Hello, and welcome to CTT's first quarter 2026 results conference call. This event is hosted by Mr. Guy Pacheco, CEO of CTT, and by Mr. João Sousa, CCO of CTT. Please note that this conference is being recorded. For the duration of the call, your microphones will be disabled. We will have a Q&A session at the end of the presentation, and the analysts will have the opportunity to ask questions. To do so, simply click on the button to raise your hands, and we will give you access to the microphone. If you are dialing from a phone line, press star nine to raise your hand and star six to unmute yourself. I'll now turn the call over to Mr. Guy Pacheco, CEO.
Good morning to you all, and thank you for attending our first Q conference call. I would invite you to start our presentation on slide number four, where we show a quarter of resilient growth with 4.3% growth, with our growth areas performing well, parcels and Banco CTT showing growth acceleration. Although, as anticipated, our profitability was impacted by a number of congenital impacts. Namely, the Middle East crisis and new regulation introduction in parcels, concentrated peak volumes that spilled over to the first quarter, and the storms that affected central Portugal due to the hurricane Kristin. With that, our EBIT declined 35.3% year-on-year on a comparable basis.
These events were contained in April, and April is showing strong signs of improvement, with E&P volumes acceleration, accelerating e-commerce solutions, recurring EBIT also improving sequentially, and the public debt placements showing signs of strong recovery, and should improve further with revision of the limits that government announced last week. On page five, we can see the e-commerce solutions volumes, where we continue to see strong volume evolution with another quarter of acceleration on growth. We posted a very strong 14.3% in the first quarter, and April shows strong signs of improvement with almost 30% growth on April. This growth is supported mainly on non-Asian customers, with strong volume acceleration.
With this, we continue to see a very strong Iberian structural opportunity that remains unchanged since the last quarters. On page six, we can see e-commerce solutions revenues growth that remain very solid. E&P revenues increased 14.4% on the back of strong volume growth that we saw. E-commerce solution revenues consolidated growing on a pro forma basis 10.2%. The non-E&P revenues, namely on CACESA, were impacted by discontinuing of low gross margin business like handling and impact of the introduction of the new G4 regulation in March. Our margin at the impact of these specific events, and as such, we had a challenging margin in the first quarter.
Regulation, peak, volumes, and Middle East crisis, introduced volatility in the volumes throughout the quarter, as shown in the intra-month, detail that we shared on the previous slide. That poses a number of capacity management issues that affected the margin in the first quarter. All those issues were resolved, and as such, profitability in April is showing, strong signs of sequentially improving months, and normalizing. With that, I would pass you over to João, to take us through the public debt numbers.
Thank you very much, Guy. Good morning, everybody. As we did in the last call, last results call, we start this another section with our growth and diversification areas. As you can see in this slide on the left side, we show the performance of public debt placements. This first quarter performance was impacted for by two main factors. The lower footfall in our stores due to several storms that affected Portugal during the quarter that led to several stores being closed for a long number of days. Also, a demanding of this quarter versus the quarter of last year when we compare because the last quarter of last year was still benefiting from the CapEx increase that we see in the quarter, the last quarter of 2024, and also the improvement remuneration conditions.
The good news is that we already saw a sequential improvement in April. In addition, the upgrade limits at the end of April already translating to a strong growth in the first days of May. We can highlight that these first days of May we see 2x of public place placements in a daily basis. Even in the, in our app, we see a best day ever, like a record in our app, in public place placement. On the left-hand side, we see our diversified services we are doing, so the health plans and insurance.
Here we highlight health plans that, even with these lower footfalls in stores, we see the customer base continue to increase. Both health plans and insurance products are evolving very positively and helping us to build a customer portfolio with recurring revenue and great predictability for CTT. On page eight, we see the revenues decline from EUR 128.7 million in this quarter versus EUR 132.2 million in the last quarter. This performance reflects two main factors. The decline in mail, that is a well-known trend that we are managing with improving in pricing and with managing churn with the big customers. More important, the reduction in revenues from the savings certificates that I explained before, it is not a trend.
This is a specific impact that we already solved or is already solved, and we are seeing already a positive positive trend. In the other end, positive, in this chart, you can see business solutions and payments, another important pillar in our diversification strategy, continue to grow. This area continues to support the overall performance of this business unit. In terms of profitability, recurring EBIT, email services was impacted by lower revenues from these saving placements. Recurring EBIT stood at EUR 4.2 million in this first quarter versus EUR 7.9 million in the last quarter, represent the decline on 46.6%. The EBIT margin was 3.3% on the first quarter versus 6.0% on first quarter of 2025.
