Earnings Call: Q2 2020

Aug 12, 2020

Hello, and welcome to the TFDS q two report 2020. Throughout the call, all participants will be in a listen only mode. And afterwards, there will be a question and answer session. Please note that this call is being recorded. Today, I am pleased to present CEO, Thorbenk Palsian and CFO, Karina Deakin. Please begin your meeting. Good morning. This is Thorben Karnesen. I'm here, as usual, with our CFO, Karina Deacon and our Head of Investor Relations, Sharon Pointehalt. Headline Q2 ahead of forecast as freight picked up faster than expected. Background for that is we have kept all operational locations, including all ferries, Our freight volumes picked up through the quarter, particularly in June. And as we'll talk about in a minute, this trend has continued into July. We've seen encouraging passenger demand on the reopened routes, but as expected, exceptional losses from passenger activities that for a large part were shut down for more than three months. The cost control measures and adaptations to our business that we have introduced have mitigated and contained the losses. I will now pass over to Karina on Page four. Thank you, Thorben. Yes, needless to say that our top line was impacted in the quarter. We were down 34%, while our EBITDA of the DKK $5.00 7,000,000 was a decline of 49%. These results were, to a very large degree, impacted by the fact that our passenger activities were exceptionally half hit by the travel restrictions and the lockdown. If we look at the passenger revenue, it declined 86%. And if we only look at our BU passenger, so the Oslo the Oslo Copenhagen and the Newcastle Amsterdam routes, they were down 98%. We basically only had one week's activity throughout the quarter. This has a significant impact on the EBITDA. More than 75% of the decline, euros $366,000,000 related to the decline of passenger activities. Of course, we also saw a reduction in our volumes on the freight ferry. They reduced 15%, and that also had an impact on EBITDA. But from a slightly positive angle, the good news is that the decline in EBITDA reflected an operating leverage of around 39% compared to the approximately 65% that we see under normal circumstances. That was a reflection of our active strategy to reduce sailings and also lay up vessels as the demand declined. Of course, we also had a general cost consciousness. And in addition, we benefited from certain compensation programs, and that all reduced the negative impact. If we look at the logistics, there, EBITDA were actually only down by €7,000,000 compared to 2019. They also faced a decline in the same ballpark as Ferry. But following tight cost control and also benefiting from acquisitions of last year, the decline was modest. Finally, just on a more summary note, the non allocated increased compared to last year, I. E, they were better. That is a little bit of a technicality. The savings we made at HQ have not been allocated to the business units in the first half. That would happen in the second half. So when we look at the full year, I expect that the non allocated will be slightly ahead of 2019 as we have guided for before. If we turn to Slide five for a few more numbers. As I said, the revenue decline of 34%, that was, to a large degree, impacted by passenger. If we exclude the passenger activities, ferry revenue was down 27% and logistics was down 13%. The revenue decline in the freight business was most significantly in the business units, most exposed to the industrial volume, particularly the automotive sector. I have talked a little bit about EBITDA. I'll come back to it a few more details when we turn to look at the divisions itself. But one thing just worth mentioning right now is that when we look at the margin, EBITDA margin, it was down from last year. However, if we double click on that, we will see that logistics actually improved the EBITDA margin by 60 basis points over Q2 of last year. Depreciation more or less on level with last year, which meant that our EBIT before special items was €48,000,000 Looking at the finance cost, somewhat higher than last year, but it was a reflection of currency adjustments, where in Q2 twenty nineteen, we had positive adjustments and in Q2 twenty twenty, we had negative adjustments, mainly related to the Swedish krona. So if we exclude these currency adjustments, our net interest costs were more or less on level with last year. Special items, an income of €43,000,000 that reflects the completion of the sale of Liverpool Seaways, which led to an accounting gain of €110,000,000 And then we had a cost of 67,000,000 related to the organizational changes we announced at the June. We have here in Q2, expensed this DKK 67,000,000. We expect further restructuring costs in the second half of the year. So it could bring the full restructuring cost number up to about €100,000,000 Bottom line is that even after a 34% top line reduction, we actually end up with a positive profit before tax of 11,000,000 A few words on the balance sheet and the financial position there. Looking at invested capital, a