Good afternoon, ladies and gentlemen, and welcome to today's conference call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Mr. Martin Ziegenbalg.
Thank you. Hello, good morning, everyone out there. Thank you for following our last night's invitation to this call, following our release last night on preliminary Q1s, our decisions on AGM, and guidance. As announced, we have Frank Appel, Group CEO, and Melanie Kreis, CFO, here with us to take you through the presentation that we have sent with the invite or that you can find on our IR website at this point in time. I think we should be done within the 60-minute timeframe. Without further ado, over to you, Frank.
Yeah. Thank you, Martin. Also, good morning from my side. Let me go straight away onto page two. I want to give you a brief summary, then an update on volume developments, in particular for the divisions, and then Melanie will summarize the preliminary numbers for Q1. On page three, you can see what is currently on our minds. First of all, of course, it's our main priority to protect our people and provide great service for our customers. We are doing everything we can, following the instructions of the governments or the WHO, to protect our people. We are in the fortunate situation where in most markets, transportation of goods is allowed and seen as essential. The people who are working for us at the moment are doing an outstanding job. I'm really impressed and proud of our workforce. They are so committed.
They feel themselves proud that they can help the planet to move on in that very difficult situation. Of course, we see headwinds for our EBIT, because overall the activities are on a lower level. We have, and Melanie will explain more about that, about close to EUR 600 million in EBIT, including all one-time items, like the COVID-19 of EUR 200 million and the provisions we have built for the restructuring of StreetScooter. Based on the uncertainty we are in at the moment, we have very little force on somehow what might happen and how big the impact is. We think it's a prudent decision to withdraw the guidance. We are equally confident that if things are recovering, which we expect, of course, until latest 2021, but probably earlier, we want to confirm our EBIT guidance for 2022.
We also announced yesterday that we want to move the AGM in a situation when the situation is a little bit more stable and we are more forward-looking. We said as well that we intend still to pay the dividend later this year when we have the AGM. We said it's the right decision at the moment to postpone the AGM. From our side, as we said before, we are in very good shape as a company. That, of course, is a good situation if you go into such a massive crisis. Our balance sheet is in good shape, our liquidity position is in good shape, and we have a very clear strategic focus. That's the reason why we believe we are well equipped. Of course, such a crisis generates impact for our company as well.
Let me then turn to page four. Along our three bottom lines, it's clearly visible that our purpose, which we have known for 11 years, connecting people and improving lives, is very meaningful to the people in our organization. That's the reason why we believe the heavy investments we have done in the last years in certified and employee engagement, Great Place to Work, and all this kind of stuff are paying back now, because we have seen a tremendous morale of our folks out there. Of course, we are doing our utmost to protect them to stay healthy and safe . Again, I can only give compliments to our frontline employees for the outstanding performance.
That has led to the situation, despite that we see in some situations, like in India or before in China or now in some parts of Europe, that we are doing our utmost to keep really the best service quality. I have to say, so far so good. We really can be satisfied with the performance. Coming to the investment of choice, of course, our operations are in full swing, but nevertheless, we have lower volumes, and that, of course, has an impact on our EBIT number, despite that all divisions still have positive EBIT in the first quarter. Go to the details and volume development in particular.
On page six for P&P, what we have seen is we had a start into the year as we expected, between a 5% and 6% decline. Now it has accelerated, and the reason for that is currently only that Direct marketing volumes are going rapidly down because customers are stopping doing advertising if they are closed down anyway. We have seen on regular mail communication so far. On the other side, we have seen a good start in the range of 0%-5% parcel volume. In the last two weeks, we have seen a significant increase in our volumes. We said it last Friday already, we expect this week even before Christmas volumes. Of course, that's a challenge for the operations, we are doing our best to manage these kind of volume increases.
The financial impact in the first quarter was about EUR 40 million. That is, of course, against the expected run rate we originally had in our plans to deliver our EUR 5 billion. That is on P&P. On Express, we have chosen to demonstrate here what happens if the crisis is normalizing in China. We saw a significant drop in absolute volumes in TDI in China. Of course, that was also influenced by Chinese New Year, but it didn't recover rapidly. Now we really see significant volumes coming back from China, which is encouraging. In Europe, we are now in the middle of the crisis, so therefore we see a decline in volumes, but we expect a similar pattern if the lockdown is relieved or released to a certain extent. We should get additional activities, and we should see increases in volumes.
We expect that this pattern will follow the Asian model. If it's as fast as in China to be seen, the measures the governments have taken apparently are now working and have reduced the number of new infections, as you all have seen. Overall, Express is working extremely well. The service quality is great, despite that we have, of course, some missing belly space capacity for commercial life. The team is doing a great job to find additional freighters or to use our own airplanes for further rotations. The impact was EUR 90 million, not unexpected, because we have lower volume and lower utilization. On the other side, we also have a higher cost to protect our people.
Of course, there is some movement on yield that we can't do too much about because we see as well that our customers should expect from us that we are recovering or can expect from us that we are recovering additional costs. We are not increasing prices to a very high level to benefit from the crisis. DGFF, the volume development is here as well, the same. Airfreight, of course, came down. China is recovering, and the ocean is as well. Roads are down in Europe as well due to the lower activity. We see a recovery in Asia, and we expect similar patterns for Europe and the U.S. If it goes along, the rates are, of course, extremely high at the moment. The intransparency is high, and that has led, despite a significant volume decline in the first quarter, to a relatively stable profit.