Nevertheless, we maintain a positive outlook on this, on this mail and others, because continued growth of business solutions. We see, and we already see this recovering on savings placements in April and these first days of May. With this, I pass to Vitor.
Thank you, João. On page nine, we can see Banco CTT operationals. The Banco continues to accelerate sequentially its volumes growth, showing early signs of success of the new strategy that we have been implementing, with volumes growing almost 14%, especially on the loan book, with growth of almost 16%, and off-balance sheet savings that continue to overperform with 23.2% growth. Banco was one of the bank that growed most in within the retail banks in Portugal, for the ones that post results. Very strong performance here. Current accounts continue to grow 3.5%, reaching almost 12,000 customers.
On banking revenues, we continue to see net interest margin improvement that now stands at 2.2%, and the banking revenues driven by net interest income and commissions, reaching almost 9%. In terms of recurring EBIT, a flattish performance or a marginal improvement as we continue to invest in reinforcing our commercial and digital capabilities to refuel or to reignite the bank growth going forward. On page 11, we can see the beginning of our financial review with our key financial indicators. Please bear in mind that these are not performers, so include the impact of the acquisition of CACESA. We see 14.1% growth on revenues. Our operating costs, as mentioned, with the additional costs due to capacity management, and impacts of weather growing 17.7%.
Recurring EBIT reaching EUR 15.3 million with a decline of 24%. Our net profit was EUR 4.5 million with 17.6% decline. Our free cashflow was heavily impacted by seasonality, that is due to the repayments of the capacity installed to phase peak and the additional and the CapEx that normally is back and loaded. As such, we saw this reversal that we expect, as previously commented, to reverse during the year. On page 12, we see revenue growth continues to be pulled by solid performance of e-commerce solutions where we see SAP with very strong performance and overall growing 10% or EUR 15.1 million. On mail, we saw the decline of financial service placements that account for EUR 3 million of this decline.
The remainder is the net effect of good performance on business solutions and still decline on volumes of mail. Banco CTT growth of EUR 3 million driven by volumes that drove net interest income and commissions, and overall growing 4.3% on a pro forma basis on the first quarter. Our e-commerce will continue to be the catalyst or the core catalyst of our revenues and accounting almost half of our revenues in the first quarter. On page 13, we can see the evolution of our costs that as mentioned, were mainly driven by temporary e-commerce capacity challenges.
E-commerce solutions grew 19.8% with high volatility due to supply chain disruptions and peak season 2025 spill over to January due to an abnormally concentrated peak around Christmas, required significant additional effort to maintain quality. As such, we continue to prioritize quality for our customers because we think that is what protects value in the long term. These ads contain the impact on the first quarter. Mail and services declining EUR 0.8 million, showing lower activity in mail and financial services, with some cost impacts resulting from the storms in Portugal and Banco CTT, EUR 2.9 million increase due to the investment on growth and commercial expansion.
Our core cost of risk now stands 1% with a slight increase from 0.9% last year. Overall, our revenues grew 7.5%. In slide 14, we can see our recurring EBIT bridge, where we see a first quarter showing compression in our margins due to these highlighted events, where we see early signs of recovery with the strong April in terms of operationals. Our EBIT is declining 35% on a comparable basis due to these impacts, namely on e-commerce solutions, where the capacity management issues and regulations impacted the performance, with EUR 4.7 million decline. In mail and services, the impact of lower public debt placements also affecting performance, with a EUR 3.7 million of decline.
The bank showing a flattish performance in line with guidance and with the phase of investment that we are now undergoing. The recurring EBIT performance is set to improve in the rest of the year. The second quarter started strongly with parcel volumes also posting strong performance and recovering on profitability. On mail and services, we see financial services benefiting from not only higher interest rates, but especially from the increase on limits. The government increase limit is on the current series from EUR 100,000 per person, individual limit to EUR 250,000. We, as João Bento mentioned, we see early signs of elasticity due to those changes.