slight increase over Q2 last year, but a small decline compared to Q1, partly explained by a good development in our working capital. And that also reflected in the cash flow where we, from a positive impact from net working capital, could report a free cash flow of $272,000,000 and if we adjust for lease payments, 100,000,000. That meant that our net interest bearing debt in total of DKK 12,100,000,000.0 was slightly down from Q1. However, due to the lower earnings, then when we look at our leverage, it increased to 3.9% from 3.3% at year end and from 3.5% at Q1. But however, given the relative stronger performance in Q2, it was below our expectations. If we look at ROIC, 5.1% down from 2019, of course, impacted by the significantly lower earnings. It's worth noticing that if we exclude BU Met, where we had 1.3% in ROIC for this quarter, the rest of DFDS was just below 8%. Let's turn to our fare business. And I'll just say upfront that in this Q2 report, we have added the much asked for EBITDA numbers on our business units. So I'll talk about EBITDA in the following. On the freight side, we saw a 15% reduction in volumes on a like for like basis. They were reduced considerably. We already talked about that after Q1 with 24% in April. Then we saw a slight decline, so we were down 17% in May, while in June, the demand picked up where we only saw a decline of 3%. As mentioned before, the significant EBITDA reduction came from the passenger business, not only from the passenger BEU itself but also from the channel and The Baltics. To illustrate in the channel, we had a decline in passenger numbers of 90%. And in The Baltics, the impact was less but still impacted by minus 20%. And the reason for that relatively modest decline was that the essential travel continued to a large extent here due to migrant workers. Looking at the business units, mostly down 90,000,000 But if we adjust for the DST income last year, the decline was EUR 44,000,000. That reflects the volume decline of 19%, significantly impacted by the share of automotive volumes from Sweden, whereas the route to The UK, they were less impacted as they carry more consumer goods. The positive story in the quarter, that's from our Baltic business unit, where we actually saw volumes up 3% if we adjust for restructuring of the Pelsinki Henkel route. However, this volume increase was followed by price pressure. So when we look at EBITDA, we did see a small decline, but the majority of the decline came from the passenger business. On the channel, volumes were, and I have to say in this context, only down by 9%. So actually one of the areas which did better than average. We were very active on cost savings. We saved on Dunkirk, and we laid up one of our ferries. So actually, our EBITDA from the freight business increased compared to Q2 'nineteen. So the decline comes from the passenger activity. We have touched upon the exceptional quarter for our BU passenger. We did take part, of course, in furlough schemes to the extent we possibly could. But even so, we had a loss of more than €100,000,000 meaning €228,000,000 below last year. Finally, if we look to the MET, hard hit in Q2 and volumes down 34% to a significant extent caused by the high exposure to the automotive but also to the textile industry. We also saw a higher competition from land transport. In this situation, where decline where we see declining volumes, customers' equipment becomes idle. And the fact that travel restrictions prevented air travel for the truck drivers, that meant that the land transport gained some market share. So all in all, we were down €97,000,000 on the EBITDA despite a very active strategy for laying up ships and reduced sailings. If we turn to Slide seven and the logistics business, an overall volume decline of 17%, different intensity depending on the geography and also the exposure to different industries. So in Nordics, no surprise that due to the reduced activities in the automotive sector, we were down 15% than volumes, and that meant a reduction of EBITDA of 10,000,000 It is worth noticing, though, that there was a one off cost of EUR 7,000,000. So the underlying reduction was only EUR 3,000,000, but also following the inclusion of acquisitions in Finland from last year. Continent also impacted by the automotive industry as well as lower activity in the construction sector. So they saw a decline in volumes of 20%. Even so, EBITDA was only down EUR 2,000,000 following tight cost control. And there, we also had the help from an acquisition in The Netherlands from the 2019. Finally, in The U. K. Ireland, we saw a volume decline of 12%. That was actually a mix of some good and bad because if we look to the frozen food and retail sector, we were above 19% in terms of volume. But as we've talked about before, the agriculture business in Scotland and England suffered from the lockdowns. We have seen a good pickup towards the end of the quarter when The U. K. Catering sector started up again. Regardless for The U. K, that meant that we saw an improved EBITDA following tight cost control and also a more