As you can see , we only had an impact of EUR 30 million, which is, I think, given the tight market or low market volume, extremely good performance, I think. We are very happy with what we have done. Again, here, the focus is on service quality. We get a lot of thanks from customers because, of course, capacity on airfreight in particular is a very limited resource at the moment. DHL Supply Chain is different by sector. We see some uptrends like Life Science, healthcare, or some grocery. Of course, retailers, fashion, or automotive are down. Again, the challenge here is how you manage the volatility. In some facilities, you need more people. In others, you need hardly anyone. Of course, the ops people are working intensively to manage that. The impact has been EUR 30 million. Also here we see some impact. Finally, e-commerce solutions.
B2B volumes are, of course, slower, but B2C growth is protected. India had a quite complete lockdown. It gets now released again, and we see increasing activity on a lower level than normally it's happening. Focus, again, provides great domestic and cross-border service. People are doing a great job, and here we have seen the least impact of EUR 10 million in the quarter. With that, I would hand over now to Melanie to give you a little bit more insight into our financial numbers. Thank you very much, and Melanie, now the floor is yours.
Yeah. Thank you, Frank, and good morning, everybody, also from my side. I'm turning to page 12, where we have tried to put together our best understanding of the Q1 2020 numbers. The first two columns are the Q1 2019 numbers, where we obviously had a significant positive one-time benefit from the disposal of our Chinese supply chain business. If you adjust for that, the comparison is a hit of EUR 814 million in Q1 2019. How did we do in Q1 2020 compared to that? The third column shows you our reported numbers. Those reported numbers were obviously impacted by COVID-19. Order of magnitude is around EUR 200, and we had EUR 230 hits from StreetScooter in line with our full-year guidance of between EUR 300 -EUR 400. The reported number is about EUR 590.
The clear caveat here is those are preliminary figures, which is also why we are giving you rounded numbers. You may have spotted that if you add up the division numbers, you actually end up with EUR 580. This is due to rounding. I think those numbers are not going to deviate in the final picture materially. I think this is a very good indication of how we have done in Q1 2020. Looking at COVID-19's impact, EUR 200 million. Frank already mentioned the numbers by division. I think in terms of final phasing between Feb and March, end of Feb, we had anticipated between EUR 50 million and EUR 70 million for Feb. We saw in the beginning of March that it was probably more at the lower end.
I think when you do the best allocation between Feb and March, it's probably EUR 50 in Feb and EUR 150 in March. March is higher than Feb because now we have seen the spread of COVID-19 to more regions. On that basis, all of our divisions have now been impacted in March and for the first quarter. I think for me, the very positive news is that even including the EUR 200 million COVID-19 impact, all our divisions delivered a positive operating result in the first quarter. I think that's the first encouraging message here. The second encouraging message is if you adjust for COVID-19 and StreetScooter, we actually saw a solid year-over-year increase in operating results by around EUR 200 million. In terms of Free Cash Flow, we're still finalizing the numbers here.
You probably all know that we tend to have a negative Free Cash Flow in the first quarter because we have a number of annual payments that are being made at the beginning of the year. Our current estimate is for Free Cash Flow to be around EUR 400 million, which would be a substantial improvement year-over-year because, again, in the first quarter of 2019, we had a significant positive impact also on the cash flow side from the disposal of the Chinese business. That's the current picture. In terms of priorities, what are we focusing on and how are we trying to steer things from a financial priority perspective? That is what we have tried to put together on page 13. Obviously, we are very focused on cash and liquidity.
Starting with the EBIT side of things, we are, of course, looking for opportunities to work on the cost side. We are trying to find a balanced approach here, adjusting the cost base where necessary, but also being in a position to ramp up again when things get out of lockdown mode. That is something we saw very clearly in China, where, based on our balanced approach on the cost side, we were actually able to ramp up quickly now in March. With regard to Working Capital, theoretically, if you have lower revenue, you should have a relieving impact on the Working Capital side. Let's see. The clear focus for the finance team is on collections. We did not see a material impact in Q1. Also in the last days of March, payment behavior from customers was pretty much normal.
We are watching this extremely closely because we obviously have to expect some impact now in the second quarter. Last but not least, on the CapEx side, we have categorized our CapEx projects. We will see some automatic delays in certain projects, for example, with regard to construction projects. Here, again, we are trying to take a balanced approach, and we don't want to sacrifice the future. We're trying to continue with critical projects, but we're doing this in a very conscious and constantly adjusted and monitored way. That takes me to page 14. Where do we stand with regards to the balance sheet and our liquidity position? We started the year and the COVID-19 crisis with a very strong balance sheet. Our liquidity position at the end of last year was EUR 2.9 billion.
We have a syndicated credit facility of EUR 2 billion totally undrawn. We have bilaterals. We have a very limited amount of maturities due in 2020. We feel that we are in a comfortable position. Nevertheless, that does not make us complacent. We are watching this extremely closely, both on the cost side and now particularly on the collection side. I would say really so far, also with regard to Q1, we feel that things are in a stable situation. That takes me to our guidance. You can see on page 15, quite visually, we have withdrawn our guidance for 2020. There are two reasons for that. First of all, we don't have a crystal ball either. We don't know how long the situation is going to continue or how quickly we will see a recovery. That's the one element.