Net interest margin in the bank will have tailwind from interest rates, but the investment will continue as guided. In page 15, we see cash flow, and the net debt, our leverage ratios due to the working capital performance now sits at 2.2x , still below the self-imposed limits of 2.5x . We expect working capital normalization throughout the rest of the year. That will help deleveraging that coupled with the proceeds from this JV with DHL that is expected to close this month. We see leverage immediately below 1.7 and with the reversal to input improve further throughout the year. With this, I would move to my final remarks.
We continue to believe firmly in the future growth of this company, continue to building upon our strategic foundations. We have been building this commercial franchise, strong commercial franchise throughout Iberia, and that continues very strong, especially in the dynamics of revenues, where we continue to see resilience growth in the e-commerce solutions. The first quarter was affected by anticipated headwinds with limited impact throughout the quarter, and we see April trading showing strong signs of recovery. For the rest of the year, we see normalization underway, with this recovery on margins of e-commerce and continuous strong volumes. Mail and services stabilizing on the back of recovery and better performance of financial services with the revisions of saving certificates.
Banco CTT will continue this path of accelerating growth with no changing in our strategic stance in terms of investment. With this, we are reiterating guidance, notwithstanding a volatile environment in regulation and increasing execution risk, but we remain committed to achieve our full year guidance that I remind it's a growing guidance. With delivery to be driven by e-commerce execution throughout the rest of the year and tailwinds on financial services. We expect, as mentioned, our leverage trajectory to improve after DHL closing in May. We started very strongly our second quarter. We see second semester also with strong fundamentals, but subject to the new regulations. We are preparing according to our scenarios, but we'll need to adjust according to reality.
We remain very committed to achieve our full year guidance. With this, I would be ready to take your questions.
We are now available to take your questions. As a reminder, analysts that wish to place a question should click on the button Raise Your Hand, and we'll give you access to the microphone. Analysts dialing from a phone line should press star nine to raise your hand and star six to unmute yourself. Our first question comes from João Safara. João, please ask your question.
Hi, good morning. Thank you, Guy and João, and welcome Joana to the team. I mean, I have two questions. I think they are related. The first one is just if you could, well, help us understand or try to identify the several impacts you mentioned. You mentioned peak seasons spillover, volatility, volume volatility, weather. I don't know if there is a way to sort of give us an idea of exactly what are these impacts, what is the contribution of each of these impact?
The question here is also because it seems that, and we've seen that as well in, it's true with different perimeter, but we've seen that as well in the first quarter of 2025, that there was because of quality, some deteriorations of margins. Here, basically what I wanted to understand is a bit if this is something that we should expect going forward in the first quarter, in the sense that, okay, I understand the weather. Definitely that is a one-off, maybe the other impacts might happen on a recurrent basis. A bit this is my question, I don't know if you can help me understand this a little bit better.
Just on the performance of CACESA, I mean, is it fair to assume that CACESA did relatively worse than the rest of the business? The reason why I'm saying this is because we've seen some volume growth in the quarter, which was quite strong, 14%. That should have triggered some operating leverage. I mean, I don't know, or maybe it was just that the base for CACESA's margin in the first quarter of 2025 was too high. I don't know if there's something there that you could also help me understand a little bit better. That's it. Thank you.
Thank you, João, for your question. I will start with the first one. You are right when you say there is some seasonality effects on the first quarter, and it's easy to explain why. That is, the market is still very exposed to Asian volumes and on the first quarter, we have February typically with the Chinese New Year. Normally, we have very low volumes around those weeks because production in China stops and as such, that impacts the supply chain, and that is the reason why the first quarter normally has lower margins because it's difficult to just for one week or two adjust capacity to then resume with significant volumes uplift in March.
As such, normally we have lower margins in the first quarter. That trend this year was aggravated further by specific impacts. That was the peak and the war. That's why, because we had in every month, so in January, February, and March, a high volatility from 1x-3x the volume week on week. That poses tremendous challenges in terms of managing capacity because when it's slow you are under capacity and having margin loss because of that. When it grows, you need to put extra labor and hire people at higher costs in order to face that extra growth. On average, growth was resilient as you saw. But with this volatility, impacted.
That volatility was driven in January because of the spillover of the peak. February normally is slow because of Chinese New Year and no news there. When we were expecting a strong recovery, or after the New Year's in China, as every year happens, we have the Middle Eastern war prices that impacted all the flows that come through Middle East and that took some time to recover it. Luckily, the supply chains were agile enough recovering, but we had a huge amount of volumes coming on the end of March that once again impacted margin. Good news is the business remains strong. We had this volatility that impacted margins temporarily.