efficient agency structure. But I will also mention that we had some accounting help from IFRS when we look at EBITDA. So that was a review of the business. And then I'll turn back to Thorben. If you turn to Page nine, we'd like to give a little flavor to what we have done to have an impact of only in our world, only DKK 500,000,000 EBITDA against a drop in volume of 34% or close to DKK 1,500,000,000.0. First thing we did when the lockdowns came was to make sure that we kept all sites and offices safe, as I talked about in the beginning. But we also immediately turned to how we could contain our cost We laid off in total 17 vessels, five of these were passenger vessels. And then we have gradually reintroduced these vessels as demand has allowed to do this. We also cut CapEx everywhere where we could for legal and or prior commitment restrictions. We then, when these elements worked and were in place, turned our attention to how the business should look in a post COVID-nineteen world. And if you turn to Page 10, what we did was that we continued the implementation of the strategy that we announced in 2018 and 2019 to simplify our business structure with an aim to focus our commercial focus to strengthen our commercial focus. We changed the concept on board our passenger vessels. We adjusted various elements in our business support functions to design the company that we think will carry us through the change times. We did not set a target for how many people this would mean would be made redundant. But as a consequence of these changes, we were able to reduce six fifty people some adjustments afterwards in the markets, we couldn't announce it that day comes close to 10% of the workforce. But again, it's not driven by an aim to reduce the workforce, but more to make sure we have the right commercial focus, both on our freight and our passenger division. For this year, the impact of the changes will be awash due to the one off cost. But going forward, we should see cost savings from this of DKK $250,000,000 and obviously also revenue strengthening. Before looking at the outlook, Karina will, on Page 11, talk about our financial position. Yes. As we have communicated before, we have, during the past months, adapted our financial position, and that continued here into Q2. So after Q1, we reported that we had increased our committed facilities by about 1,000,000,000. And after that, we had committed facilities in total of DKK 2,700,000,000.0. Since then, we have secured further facilities. So now we have access to committed facilities of more than DKK 3,500,000,000.0. So together with cash of about DKK 600,000,000 now, we are looking into cash and committed facilities of about DKK 4,100,000.0 today. As we talked about before, we, in Q1, adapted our covenants we talked about in Q1, sorry, we adapted our covenants related to the U. N. Row Row acquisition to reflect the uncertainty of the current situation. We have made no further changes to that. And just to reconfirm, there are no other loan agreements where we have relevant covenant risks. So we feel that we are in a good and solid position as we speak. Thank you, Corine. And we have included this slide because especially many banks have taken an interest in whether our cash positions were healthy. And we hope that this slide demonstrates that after an initial focus in the Phase one on this, we've luckily been able to focus our effort on how to adapt the business rather than focusing on our cash situation. If we look to the outlook on Page 13. As I mentioned before, the positive volume recovery trend continued into July. Our automotive exposure tells us that the automotive rebound is slower. Therefore, we are still alert, still see some uncertainty for the remainder of the year. Other competitors have taken a different route than us and have closed down services, they are coming back. We can see that although Turkey, in our opinion, has the potential to actually come out quite strong economically from the crisis, the lira is weakening. And if there's too much focus on keeping interest low, the positivity around Turkey could change. We see that EU, UK make very little progress on a deal after the period that ends in December, which also creates some uncertain outlook. But all in all, the expectations we now have is that we will lose less than 10% of the volumes compared to 2019, whereas we previously expected a drop off of 15%. On the passenger side, also, as I mentioned in the beginning, we have seen an encouraging pickup in demand from passengers where it is safe to travel. But as the second outbreaks may intensify, it is a vulnerable and fine balance that we strike with the passenger. And we have seen that on the channel and between Amsterdam and Newcastle, the comebacks have been less strong than in on the route between Denmark and Norway. So again, a cautious optimism, but monitoring closely how the COVID situation develops. All in all, on Page 15, the knowledge we have and the outlook we see and get from customers and others make us adjust the EBITDA range from down to what DKK2 billion