The second element is this approach of differentiating between the underlying performance and COVID-19 impacts, which worked quite well for the first quarter, is, of course, getting increasingly difficult. Now when we look at February and March, we had a very good comparison. What was, for example, our express volume growth going into COVID-19? There was a baseline against which we could really quantify the COVID-19 effects. Of course, with each week passing, that baseline gets more artificial. I think COVID-19 is the new reality. We felt maintaining this differentiation would have been artificial and less and less meaningful.
As soon as visibility increases, I think that will be the case when we have a clearer picture for the main economies, how Europe and the U.S. are coming out of the lockdown situation, we will work on a new forecast for 2020. We will then give you new guidance. Turning to page 16, the second element of our guidance was and is our guidance for 2022, where we have not made any changes because we still feel that, yes, there will be a recovery and that should then put us back on track to deliver on our EBIT guidance for 2022, the minimum of 5.3. We are also committed to our CapEx and Free Cash Flow guidance. There, with regard to Free Cash Flow, we will have to see what the COVID-19 impact is for 2020.
In terms of underlying performance, also based on what we have now seen in Q1 2020, we feel on a good path to deliver against those commitments. That's the financial overview. With that, I will hand over to Frank for some closing remarks before we take your questions.
Yeah. You have heard from us that we were in good shape or better shape than ever before when we started the year and entered the crisis. Of course, that's still the case: we are in good shape. That's the reason why we have clear priorities. We want to protect our people in the best way. We want to keep our customer service up and running. Of course, we are focusing very much on the liquidity and the balance sheet strength. We have, unfortunately, as Melanie said, a little bit limited visibility on what might happen in the next weeks, even if I'm personally optimistic that the first signs of recovery, at least on the infection rate, are happening in some markets. That should then lead, like we have seen in other markets, in particular in China, to a recovery of the economy.
It's too early to say that, and it's too early to judge how long governments really keep the lockdown in place. That's the reason why we have done what we have done since last night. The main focus, of course, going forward is that we provide great service for our people, and beyond the crisis, we will continue to invest in our core capabilities. I think we are in the good position that not only are we in good shape, but also we have a very clear focus with our Strategy 2025. Execution excellence and digitalization are the themes going forward. The world definitely will become more digitalized, and the process will accelerate. That is, of course, nicely fitting to our strategy. Execution excellence is very much visible at the moment how important that is, and I think we can benefit from that in the long term.
Overall, again, the priority is to manage the crisis, keep the liquidity in place, and then focus on how we can benefit after the crisis from our market positions. With that, I hand it back to Martin. Thank you very much.
Okay, thanks, Frank and Melanie, for the quick run -through. Operator, we're ready now to start the Q&A sequence, please.
Okay. Ladies and gentlemen, if you'd like to ask a question, please press nine followed by the star key on your telephone keypad. To withdraw your question, please press nine and then star again. We will announce your question with your name and your company. The first question for today have already come in.
Yeah, let's start with Rob Joynson.
Okay, over to you, Mr. Joynson.
Good morning, everybody. Three questions from me, please, mainly on volumes. If we start with DGFF, you talked about a significant decline in volumes during Q1 throughout air, ocean, and road. Could you perhaps provide some color on what volume growth was for each of those businesses towards the very end of Q1, which will hopefully therefore provide us with some sense of the current run rates? The second question on Express. With much of the passenger fleet grounded at the moment and air freight obviously spiking upwards in recent weeks, is DHL Express seeing incremental demand from customers that typically would not use an Express service? The final question on German parcel volumes, where you've obviously seen quite good strength recently. Do you have any sense of the extent to which those volumes have been helped by one-off parcels?
For example, people ordering printers for their home offices or that type of thing. I'm just trying to get a sense of the extent to which volume strength may fade over the coming weeks if the lockdown continues. Thank you.
First of all, on the forwarding volumes, I'm a bit hesitant to give you concrete numbers because it is still hugely volatile. We saw some encouraging trends in both air and ocean. I would've said that it got better towards the end of the quarter and in March. I don't see a sufficiently stable trend to give you any solid numbers on that. With regard to Express volumes, definitely see a lot of demand from regular customers but also from new customers. We've seen a strong increase also from smaller shippers over the counter, which has also helped us on the yield side. There is a very strong demand out there, particularly outbound from China and increasingly also from the rest of Asia.
With regard to the German parcel volumes, that's a very interesting question because we do see a number of mixed effects at the moment. We see a lot of volume from big traditional B2C customers at the moment. I think in terms of what is getting shipped, there are differences. I think fashion is a little bit less sought after than kind of like daily -use goods. In terms of fashion, that doesn't make a difference for us. The interesting thing is that we do see relatively strong growth also from small vendors and private customers. We have seen quite a lot of volume coming in through our retail outlets, which are still fully open and operational across the country, which, again, should show some positive development on the yield side.
Overall, I think if you think about it a little bit ahead, if you think about what might happen. Let's assume the market in Europe and the U.S. are coming back in the same way. What I don't believe will come back instantly is a lot of passenger traffic. People are learning now to work with their mobile activities and from home, and governments will probably be pretty reluctant to allow full-fledged travel again. What it means is that we will see a scarcity for air freight capacity and belly space for a longer period than just the lockdown. That's at least the assumption, and what you should see is that the express operator should benefit, and the ocean carrier should benefit to a certain extent. We will see up trading, down trading until things are normalizing.