As I mentioned, we continue to protect quality of our customers in order to keep loyalty of them, and that's what we see in the long term generating more value. Unfortunately, we had these impacts on the quarter margin. In terms of the storms, they were more contained on the mail and services impacts. Not on the parcel division. CACESA. CACESA, in terms of margin, in terms of top line, we discontinued some legacy business they had from their past in Iberia. Remember that CACESA used to be an Iberia division, and they had some handling services that were non-core and low margin that we discontinued throughout last year.
In March, the Spain Customs Authority was the first in Europe to introduce a new EU regulation that is G4, and that poses a number of problems in the Madrid airports, not only for us, but to every customs broker in the market. With the inability to clear volumes, that due to namely constraints on the customs authority side in IT that was unable to respond to the clearance requests and that adds a double impact on margin, in revenues and in margin because we add more costs of storage in the airport side due to that. Since then, things are improving as normality with tax authority resumed.
We are seeing, things going back to normality.
All clear. Thank you very much.
Our next question comes from Filipe Leite at CaixaBank BPI. Filipe, please unmute yourself and ask your question. Filipe?
Yes. Hello. Can you hear me now?
Yeah, we can.
Yes. Good morning. Oh, okay. Perfect. Good morning, everyone. I have four questions if I may. First one is regarding DHL, the joint venture with DHL. Because you, as you mentioned, it's expected to be closed this month. Just to confirm what will be the net proceeds, the final net proceeds for CTT. Also if we can already assume that DHL will not take any stake in CACESA. Second question on e-commerce solution, because you mentioned profitability improvement in April, and he was just explaining that. In terms of numbers, can we assume that the EBIT margin in April stood already close to the almost 10% reported in second quarter of last year?
The sequential improvement as you mentioned in the presentation, means that probably in second quarter we will still have an EBITA margin for this division below the close to 10% reported last year. Third question, also on e-commerce, and is actually a clarification because you mentioned a new regulation affecting parcel volumes. Just to confirm that this new regulation will be implemented only in June or July, right? My question is just to understand how this regulation that will be implemented only before summer, already impacted the volumes in first quarter. Last, a clarification on Banco CTT and on recent news that apparently you hire a financial advisor to evaluate your options on the bank.
Just to confirm, how is the process and if there is any official process open to divest part or the entire stake that you have in the bank. Thank you.
Filipe, thank you for your question. Starting on DHL JV, it will be closing on the next weeks. We still cannot confirm the final number, although we are not expecting material differences from the number we announced. We announced a number that is a non-debt basis, and we'll have a cash adjustment according to the accounts of April. We are still finalizing that number. We are not expecting a material adjustment due to that. Regarding the margin, we see a sequential improvement. The last quarter margin was close to 10%. We see convergence to that number. Still early days to commit to a specific number, we see signs of normalization.
In terms of the bank, I won't comment news, but I can say that we didn't hire any advisor at this point. Nothing else to comment on that.
On regulation, you are right to ask that clarification. From First of July onwards, we'll have the de minimis removal. That is encompassed in the what you calls the European Union Tax Reform, where there are several changes. Those changes are not material in terms of taxation or any kind of levy charged to the goods like it will be from 1st of July onwards. There are changes in the amount of information exchange between the platform, the commerce platform and tax authority. That is increasing materially because one of the aims of the tax of European Union is also to increase transparency in what arrives and enters the European space.
As such, the number of information collected increased materially, and that's what driven the chokes on the IT systems from Customs side. The number of information increased by almost 100x per parcel. Those throughput issues pose temporarily issues on CACESA business in Spain that is, as you know, the big chunk of CACESA numbers and profitability.
Just if I made a follow-up
And-
-on DHL. Yeah, sorry.
On CACESA, right? I forgot to mention that.
Yes.
CACESA will not be on the perimeter.
Okay. Thank you.
We continue available to take questions. Analysts that wish to place a button, to raise your hand, and we will give access to the microphone. Analysts dialing from a phone should press star nine to raise your hand and star six to unmute yourselves. As we don't have any other questions at this point, I will turn now the call back to our CEO, Guy Pacheco, for additional and closing remarks.
Thank you for attending. We have a new management team in place. We are very excited to take on this new challenge. We see encouraging signs of recovery and an encouraging start of this quarter with our April numbers, and we remain very committed to deliver our commitments to the market. Thank you all, and see you next time.