to a range of DKK2.2 billion to DKK2.5 billion with an unchanged investment outlook of billion. Uncertainty, as I just explained on the previous pages, remain elevated, but that's not a surprise, I guess, to anybody during these times. On Page 16, in summary, ESGIS is well positioned to meet the challenges and to meet the opportunities that lie ahead of us. We have completed major adaptations to our business, which has strengthened our commercial focus. We begin to see some interesting customer wins on the freight side from this. And we have seen that the adaptations on the passenger side are paying off, for example, with the new leg from Frederikshaven to Oslo, adding revenue with the same capacity deployed. We think and have seen that new opportunities like that one can arise from structural market changes as operators and customers review their needs and the situation as the transparency of the impact of COVID-nineteen becomes clearer, we feel that we are in a strong position to pursue such opportunities that may arise, especially given the good development we have seen and the good recovery we have seen from the low point in April. With that, we turn over to questions. Our first question is from Ben Togo from Carnegie. Please go ahead. Yes. Hello. And congrats with the with the with the recovery, if you can say that. But I'd like to start out with the compensation you have received. How much of an impact is there in the Q2 numbers? How much can we expect in Q3? And in which business areas has it had, you shall say, the largest impact? That's the first question. Yes. Let me give a go on that one, Dan. In total, we have included about 150,000,000 in the numbers for Q2. And when I look into Q3, it'll be a very small amount that you will see in Q3. We have currently around 500 people on furlough, going down from the up to 2,800. And also compensation from any fixed cost schemes have been included in Q2 and will not be there in Q3. So a minor amount in Q3, I would say. Then you ask where have they been included. They have been included across the business, most significantly as a stand alone in the passenger business, where we see about onethree of the total compensation split out between salary compensation and fixed cost compensation. Okay. And then a question on the guidance. Tom, you mentioned that you now, so to say, expect drop of around 10% in volumes and freight volumes coming from 15% previously. So the 10% drop is would that, so to say, correspond with a a midrange for the for the EBITDA and whatever uncertainty lies, you know, on each side? So so 10% decline, would that match the midrange of your of your guidance range? That's a that's a good assumption. Okay. Super. And then finally, the whole business, you know, you have been through, you know, the post COVID scenarios, etcetera. Has that triggered any thoughts on how you will or effects on the Win 23 ambitions? Should we look at that different now? Or how do you view that? As I think we also discussed after Q1, we have been through the different strategic initiatives to see if our mindset has changed With a few adjustments, all of the initiatives are still relevant for us. In fact, some of the changes we have now made are reinforcing those. We've also said that to come back with what our absolute ambition is for 2023, we'll wait until our focus is shifted away from the COVID immediate challenges. But all the initiatives that are included in the Win 23 ambition are still valid. But the underlying business is in another place. Is that correct? The underlying business obviously has gone the wrong direction. But the uptake from the initiatives, we believe, are still valid. But again, we'll come back to give you a summary of the two elements once the times have normalized a bit more. Sounds good. Thanks. And our next question is from Markus Galande from Nordea. Please go ahead. Thank you. I have a few questions, if I may. First, looking at the channel channel freight volumes, they were down 9% year on year, I believe, whereas we've seen Eurotone reports minus 25% year on year. Could you say something about the dynamic there, why you seem to be taking so much market share? We have taken some market share. That's correct. The dynamic is that we have kept our five out of six vessels operating. We reduced the number of departures. So I think we have reduced, at least in the beginning of, to 20%, 25% of capacity. Our main ferry competitor did something similar, but they did it through a reduction from five to two vessels initially, which meant that their frequency may have suffered a little more than ours, which have shifted some market shares. In addition, without me knowing all the details, I'm sure some of you have been on the Eurotone calls, but they've had some space restrictions for drivers in this period, which has also helped us on the freight side, whereas the opposite has been true on the passenger side, where we have reduced heavily the number of passengers that could travel with us, whereas as they have been less impacted on that side. So I think you would have seen Eurotone