When that happens, I don't know, because that is a decision of individuals, which is very little to predict. It's not companies. It's mainly passengers. Of course, the carriers can't fly empty airplanes. That's the reason why we in Express will, of course, benefit from that situation. That's the reason why we are not playing games now with yields, because we think that's not responsible. Of course, we have to recover our extra costs we have. That's the reason why we put some surcharges in, but not to extend the market, which you would probably expect if you really saw the rates in the market for freighters at the moment. The ocean part will probably benefit from the rail, but the rail will not cover the impact.
We have, of course, in DGF, an advantage now that the system division is flying wide bodies, and not every wide body is 100% filled on a daily basis, that gives us some opportunity. That's the global picture, and that's not different from crises before because we always have seen that Express is a beneficiary from a slowdown in air freight and ocean. This time, the impact on the passengers is more severe than it has been in former crises, and it's not clear when this will get back to normal. We are nicely positioned for the long term on this because we have the most global network in Express, and we have a very global network as well in DGF.
That helps as well to get freighters, by the way, because also the big players should have easier access than regional or local players because the people who have carriers or have cargo airplanes, of course, are looking at who has a long-term partner potentially.
Great. That's good cover. Thank you, guys.
Thanks, Rob, for calling, and we continue with a question from Tobias Sittig.
Yes, good morning. Thanks for taking my questions. Two for me, actually. Firstly, could you elaborate a little bit on the supply chain development? EUR 30 million hit, almost 25% of profit in the quarter, seems pretty harsh given that basically the real lockdown only started mid-March. What's behind that, and going forward, what should we be looking at in terms of would 20% revenue decline have an over proportionate impact on EBIT? Can you adapt the cost base more linearly going forward because it looks a bit over proportionate there? Secondly, could you expand a little bit on the increase in the corporate center cost year-over-year? Is that due to underlying cost inflation, or is that a function of lower internal cost allocation? Thank you.
Yeah, I think they're very good questions. First of all, on the supply chain side, I do agree with you that the EUR 30 million looks relatively large. Supply chain is actually the one division where we had a bit of bad debt impact from a very specific customer. That contributes here. I think in general, also in terms of whether we're able to manage the situation in the supply chain, there's a degree of cost variability. It very much depends on the country. Given that we have certain sites where nothing is happening at the moment, the key question for those sites is what can we do to work with our people there? What does the contractual agreement with the customer say? That is really very much dependent on the country and on the contract specificity. It takes some time to work through it.
What we now see is that we normally tend to find good solutions, but there's a certain time delay, which I think also explains the hit we saw in Q1 for supply chain. In terms of corporate center, there are a number of more phasing, like one-off effects. We actually also have a bit of a cost increase in the corporate center due to COVID-19 because we have our IT infrastructure and all the additional measures there, which we didn't specify. I think in terms of underlying run rate, there's nothing to worry about. I wouldn't overinterpret the corporate center number.
Thank you. May I ask one follow-up on the dividend, please?
Sure.
Is there any causal relationship between you paying a dividend and you applying for Kurzarbeit or taking any form of support there? What would hinder you from actually paying the full dividend this year?
Yeah. Really, if we would get into a situation where the government would actually take an equity stake in us, I think that would be a hindrance element for the dividend. That is very clearly not on our roadmap. At the moment, we don't have any reasons to believe that there would be some legal limitations for us to stick to our dividend payout plans.
Kurzarbeit, I think, what is the purpose of the Kurzarbeit? The purpose of the Kurzarbeit is not to subsidize companies. The purpose of Kurzarbeit is to keep people employed. That is, of course, our objective as well, due to two reasons. One is our responsibility for people, that we keep as many people employed as possible. Second, it would prepare us as well better for the recovery. You can see that Germany went out of their last recovery quite rapidly, a financial market crisis, because there was a Kurzarbeit. Some European countries have now copied that model somehow to subsidize, because it's better to keep the people, particularly in markets like Germany, where we had a labor shortage recently. The objective is to keep as many people as possible, but this is not state aid in a narrow sense, I think.
I think that needs to be understood as well. On the other side, talking about the whole theme of the AGM, I think we always have to balance, and you have seen that as well, that some companies got significant headwinds with doing certain things and announcing certain things. I think we have to keep everything in balance. We have to secure that the company goes well through the crisis. We have to keep our shareholders' interests in shape. I think the timing is important. We have to keep our reputation in the best possible shape. These things need to be balanced, and that's the reason why we came to the conclusion. I think it's good at the moment, even not knowing how an online AGM would work, by the way, because it's a rapid decision and the law, but we need careful consideration as well.
I think the right decision is to postpone the AGM to a later part of the year, but keep the dividend at the same level as so far.
Okay. Thank you. Enough of this?
Okay.
Let's continue right away with David Kerstens from Jefferies, please.
Hi, good morning.
Hi, David.
