the margin development. We're looking at, let's say, three periods on this graph on slide 13. We've talked about the margins pre-COVID, around about 7%. From there on, we've launched very many initiatives that are improving the margins in our parcels business. Think about the peak pricing, the pricing metrics on the back of volume in size of parcels.
At the same time, we're creating operational efficiencies by trying to get to a more equal flow within the days of the week. All of those contribute to improving margins. Above and beyond that, lockdown led to even more equal flow and more efficiency in our network. That brought margin towards the 11% mark, of which we've said that it's not feasible to assume that those margins will continue. Within 2021, you see a decline in margins, particularly in the third quarter, which is driven by the step-up in costs for the fourth quarter, and obviously the addition of the new facilities that will allow us to accommodate the growth of our partners and clients in the important fourth quarter.
Towards the end of the year, and also from there on onwards, we still believe we'll end up with a margin around about the 9% mark that we discussed before, which is somewhere in between the 7% and 11% of pre-COVID and partial lockdown. We move towards the mail segment. Solid performance at mail, improvement in the underlying substitution rate. If we talk about the normalized EBIT, normalized EBIT is up EUR 8 million. There's, let's say, EUR 14 million improvement on COVID, six down on other business elements, of which EUR 5 million is driven by the value-added tax regulation. Revenue is down, and that is driven by EUR 29 million. Other revenue mainly explained by the sale of Cendris, around EUR 14 million and less export cross-border mail as well.
If we talk about the EBIT decline in other costs, it was mainly explained by the integration costs for Spring and additional payments to people both in the third quarter of 2020, and an improvement driven by cost savings and efficiency improvements in the preparation processes and route optimization. Stamp prices are unchanged in 2022. That was no surprise to us. Our projections for 2022 did not include any stamp price increase. At the same time, we'll continue with moderate price policy for our business mail also in 2022. The reason why there's no price increase in 2022 is the way the regulation works. It's based on cost and then based on 2020 and 2021. 2020 actuals, 2021 forecast on volume developments, and there clearly in 2020 we've been benefiting from additional non-recurring COVID volume.
That basically is a different trend. The system works well if, let's say, we continue down the road of year-over-year, quarter-over-quarter volume decline, but clearly incidental volumes impacted the system. That's why we're positive about the change in the draft postal regulation that accounts for this change, which will allow us to continue with our pricing strategy from 2023 onwards, also on stamp prices. If we then go to the Mail in the Netherlands, normalized EBIT bridge on slide 15, we see the four compared with the 12 in this year. No volume effect. A positive price mix effect of EUR 4 million. Even bigger positive price impact partially offset by less favorable mix. EUR 5 million increase in organic costs. Volume dependent costs, EUR 4 million down.
That's also partly mix driven as a consequence of the cross-border mail developments and other cost development, which is EUR 16 million +16 positive, driven by lower Cendris integration costs. Last year we made additional payments to our staff of EUR 5 million, and at the same time, cost saving step up and some positive incidentals in the third quarter of 2021. Other results, EUR 3 million down, which is explained by the lower result of international mail of EUR 4 million. Moving on to cash flow. Positive cash flow development, EUR 5 million free cash flow in the quarter last year, EUR 10 million in this year. What we clearly have stated is a step up in CapEx, which you can also see from EUR 17 million investments towards 41. That includes obviously capacity related investments as well as acceleration of digitalization.
A more positive working capital development based on strict working capital management and some phasing effects. All in all, a strong cash flow performance. That, together with the profit, leads to a strong financial position with an adjusted net debt at EUR 266 million, a total comprehensive income of EUR 26 million in the third quarter, and a total normalized comprehensive income of EUR 27 million, resulting in a year to date normalized comprehensive income of EUR 196 million, and that is, as you know, the basis for our dividend policy. Let's move towards our full year outlook and guidance. The outlook is confirmed. And if we look at the different components, on normalized EBIT, we do expect a EUR 280 million-EUR 310 million result, which includes EUR 30 million-EUR 35 million costs for Digital Next and an increase in non-cash pension expenses.
No changes there. Free cash flow, EUR 250 million-EUR 280 million, which includes the cash out on Digital Next. If you talk about the CapExes, we've assumed EUR 160 million that now has been slightly adjusted downward to EUR 150-EUR 160 million, also slightly depending on how supply chains work. It is basically also a function of can we get the assets in time delivered to us. An example is roll cages that, for instance, are still in Chinese harbors waiting to be shipped to the Netherlands. That could be a slight phasing element there. No change in the delta pension expenses and normalized comprehensive income also unchanged at EUR 250 million-EUR 280 million and developing in line with normalized EBIT. Let's look at the phasing over the quarters on slide 20.