pick up market share on the passenger side, whereas we have picked up market share on the freight side. Okay. And has the lower fuel price also benefited you? Have adjusted prices down to gain some market share there? Lower fuel prices benefit us somewhat on the channel because we also have passengers. In theory, it's a pass through to the freight customers. But of course, when as you know, when fuel goes down, there can be a time lag and vice versa. But we have not, other than those automatic adjustments, been out doing anything on pricing in this period. Okay, understood. And then my second question is regarding the ship operation and maintenance costs. They seem very low in the quarter. They're declining quite considerably both in absolute terms, of course, but also as a as a share of sales. And I'm guessing lower fuel prices help there, but but there seems to be more going on. Could you elaborate a little a little on what you've done there? That's a good catch. There are two elements. One is, of course, that when the ships do not operate, there's also less maintenance. And then there has also been an instruction to our technical organization in this period to be cautious about maintenance work that is not required to perform. So it's those two elements in combination. Plus, I believe, we may have had slightly elevated costs last year, which then further reinforces this trend. Okay. So should we expect a catch up of maintenance costs in the coming quarters? I don't believe so. Okay. And then last question, and I'll jump back into the queue. You're saying you expect full year volumes to be down 10% year on year, and I think that's roughly how much volumes were down in the first half of the year, which, of course, means you expect full year volumes to be down 10% year on year in the second or second half volumes to be down 10% as well. But you're also suggesting that July volumes are up. Is that so why this seemingly negative view on the second half of the year when it started so strongly? Have you seen stockpiling among customers? Or what's going on there? It's a consequence of the elevated uncertainty. It is very difficult for us to derive whether the strong pickup now is a demand driven a truly demand driven pickup or whether it's some backlogs from the lockdowns. That in combination which could, for us, indicate that there are some risks that automotive and other industries will reduce capacity again come September, October. That, in combination with the COVID-nineteen developments we see around Europe, have led us to take a cautious view on volume developments after July. Okay, understood. Thank you. And our next question is from Lars Heine from SEB. Please go ahead. Yes, good morning. Thank you. And first of all, thanks for now giving us the EBITDA. It's a big help at least on the business units when we do the forecasting. A few questions on the Mediterranean. The first one is if you can disclose the price that you have paid for the terminals that you have now acquired or the concession for the neighboring terminal. That's the first one. That is an easy one. We cannot. I can disclose that it was paid in 2019. So it doesn't have a cash impact this year. Okay. Then secondly, still regarding the Mediterranean. I know also Dan asked you a little bit about the Win 23 strategy, and you said that some of the measures there are still valid. But if I understand you correctly, most of the earnings progress that were for the Mediterranean in Win twenty three were supposed to come from restructuring of the network and the terminals. Can you say if you still believe that, that will be achievable? And I think at an earlier point before COVID-nineteen, you were talking about an earnings growth of towards DKK 150,000,000 to €200,000,000 from this restructuring and the reduction of capacity Mediterranean for this year. Is that something that is still valid? Because this is as far as I see it, this is mostly on the cost side. I know that volumes are down, but if you can still achieve those savings on the cost side. It's the challenge is, of course, when volumes are down, all the congestion and stuff we talked automatically. So we have been able to do cost savings, but Turkey has been particularly hard hit by the automotive and the textile industries. I have a strong belief in Turkey coming back. Turkey will midterm win from the trade wars, from the COVID learnings. We know Inditex are moving production from Asia to Turkey. We know Microsoft, HP and others are moving some of their hardware needs from Asia to Turkey. So the potential for our Turkish operation is unchanged. The timing, Sweden and Turkey are the two hardest hit areas that we have due to the heavy reliance on automotive. But the potential is unchanged in our view. Okay. Will Turkey will Mediterranean make money in the third quarter on EBIT? Do have we not we have that in the table, don't we? It's not asking about third quarter. The third quarter, sorry. No, I can read the second quarter. Sorry. I we cannot talk about that level at this stage. But Turkey is the one that has recovered