Hi, good morning. Three questions, please, from my side. I was wondering if you could please shed some more light on the half a billion underlying improvement in Free Cash Flow. I understand you managed to hold up adjusted EBIT very well at last year's level. You suggested it was not yet driven by a decrease in Working Capital. If you could, please clarify what the half a billion improvement in Free Cash Flow. Do you have any further detail on the breakdown of the mail volume decline? I think Dialog Marketing, you had initially said that that would be down more because of the change in regulation. Now you see the impact from COVID-19. A better understanding of what the drive is between Dialog Marketing and mail communication would be very helpful.
Finally, I was wondering what you make of the news overnight that Amazon in the U.S. is stopping the delivery for third-party customers. I don't think they're doing that yet in Germany, do you see any pressure on their network in the current situation? Are you able to benefit from that? Thank you very much.
Yeah. Maybe Melanie can take the first, and I take the second. Overall, I think it's too early to say because the lockdown only started in the second week of March in Germany. What we really see is that people are just stopping advertising. If you have, and we have a lot of local customers who have stores , we are sending them special invites for sales they have, and they have not restarted. Maybe that changes again in the future because, actually, Dialog Marketing or direct mailings need to be increased to get knowledge from your own store if you want to do some sales online or whatever now, but that has not happened yet. On mail, we have not seen a major impact yet on our volume.
It's an acceleration, but one effect is, of course, continuing that we have a reduction due to the change in regulation, which is up-trading to mail communication. We see that trend. We have seen that trend in the first weeks, and we have seen now an acceleration because people are just stopping advertising. There was a second part to that. I didn't write it down, unfortunately.
That's Amazon.
Yeah, Amazon. I think that's too early to say. What we definitely see is that some customers—we see more volume coming now, sometimes direct. That is what we can see anecdotally. If that's a trend, we will see. Of course, there is a limitation to how much volume we can digest. It depends a little bit how much additional volume is now coming into the market. The capacity of the parcel delivery of the combined industry is not sufficient to deliver as much volume as is usually sold online and offline because e-commerce is about 20% of the market. We can't now assure an 80% increase in volume in the whole industry. If that happens and everybody goes online, definitely the capacity of the industry will not be sufficient. I'm not talking at last about us, I'm talking about everybody, and it will not be sufficient.
It's not the people who make the deliveries, it's more the sorting capacity, which will become a constraint. So far, that's not the case, but we don't know how much volumes will go up, and then we have to see what that means.
To the first question, why was Free Cash Flow so much better? I think there are two elements. The first one is the improved quality of our underlying performance. Just looking, for example, at the P&P result, even including the COVID impact, it was EUR 100 million up in terms of EBIT. This is really also materializing in the operating cash flow. The first element is the better underlying performance of our business. The second element is what we said in connection with our Q4 numbers. We had a much more moderate approach to managing Working Capital in the year-end 2019, and hence we had a significantly better swing back on the Working Capital side in January than what we had in January 2019.
David, clear now?
Yeah. Great. Thank you very much.
Great. Thanks. We continue with Andy Chu from Deutsche Bank.
Morning. Just one question from me, please. Just in terms of the COVID-19 impact, although it's very difficult to say what's going to happen for the year. Do you have any sort of flavor as to what the sort of short-term impacts of COVID-19 could look like for April and May? Clearly that's very near -term. We're obviously in April. We know what's happening to volumes across the group. The sort of ramp-up in the Feb 50 to March 150 number, what do you think that could actually max out at in the short term? Is it possible to give us a flavor of that or not? Thanks.
I would love to have the answer, but I think it's really not possible to answer that question with some form of solidity. When you just look at the development we saw in March and how much it changed from week to week in March. Looking at what we saw in the first week of April, to extrapolate that even for April, I think is really impossible. When you think about the speed with which the volumes finally came back in China in the course of March. Do we now assume that something similar will happen in Europe in week two, in week three, and in week four of the quarter? I think it's really impossible to predict that with any form of solidity.
Fair enough. Thanks very much.
Okay, Andy. That's what we have right now. We continue with Cristian Nedelcu from UBS.
Thank you very much. Three questions, if I may. The first one, coming back to one of the previous questions of the weekly volume numbers you offered for Express and for Post and Direct Marketing , has been very useful. One thing that is obvious is that in week 14, the level of volume decline seems to be higher than the averages seen in March. I guess just based on that comment alone, that would indicate that the headwind, the profitability, at least early in April, seems to be higher. Is that fair to say, or do you actually see the cost offset, do you actually see more actions that you can take, and are you seeing more benefits from that side? Secondly, I remember you mentioned previously that the StreetScooter situation would allow for a bit of Working Capital release.
It doesn't seem to be the case that this had a benefit in Q1, but do you expect over the next quarters a bit more cash inflow from the Working Capital related to StreetScooter? If you can help us quantify that to some extent. The last one, if I may, please. I believe that the Direct Marketing revenues, and please correct me if I'm wrong, but I have in my model around EUR 2 billion of Direct Marketing revenue. You talk about this double-digit decline in volumes as we enter April. Can you give us a bit more color? Are we talking low -teen declines? Are we talking about a 30%-40% decline in the volumes in Direct Marketing? Thank you.
Yeah. May I take the first and the last, and Melanie, the middle one? On the last one, I think we should not talk about weekly numbers now and say this is the impact. I think this is a little bit rough. Therefore, I would abstain from really sharing, and that's the reason why we didn't show these numbers, because it's unclear that it's a trend. If you look into newspapers, for instance, they see an increase in advertising for local shops who now have a website. I'm not sure if not certain things will happen rapidly, that if the lockdown continues, stores will say, Okay, I need to send out material to the customers. I need to make people aware that I have a website. They will not be found on the internet without actual intention.