Clearly you see the comparison. In fourth quarter of 2020, we had extraordinary large impact driven by non-recurring COVID, which was in that quarter, roughly speaking, EUR 46 million, EUR 26 million of which at Parcels and EUR 20 million at Mail. We've got three working days less than in 2020. Obviously, still an acceleration of Digital Next and some additional costs for startup of new facilities that is already in Q3, and obviously will continue into fourth quarter. Higher pension costs and additional cost inflation in comparison to last year. That said, also an expected step-up in volumes from Q3 to Q4 on the back of of, let's say, the expectations of both our clients and ourselves.
Still a bit of uncertainty around the impact of the value-added tax changes as to the level of the growth. Obviously we need to monitor closely whether or not COVID-19 has implications on the last quarter as well. The outlook for the free cash flow of EUR 250 million-EUR 280 million, taking into account tax effects, change in trade-offs, CapEx leases, and acceleration of CapEx in relation to digitalization. That is basically the key takeaways for the fourth quarter. We move to the last slide. We are very positive about the transformation. We're looking at a strong business that is positioned well for further growth to be the leading logistics and postal service provider into and from the Benelux. We're building on a solid performance year to date, 2021. We're anticipating a very busy peak season.
We're seeing continuing positive trend in e-commerce growth, and we're accelerating our digital transformation to strengthen our competitive position. We're progressing well towards achieving our ambitious environmental targets. We're not insensitive for, let's say, global supply chain implications that could have an impact on value-added tax regulation and overall global market developments. At the same time, we are confident to be able to confirm our outlook on normalized EBIT and on cash flow as well. That concludes the presentation on Q3, at least for now, before we move over to through Jochem to Q&A.
Thank you, Pim. Operator, can you open the floor for questions, please?
Thank you, sir. Ladies and gentlemen, we will start the question and answer session now. If you have a question or remark, please press star one on your telephone. Go ahead, please. Star one for questions or remarks. The first question is coming from Frank Claassen, Degroof Petercam. Please go ahead. Your line is open now.
Yes, good morning, all. First of all, on your outlook, do you still anticipate positive non-recurring COVID impacts for Q4? That's a bit unclear to me. What could be the drivers behind these effects, possible effects? Secondly, on the parcels business, of course, yeah, quite a bit of upward cost pressure on labor, fuel. Do you see room to pass these on via price increases? What kind of price increases or cost inflation are we talking about? Thank you.
First, question, we at the moment do not assume any non-recurring COVID impact anymore in the fourth quarter. If we talk about the roughly EUR 74 million non-recurring COVID, that is also what we expect full year.
Okay. Sure.
On the second point, yes, on some of the elements there is a cost pressure, and through our regular ways that is used for indexation of our pricing points in the customer contracts that we have. That's not to say that we'll always will be able to pass on 100% of those cost increases directly. Over time, certainly there's ways to let's say index, use indexation in our commercial prices as well. At the same time, on some of these cost drivers, we've secured our position before. On energy, for instance, we've hedged that risk for a longer period in time. Yes, there's some upward pressure on fuel prices, but that is not that big, and definitely not that big in our full-year expectations.
Could you roughly quantify what kind of price increases across the board are we talking about?
No, yeah, that's difficult to say. There's normal indexation in our contract that's based on, quite often on CPI indexation metrics, and that follows the outcome of that index. That is kind of regular indexation agreements with our customers. Still, obviously, when contracts are, let's say, ended, there's renegotiation of terms. As we've said before, that is a moment in time where we can adjust prices, and all in all, individual price points are still moving up.
If I talked about, let's say, the margin development of parcels on the specific slide that we've included for that purpose in this deck, I said that we do expect a margin of parcels at around about the 9% mark of the segment, which is also what we've assumed to continue, and it's also in line with what we said when we talked in August.
Okay. That, that's helpful. Thank you very much.
The next question is coming from Mr. David Kerstens, Jefferies. Please go ahead.
Thank you. Good morning, everybody. I've got three questions, please. First of all, you highlighted the parcel volume growth of 19% versus Q3 2019. I think your largest competitor in the Netherlands recently called out 78% growth over the same period. What's driving that big difference in volume momentum? Is it due to the launch of Amazon in March 2020, or were you impacted by capacity constraints? Now with small parcels sorting centre open, do you expect to regain some of that share? Second question is around the parcel volume growth outlook for the fourth quarter. I think some of your customers have talked about product shortages due to the global supply chain disruptions. As a result, volumes could be down in the fourth quarter.
What is your expectation in terms of volume growth, and will you still see also that impact from the higher VAT impacting volume? Final question on the mail side. You highlighted labor negotiations have started. To what extent will you be able to mitigate a potential significant step up in rate inflation in a light of relatively more limited stamp price headroom? Thank you very much.
The parcel volume growth in comparison to DHL, I think, a few ways to explain it. As we did present our Capital Markets Day in 2019 with the