latest together with Sweden on the volume side. Okay. Then regarding the tax business, I don't know if you can yes, I understand that there's you've been up and running again. But can you share any insights into how the progression has been? And what kind of load factors do you actually need for the passenger to be back at breakeven on those two key routes that you have? And is that likely to actually to be achieved here in the first quarter, given the progression that you have seen in passenger volumes now after the opening? It's a very delicate balance with the number of passengers. What we have focused on in this reopening phase is how many passengers do we need for it to be better to operate than to not operate. On the Oslo Copenhagen, that number after our adaptations were around 300 passengers. And in July, we've had north of 700 per departure on average. That number will be dropping in August and has been impacted also by the worrying COVID numbers in both Norway and maybe particularly, The U. In on the channel, we are down to around onethree of regular passengers. But there, of course, we are operating for freight purposes anyway. And on Amsterdam, Newcastle, we are down to probably onefour of normal load factors, still better than not operating, but obviously far from a breakeven situation. And it completely depends on how the COVID situation develops in terms of whether passenger will travel in bigger numbers. So too early to say, but not as big as we operate, whether we have 25 or 35% on the Amsterdam route, it's not something that is make it or break it in terms of our forecast for the year. But on the Copenhagen also, with those amount of passengers you talk about here going into June and July and August also, will it actually make money there? Or will it continue to lose money on with that kind of passenger volumes? It's there may be a breakeven month included here. I don't think I said August had strong numbers on Oslo Copenhagen. I'm sorry, I misunderstood you. Yes. We've seen already the it's still much better than the 300,000,000 that we need, but it's already showing some signs of the COVID nervousness that the booking inflow is reducing. Okay. And then lastly, just a housekeeping question. The cost reductions of €200,000,000 was it $250,000,000 Or it's 200,000,000, I can't recall now. DKK 50,000,000, yes. How will that be split? If you can give us an indication on how that would be split on the business units? That's that we cannot give here. You may be able to get some guidance from our Investor Relations afterwards. Okay. All right. Thank you. Our next question is from Casper Blom from ABG Sundal Collier. Thank you very much, and thanks for taking my question. I'd like to follow-up a little bit on Dan and Lars' questions regarding the Win 23 and talk about the passenger business. You mentioned that as part of your adaptions to COVID-nineteen and the world after that you are aligning your passenger concept to be more for travel purposes rather than sort of the more, let's call it, cruise liners or whatever you want to call it, the passenger concepts before. How does that sort of how is that aligned with the ambition to sort of sell more for to passengers on board that you that you talked about in connection with the Win 20 three? I think it's it's that will still be possible. We have shifted we, of course, still need to have things going on, on board. So there's still restaurants. There's still entertainment for children. You can still sit on the sundeck and enjoy a beer and white wine with a troubadour playing. But the discotheque is closed. The nightclub has a different sense when you enter it, of course, to live up to all restrictions that you would also see at shore. On the other hand, adding transport route to Frederikshaven means that you get the families on board with cars and with probably a bigger desire to spend than some of the people who travel to be in the disco. So we think that, that's still a possibility. And of course, the extra revenue from that leg will would compensate if we miss some of the onboard targets just from the fair amount we will get through that. How does this sort of, call it, updated concepts, does that in any way change your consideration with regards to renewal of the ferries that you use on Amsterdam, Newcastle, Copenhagen, Oslo? We are not actively pursuing that at the moment. Obviously, with the COVID-nineteen, there may be secondhand tonnage available that was not available before. So we keep an half eye open for that. But at the moment, we focus completely on the adaptations, making those work on both those services and then getting the revenue back at the right levels. New tonnage is not on our mind right now. Okay. What about new tonnage in the case where you get a call to your M and A department? Has that sort of had an increasing activity or more incoming calls over the last three months? It's where we are in in in the same direct markets, it's it's pretty obvious what elements could could happen. And there sometimes the dialogue is more intense, sometimes it's less