They might come to the conclusion, Okay, it's better that I send Direct Marketing mailings out because that raises attention, and maybe local people will say, Okay, I buy there instead of buying on the portal somehow. I can't predict that. That's the reason why I'm always cautious in saying it will now go to this level or it stays on that level, and it's changing every week. We have seen a relatively slow start. The market already talked about a massive volume increase since early March for online. Nothing happened. Why? Because the people stay at home and watch just the media, what's going on with Corona? Now we see in another extreme that people say, Oh, Easter is coming, and they are used to that.
Now they start ordering because they are bored at home, and we might see a wave that will diminish again if people are getting back to normal or they are allowed to go back to the office. It's so unpredictable that we can only describe what we have seen. If that's the basis for the April numbers, I would seriously doubt that this is a prudent assumption. That's the reason why I think we have to be very careful. That's the reason why we intentionally didn't show you absolute numbers or relative numbers, because every assumption we would make would be wrong. What we have to do as a company is we have to be as flexible as possible, and we are doing that. We are transferring people from mail to parcels. We are transferring people from supply chain to parcel, and so on.
It might be the other way around, too, if volumes are coming to normalize or the lockdown is finished in Germany. That's the reason why we had a discussion in our senior team: should we not show the percentage point? We came to the conclusion all these percentage points are misleading. Because if you take one as too positive, then you are wrong. If you take one to be negative, you are wrong as well. That is what the reality is at the moment. I can't tell you what will happen in the next two weeks with volumes. There might be even a stabilization or increase in Direct Marketing mailings due to the reasons I have just described. We just launched a process where we help now to get small shops online. We have developed that with partners in nine days, but we are too late.
Customers are flooding us with volume already. There is no need any longer, they found solutions to get online service done. I think the reality is it's so volatile that you don't make any assumptions in your models because they definitely will be wrong.
With regard to StreetScooter, what we said is that we expect a P&L burden of between EUR 300 million and EUR 400 million from StreetScooter. The impact on cash is going to be limited. Why is that? Because we actually had quite a lot of cash burden from StreetScooter in 2019, also through the build-up of Working Capital. We have lots of finished and half-finished vehicles in Working Capital on balance, which is now going to be put into operations and into use in the course of 2020.
Thank you very much.
Good. Question answered. Perfect. Let's continue with Mark McVicar from Barclays, please.
Yes. Good morning, everybody. Two questions, please. First of all, I think for Frank, can I just come back on this issue of the AGM and the dividend? What sort of delay do you and the board have in mind? Are we looking at one month? Is it three months? Is it six months? What would have to happen for you not to pay or not to be able to pay or not be willing to pay the full EUR 1.25? That's the first question. The second one is we've heard from a couple of other postal businesses elsewhere in Europe that they've spoken to their regulators and are slightly reducing service quality to try and keep their network running as best they can, given rising absenteeism.
Are you still planning to fully deliver the regulated service quality, or do you think you might have to step back from some of that with the agreement of the regulator at some point? Thank you.
Maybe on the second question, then I comment that absenteeism actually has stabilized. We see that. We obviously arise and start, and we now see a stabilization of absenteeism in the markets who are already longer in the coronavirus. It shows the commitment of our people to go back to work and work for our companies to provide great service. They really feel proud of what we are doing. If we really have to come, if volumes are dropping massively and we are at a 20% or 50% level, of course, then we can't provide the same service in Germany. Of course, I think there will be acceptance from the public for these kinds of things. We're far away from this situation at the current stage.
In Express, as I said, we probably have now a delay on certain routes to Africa because we used only commercial lift. We are providing full service to Africa. Of course, customers are happy that there is still some service. I think that depends on the competitive situation. I think we have everywhere still best-in-class services. At the AGM, we have not given a date yet because we don't know how long the situation will last. We want to have stabilization first. Our priority would be that we have an AGM with people being present, and that needs still the prerequisite that governments are allowing that. We don't have any visibility on that at the moment. Therefore, I don't want to speculate when that will be.
Between the date that it's all allowed to come together in a place and that we can then hold the AGM, there is a lead time to that because we have to prepare for that as well. We are looking into and trying to book already-booked facilities on certain days. It's too early to comment which one is probably finally the right one. I think there is a time lag between when the governments allow meetings and when we can really perform. On the dividend, that's just speculation. I always said to avoid speculation. What we can't do for sure is not, as a company, go out for state aid and then pay the dividend. That is probably something I would not do because you really can't explain that you are taking the money and passing it on to shareholders.
I believe we are far away from that. We are very much down the food chain anyway. Our services are necessary to run any business. If all our customers are going bankrupt, then we might have a problem as well, or if everybody doesn't pay any bill any longer, then we might have a problem. If that doesn't happen, I can't see any other reason why we get in a problem like I just described, that we need government money to survive. That would be a moment where I would say, Shareholders, I can't pay a dividend if I need cash from the money to keep up and running. I convert the money I've just got to pay to the shareholders. I think that would not be acceptable from the public, and I think we would make a big mistake.
