The conference is now being recorded.
Good afternoon, ladies and gentlemen, and welcome to today's Call. Let me now turn the floor over to your host, Mr. Martin Tingberg.
Thank you. Hello, and 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 the guidance. As announced, we have Frank Apple Group CEO and Melanie Christ, CF will be here with us to take you through the presentation that we have a sent with the invite aura that you can find on our IR website at this point in time. And I think we should be done within the 60 minutes time frame.
So without further ado, over to you, Frank.
Thank you, Martin. Also good morning from my side. Let me go straight away and onto Page 2, 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. So on page 3, you can see what is currently on a mind. 1st of all, of course, it's our main priority to protect our people and provide, great service for all our cost customers.
We are doing everything we can following the instructions of the government or WHO to protect our people. We are in fortunate situation that in most markets, transportation of goods is allowed and seen as essential, and 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 to pay for use themselves proud that they can have the planet to move on in that very difficult situation. Of course, we see headwinds for our EBIT, because overall, the activities are a lower level.
We have, and Melanie will explain more about that about close to 600,000,000 EBIT including all one times like the COVID-nineteen of 200 and the, provisions we have built for the destruction of streets scooter. We also have based on the uncertainty we are in at the moment, we have a little very little force somehow what might happen and how big the impact is. Therefore, we think it's a prudent decision to withdraw the guidance, but we've equally, confident that if things are recovering, which we expect, of course, until latest 2021, but probably earlier, that we want to confirm all the guidance on our EBITDA for 2022. We also have announced yesterday that we want to move the AGM in a situation, then the situation is a little bit more stable and we have a more forward looking. We are say as well that we intend still to pay the dividend later this year than we have the AGM, but we said it's a right decision at the moment to postpone the AGM.
Finally, from our side, what we said before, we are in very good shape as a company that, of course, is a good situation. If you go in 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. So that's the reason why we believe we are well equipped that, of course, in our subject prices generates impact for our company as well. So let me then turn the page 2H4 along our three bottom lines and it's clearly visible that our purpose we have known for 11 years connecting people, improving lives is very meaningful to the people at no organization.
And that's the reason why we believe the heavy investments we have done in the last years in search fraud and employee engagement, great place to work on all this kind of stuffs obtained 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 themselves. But again, I only can say complements to our frontline employees for the outstanding performance. That has led to the situation despite the see in some situations, disruption like in India, before in China or now in some parts of Europe, that we are doing our utmost to keep really the best service quality. And I have to say so far, so good that we really have, we 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 impact on our EBIT number, despite that all divisions are still have positive EBIT in the first quarter.
So then go to the details and volume development, in particular, on Page 6 or P and P, what we have seen, we had a start into the years. As we expected, between 5.6% decline, but now it has accelerated and the reason for that is currently only that a direct mail volumes, direct marketing volumes are growing rapidly down because customers are stopping do advertising, if they are closed down anyway, we have seen on regular May communication very little so far. On the other side, We have seen a good start in the range of 0% to 5% parcel volume, but in the last 2 weeks, we haven't seen a significant increase in our volumes. And we said on last Friday, we expect what we see before Christmas volumes And of course, that's a challenge for the operations, but we are doing our best to manage these kind of volume increases. The financial impact the first quarter was about 40,000,000, and that is, of course, against the expected run rate we are reaching in our plans.
To deliver our 5,000,000,000. So that is on PNP. On Express, we have chosen to demonstrate here what happens 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, but now we really have significant volumes coming back from China, which is encouraging.
In Europe, we are now in the middle of the crisis that we see a decline in volumes, but we expect a similar pattern if the lockdown is relieved or released to a certain extent, then we should get additional activities and we should see increases in volumes. So we expect that this pattern will follow the Asian model. If it's as far as in China to be seen, but the measures the governments have taken apparently are now working and have reduced the number of new infections as you all have seen. So overall, Express is working extremely well. The service quality is great as far as that we have, of course, some missing our value space capacity commercial lift.
The team is doing a great job to find additional freighters or to use our own airplanes for further rotations. The inlet was 90,000,000, not unexpected, because we have lower volume and lower utilization, but on the other side, we also have higher cost protect our people. But of course, there is some movement on yield, but the we can't do that too much 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 our costs, but we are not increasing prices to a very high level to benefit from the crisis. DGFS, yes. The volume development is here as well, the same.
Outfit, of course, came down, Sharpena is recovering ocean as well. Road is down in Europe as well due to the lower activity. We see a recovery and we expect in Asia and we similar patterns for Europe and the U. S. If it comes, if it goes along, the rates are, of course, extremely high at the moment.
The in transparency is high, and that has led us by the significant volume decline in the first quarter to a relatively stable profit as you can see, that we only had an impact of 1,000,000, which is, I think, given the tight market or low market volume, extremely, performance, I think, and we are very happy what we have done. Again, here, the focus is on service quality. We get a lot of things from customers because, of course, capacity of air freight in particular is a very limited resource at the moment. The joint supply chain, different by sector. So we see some operators like life science, health care, or some grocery, of course, retailers, fashion or automotive are down.
Again, the challenge here is how you manage with 1 facility in some facilities, you'll need more people and others, you need hardly anyone. And of course, you know, the ops people are working intensively to manage that. The impact has been 1,000,000. So also here we see some impact. Finally, E Commerce Solutions, B2B volumes are, of course, slower, but B2C growth is intact.