intense. And and as as I think I mentioned in the presentation, we are we are pursuing opportunities that we think could arise from this. Would you also be sort of interested in looking at, I would say, more new opportunities? I mean, for example, when you entered Turkey through UNROWRO, that was sort of new territory. Would you also be considering new territory in the current situation? I would find it surprising if we move outside our current geographies. So it's the Baltics Baltic Sea, it's the North Sea, it's the Channel and it's Mediterranean waters that we are looking for. And logistics, the same. We're looking in the geographies we're already present. Okay. And the committed credit facilities that you have, would that also be available for such actions? There are certain restrictions in the old agreements. But in theory, yes. But we do not have any immediate ideas to spend any of that DKK 4,000,000,000. That's very clear. Thanks a lot, Tobin. You're welcome. And our next question is from Steven Roller from KFW Bank. Steven, can you hear us? Sorry. Do you hear me now? Yes. Okay. Sorry. My apologies. I just had probably the mute button still on. I I well, I have a general question. You you talked about opportunities, but also about a sustainable impact because of the COVID-nineteen crisis. So looking at the sustainable impacts, I mean, if I look at, for instance, the Channel Islands, but also on the Mediterranean Sea Mediterranean, you see you've you've said that land transport has gained market share in the channels. You have the passenger issues, for instance. So in general, could you say if you expect any sustainable changes after the COVID-nineteen impact or is it too early to say? And of course, you also opened the new Fredriksen Preethixhafen route. So you took, of course, market share from other players, from RoPax operators. So do you think that, well, now RoRo operators are more well, in favor compared to RoPax operators? And the second question is on your newbuilds. So could you provide us an update on this issue if there have been any changes to your current plans? The if we start with the Mediterranean situation, Karina explained a little bit the background for the loss. The inability to fly drivers to Italy and France was a is big factor. And also the downfall in Turkey's economy, which means that logistics operators have surplus capacity. So with time, we think that, that will reverse to normal. We are meeting with customers to see how we can get their trailers back on our vessels now that drivers can again fly. On the channel, we are 100% convinced that passengers will start traveling again as soon as they deem it safe and the governments do not impose restrictions on them. Frederikshafen was actually a void in the market that was left when Stainer discontinued their RoPax service between Oslo and Fredrikshafen that we simply filled that void with our existing ferries. So we have not really taken anything from anybody from that move, we expect that to be a permanent pickup in passenger potential for DFDS and freight potential for that matter. With regard to the newbuildings, there's nothing new to report. A lot of our DKK 1,600,000,000.0 guidance and also the CapEx that we are guiding for 2021 is related to already committed newbuildings. The number five and six RowRow ferry will, in all likelihood, be delivered this year. And then we have two RowPaxes on order that, to my recollection, would be coming 2021, early twenty twenty two according to the plans. We have no intentions of engaging in any other new building contracts. Okay. And do you think that you will shift your business more to a pure RoRo business? Or is the passenger side still an important one or do you do you think that roadblocks services, for instance, still make make sense for instance in the channels or Frederik's house or what wherever? We don't see any strategic shifts in our focus on both serving passengers and freight. We have made adjustments to the passenger concept, as we have talked about here. And then we have added the leg Frederikshaven Oslo. But we don't foresee any major other changes to our passenger business. Okay. Thank you. And our next question is from Rory Cullinan from RBC. Please go ahead. Good morning. Just one question remaining, actually. I've noticed the decline in ferry revenues of 27% excluding the passenger revenues. It's quite steep relative to volume down 1314%. You mentioned that you weren't sort of doing anything active on pricing. So is that almost entirely fueled? Or is there any mix effects in There is a revenue decline from the bunker surcharge that's also in there. Okay. There's been a lot of in the markets, there's been a lot of focus on operating, getting goods moved, etcetera, and less so on actually pricing discussions, which often you would see in a declining market. But there's been so much other on people's minds that it has been less of a focus in many markets. So it is primarily driven by the fuel difference. Okay. Thank you. And our next question is from Marcus Lander from Nordea. Please go ahead. Thank