As I said, Mark, a lot of things have to happen before that really comes even in our hands. I'm not sure if the government still has enough money to stabilize all the companies that have a liquidity problem.
That's great. Thank you.
Fantastic. Thanks, Mark. We continue with Adrian Peil from Commerzbank, please.
Yes. Good morning, everybody. Three questions from my side. First of all, on P&P. Assuming that the volume trends in your two subdivisions are staying as they were in the last two weeks, i.e., weeks 13 and 14, is there a potential that actually structurally parcel may compensate for the decline that you saw in volumes in Mail? The second question is on pricing, pretty much in this division, but probably also with regard to all the other divisions. You're probably in discussions with a lot of your business customers on pricing changes. I was just wondering whether that is continuing in the current situation or if you are postponing that as you partially want to support your customers also to some degree, or what's the status here? Lastly, on StreetScooter. You booked , obviously, a Q1 impact of EUR 230 million.
I was just wondering if there's a chance that actually that is the hit you're taking from it, more or less. It's obviously already quite a big chunk of it. I would've expected you to provide actually for the whole impact maybe in Q1 and then work some of it off. Maybe you could give some clarity on what components you actually did book in Q1 on the StreetScooter for EUR 230 million. Thank you.
Yeah. Melanie answered the last and the first because I tried to do my best already on the first one. Melanie can add something. How much decline you can accept in marketing volume to get that compensated but partial. On the pricing, generally speaking, I think what we are not doing is we are not squeezing the orange and saying, We don't care. There is a time after that crisis, you should be very careful not to maximize your profits short-term. I said that already. Liquidity is important, a customer should pay for the service they bought, we should not maximize EBIT numbers. That will not go a long way with many customers, I think. That's the reason why what we are doing, actually, we put a surcharge and Express in to recover the higher cost we have for commercial at the moment.
We are not doing that for our own airplanes. We are doing that for the additional cost we have for freighters we are hiring. The prices are going through the roof, and of course we have to compensate. Also, the protection measures we are taking. If you split your team, you have higher costs. The IT cost is one, it's a smaller one, but it's ending up and adding up to a significant amount, and we have to compensate. That's the reason why at DHL Express. In DGFF, of course, we can't do it if the freighters are so expensive, we have to push it to our customers, but we are not doing premiums on top of that somehow. In P&P and Post, we are regulated anyway. In parcels, what we might have to do going forward is that we put limits into that. We can't give everybody the maximum volume.
Therefore, we have to then, if you want to give us more volume, you have to pay because we have to do workarounds to manage the volumes. It's always driven by the idea not to maximize the EBIT at the moment but to try to get compensation for the higher cost we have. That's the logic, and we are in full agreement on the board that we are not squeezing the orange now because there is a time after the crisis, and people are hardly ever forgetful. They have to accept that they have to pay higher prices if we incur higher prices as well, like in forwarding. They are happy to or not happy, but they are willing to do that as they understand that.
That's the reason why we declared force majeure already for quite some time in DGF, because we can't provide the same service or the service standards for the same price, and that's the only way to do that. We are not maximizing profits out of that. I think that would be a huge mistake if we do that.
To the first question, for P&P. In March, we saw an earlier decline in the mail volumes than the uptake on the parcel volumes. What we now have to see in April is, A, how does that balance out on the top line? Also, how do we manage it on the operations side? I think on the operations side, we obviously have to look at the development of the sickness rate, where we see encouraging signs of things now stabilizing. We all of a sudden now, with regard to the parcel volumes, we have to go into our pre-Christmas schedule. I think for me, it's a triangle equation between the mail volumes or the parcel volumes, and how we manage the whole cost base. I think people are focusing on the right stuff.
We have to see at the end what comes out of it. I wouldn't [inaudible] the whole March trend thing into April. With regard to StreetScooter, we booked, indeed, quite a lot of the balance sheet topics in Q1. We couldn't book everything in Q1. There will be more to come from StreetScooter, particularly in Q2. Our overall number of between 300 and 400 is still the full -year guidance for the StreetScooter impact.
Nothing has changed with regard to what we said a couple of weeks ago. Of course, the good thing is, as Melanie said, it's mainly non-cash. In that moment, I think it's an important message as well that it's write-offs of something we have already paid for before. Okay.
All right. Thank you.
Yes, p erfect. Two callers left, I can see. Christian Obst from Baader Bank, you're next.
Yes, good morning. Thank you. Just a small balance sheet question. I heard now from some companies that they're starting getting talks with their auditors, that they are asking for higher risk premiums, concerned cost of capital, and so on and so forth. Do you also have these discussions with the auditors? Do you see any difficulties going forward to keep the current intangibles at the current level? Or do you expect some kind of impairments going forward for intangibles or PPA? Thank you.
Yeah. With regard to intangibles and goodwill, we had a lot of headroom, and we don't foresee any issues in that area yet. Well, we don't foresee any issues here. I think the balance sheet topic we are most focused on at the moment is the receivables side. There, again, we didn't see anything in Q1. That is the balance sheet item to watch in Q2, and we are all over that.
Okay, thank you.
Thanks, Christian. Getting closer to the full hour. Only one caller left. Daniel Roeska from Bernstein, up to you now.