you. I just wanted to follow-up on one of Lars' questions. Did I hear you say that utilization on the channel was one third of normal in July? Or did I For the passenger sorry. The the passenger numbers were one third of normal. In July? Around this period, I cannot say that it's exactly those thirty days, but we've seen numbers around those levels. Yes. Okay. Because I mean, we've seen Eurotunnel's numbers have been quite strong and at least I've been reading other ferry companies speak of a very strong July volume. So I'm just surprised by that. That just seems a little low to me. I think on the passenger side, we have also think we have also yes, we have this restriction I talked about. We can only carry three eighty passengers on each ferry. I think my recollection is actually that in terms of market share, we have held up against the ferry competitor also on the passenger side, but that the tunnel has significantly gained. As I think I also tried to say before, we have gained on versus the tunnel on the freight side, but they have gained on the passenger side. Of course, passenger is lower than it used to be, which makes the loss of market share less significant in a sense. Okay. Okay. I understand. Thank you. You're welcome. And just as a final reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. Our next question is from Simon Rowe from Sanis Henderson. Please go ahead. Hi. Good morning. I just had a question actually about what you were just talking about in relation to the channel. This passenger restriction. Is that a regulatory thing? Or is that something that you've decided on? And what does it depend on? This is how we have changed the passenger areas to make sure that we live up to any regulatory demands. There's not a law saying we can only carry three eighty. This is how we have designed it, and the consequence has been that it has been restricted, which for many weeks was not a problem at all because there were no passengers. So it has only, you can say, turned an issue as we have approached the very high season. So we've been quite comfortable with how we have dealt with this, focusing a lot on the freight side. But you're saying that you think that will remain long term? I mean, what's what is are monitoring this continuously. And of course, now with the situation becoming a little more severe again between England and France, my suspicion I haven't checked the last week or so, but my suspicion is that it becomes less of an issue to have this restriction. We still have many departures. And if we can fill them every we would still have more passengers than we have now. So it's not on every departure that this is a problem. But we will we are monitoring this, but we don't want to create an unsafe atmosphere on board for the passengers. We think that's probably issue number one. Yes. No, I suppose if that continues on a long term basis, though, it obviously has a big impact on the Yes. No, no. But that will not be the case. That will not be the case. We'll be able to do differently once the COVID situation is different. Yes. Okay. Thanks very much. And again, it's only a challenge in August. After August, we will not have any problems with any restrictions due to the much lower numbers anyway on passengers. Yeah. I know. But but but but actually, you made quite a bit of money, don't you, in the peak peak seasons with with the cars and stuff? I mean, it's not Absolutely. And that's that's, of course, why we that's the main reason for our, results being much lower than last year also in Q2 is, of course, the channel passengers. And it will also has also been factored in that we will have a big drop in Q3 on the channel passenger income. Yes. Because it's not just in a sense, it's not just passengers. It's the cars that come with them, isn't it? Yeah. We only have car we don't have foot passengers. It's yes, it's the cars. But again, once you get out of the high season, you it will have a much lesser impact. Yes. Okay. Thank you. And our next question is from Lars Heine from SEB. Please go ahead. Yes. Hi again. Just a follow-up still on the Mediterranean. Can you give us a little bit of insight into the movement in market share that you have had versus the I mean, the only two competitors there is on the land transport. Have you lost? And if you have lost, how much? Well, sorry, was that about Turkey? Yes, yes. Yes. We have lost six to seven percentage point market share. And the reason for that? Well, the reason we I think both Karine and I have talked through. Happy to have you call also, Saan, to get more details. But it's again, we haven't been able to fly drivers. We haven't we've seen a contraction of the economy, which means that logistics operators have surplus equipment, which then make it cheaper for them to drive than to sail. And the and if and when the situation with the flights for the drivers will be solved, Do you expect to regain that market share? We do, and it has gradually restarted. So we have campaigns and customer visits all over to see how we can hopefully get most of that back. Okay. Thank you.