Good morning, everybody. I'll try to fit it in the three minutes. Maybe a little bit longer-term color. You're keeping the 2022 guidance, and I'm sure you thought about the pros and cons on this. Is this more an expression of the limited foresight that's possible at this time or a sign of a strong conviction that by 2022 the world economy will have worked through the current recession? Secondly, maybe also kind of long-term dynamics in the German market. Do you think that on mail there's a risk that there's a level shift in the mail volume so that kind of digital substitution increases substantially over the next nine to 12 months? Maybe longer term on Amazon, as they're building out their infrastructure across Germany, how do you assess the risk of price-based competitor responses on parcels in Germany?
Maybe the last one for Melanie on the cash flow. If we consider your midterm CapEx point as kind of EUR 9 billion, doesn't the crisis currently present a good opportunity to revise that budget? What percentage of projects within those EUR 9 billion would you actually be able to review, change, defer, or cancel compared to projects that are more or less set in stone for the next three years? Kind of, what's your CapEx headroom of flexibility that you may want to consider? Thanks.
Yeah. Let me take the first three. The assumptions for 2022 are based on two assumptions. Yes, we should be back to normal, and we should, in our industry, be relatively stronger than we went into that. As you know, we have great market positions in all our divisions anyway, and I believe that the stronger get stronger in such a crisis, and the weaker will face more problems. That will, of course, help us to support these aspirations. Because I have no doubt that customers will remember that we helped, and some competitors might even go into bankruptcy. We don't know yet. Definitely, both this assumption that we will be stronger after the crisis than our competitors than we went in and the economy will be back to normal.
The long-term market shift: we had a test case some years ago when we had a strike for 52 days. We are much shorter on this crisis so far. We had no major impact or acceleration of volumes after the strike, despite that, of course, we had a massive reduction at that time as well. Let's see. That's the only comparability I have. I doubt that this will make a massive change. That's our assumption at the moment as well. With Amazon, they will continue to build their work activities. What I can say is that from customers ' perspectives, we currently are the best performing, again, by quality. Some others are struggling with absenteeism and service quality. The crisis will learn and tell people that working with us is quite important for their business.
I think we are far away from a price war in that segment anyway, because we just changed it two years ago. That we have worked through that increasing prices, and that has worked pretty well. I can't see any reason why that might change going forward. With that, maybe Melanie, you answer the last question.
Yeah. With regard to the CapEx headroom, looking at the three-year period, there's obviously a lot of variability and flexibility in there because we don't have many multi-year CapEx projects. With regard to how much is actually already committed for 2022, we have a clear understanding of directionally what we would want to do, but there are very limited commitments. I think the more relevant question is probably with regard to the short-term CapEx, how much flexibility do we have on the CapEx budget for 2020? We have, of course, categorized all our CapEx projects for the current year into the categories of what is committed and what is not yet committed. From the non-committed stuff, how much do we really want to hang on to, and how much could we move forward?
We also have a certain natural delay because certain projects just get pushed out because not much is happening on certain construction sites and so on. Also for the current year, there is quite a bit of delay, postponement, and lack of flexibility. We are, at the moment, approaching this in a very balanced way because we don't think that we are going to stay in this current state forever, and we don't want to do stuff short -term, which will then create problems, for example, in the next Christmas peak. It is a balanced approach. There is flexibility for the current year, and we're currently reassessing how much we have to postpone and pull. At the moment, we are still doing it in a very balanced way.
Yeah, and I think you always have to as a senior team, and I'm very happy when I see my board colleagues , myself, and those below that. The agility to respond to what's happening is massive. At the same time, the willingness to think about the long term and midterm is equally valid for our senior people. We have to balance both, and we will assess CapEx exactly in that way. You can't build capacity overnight, so you have to make the call constantly. That's the reason why you have to monitor all these things all the time. You have to focus on what happens, and we are measuring that. What happens to your workforce on a daily basis: absenteeism and infections and protection. That we discuss on a daily basis with your offset.
We have to look into liquidity, and the finance organization is looking into what's happening on a daily basis . We discuss twice a week as a board what else we need to do short-term, midterm, and long-term. We need to think about all these in these three horizons on different scenarios. Actually that is what the team is doing in a very agile world and collaborative way. That makes me very confident that because there will be an end to this crisis as well, hopefully sooner than later, that the DNA of the organization is great for managing that and getting through that. That makes me so confident in what I've said before, we are in great shape. Before we entered into that, we will be in very good shape as a company afterwards.
Even if I would wish that we would not have such a crisis, I see and I feel very proud of what the organization is doing at the moment. Therefore, we always have to say maybe it's wise to spend most of the EUR 9 billion because that will make our company even stronger. Again, we might have to compromise on EBIT in certain ways short -term, but we will never compromise on the long-term prospects. That's the reason why we are confident that we can deliver EUR 5.3 billion in 2022, and we continue to invest in our business model. We can because we have enough liquidity.
Thanks.
Okay. Thanks, Daniel, and thank you, operator. I think that concludes the Q&A round with no further questions out there.
I think I summarized already that anyway, I think.
Those are good final words.
Yeah.
Okay. Thank you, Frank and Melanie, for your time. Thank you out there for your interest. Looking forward to catching up with you on whatever is going to happen now over the next weeks and months. With that, I wish you a good rest of the day under the given circumstances. Stay healthy and safe. Thank you. Bye-bye. Bye.