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, provide great domestic and cross border service. People are doing a great job and here we have seen the least impact of 1,000,000 in the quarter. So, and with that, I would hand over now to Melanie to give you a little bit more insight into our financial Thank you very much, and Melanie now, closely.
Yes, thank you, Frank, and good morning, everybody, also for my side. I'm turning to Page 12, where we have tried to put together our best understanding of the Q on 2020 numbers. The first two columns are the Q1 twenty nineteen numbers where we obviously had a significant, a positive one time benefit from the disposal of our Chinese supply chain business So if you adjust for that, the comparison is a bit of 1,000,000 in Q1 2019. So how did we do in Q1 2020 compared to that? The 3rd column shows you our reported numbers.
And those reported numbers obviously impacted by COVID-nineteen, all of magnitude is around 200 and we had 2.30 hits from Swisskumba in line with our full year guidance of between 300 to 400. So the reported number is about 590. The clear caveat here is those are preliminary figures, which is also why we are giving you download numbers you may have spotted if you add up the divisional numbers and you actually end up with 580. This is due to rounding. I think those numbers are not going to deviate in the final picture material.
So I think this is a very good indication for how we have done, in Q1 twenty twenty. Looking at COVID nineteen impacts 1,000,000, Frank already mentioned the numbers by divisions. I think in terms of final phasing between fab and March, end of fab, we had anticipated between 1000000 and 1000000 for fab. We saw in the beginning of March that it was probably more at the lower end. I think then due to the best allocation between 7th March, It's probably 50 in fab and 150 in March.
March is higher than fab because now we have seen the spread of COVID-nineteen to more regions and on that basis, all of our divisions have now been impacted it in March and for the first quarter. I think only very positive news is that even including the million COVID-nineteen impact, All our divisions delivered a positive operating result in the first quarter. I think that's the first encouraging message here. And second encouraging message is if you adjust for COVID-nineteen and street scooter, we actually saw a solid year over year increase in operating results by roundabout 1,000,000. In terms of free cash flow, as we're still finalizing the numbers here, you probably all know that we to have a negative free cash flow in the first quarter because we have a number of annual payments, which are being made at the beginning of the year.
Our current debt estimate is for free cash flow to be around 1,000,000, which would be a substantial improvement year over year because, again, in the quarter of 2019, yet a significant positive impact also on the cash flow side from the disposal of the Chinese business. So 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? Is what we have tried to put together on Page 13. So 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 run up again, when things get out of the lockdown mode, that is something we saw very clearly in China. They are based our balanced approach on the cost side, we were actually able to ramp up quickly now in March. With regard to working capital, I mean 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, but we are watching this extremely closely because we obviously have to expect some impact now in the second quarter. And 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. But here again, we're trying to take a balanced approach and we don't want to sacrifice the future.
So we're trying to continue this critical stress, but we're doing this in a very conscious and constantly adjusted and monitored ways. Now take me to Page 14, maybe we stand with regards to the balance sheet and our liquidity position. He started into the year and into the COVID 19 crisis with a very strong balance sheet. Our liquidity position at the end of last year was 1,000,000,000. We have a syndicated credit facility of 1,000,000,000,000 totally undrawn.
We have bilateral, and we have a very limited amount of maturities due in 2020. So we feel that we are in a comfortable position. Nevertheless, that does not make us complacent. We are working with extremely closely, both on the cost side and not particularly on the collection side. But I would say, really so far also with regard to Q1, we feel that things are in a stable situation.
That take me to our guidance. As you can see on Page 15, quite visually, we have the drawn our guidance 2020. I think there are two reasons for that. 1st of all, we don't have a crystal ball visa, so we don't know, how long this today is going to continue how quickly we will see a recovery. I think that's the one element.
The second element is, this approach of differentiating between the underlying performance and COVID 19 impact, which worked quite well for the first quarter. Is, of course, getting increasingly difficult. So now when we looked at fab at March, we had a very good comparison. What was, for example, our Express volume growth going into COVID 19. Now 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 nineteen is the new reality So we felt maintaining this differentiation would have been artificial and less and less meaningful. As soon as visibility increases, I think that this is the case and we have a clearer picture for the main economies of Europe and the U. S. Are coming out of the lockdown situation We will work on a new forecast for 2020 and we will then give you a 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 And we are also committed to our CapEx and free cash flow guidance. They are with regard to free cash flow, we will have to see what is the COVID-nineteen impact for 2020. But in terms of underlying performance of the base 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.
And with that, I will hand over to Frank for some closing remarks before we take your questions.
Yes. So you have heard from us that we were in good shape or better shape than ever before, then we started the year and entered the crisis. Of course, that's still the case that we are in good shape. That's the reason why we have clear priorities We want to protect our people at the best way. We want to keep our customer service up and running.
And of course, we are focusing very much on the liquidity and balance sheet strength. We have, unfortunately, as Melissa said, limited visibility on what might happen in the next week, even if I'm personally optimistic that the first signs of recovery at least on the manufacture rate is is happening in some markets and that should then lead like we have seen in other markets in particular in China to a recovery of the economy, but 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 last night. The main focus, of course, are going forward is that we provide great service to all people and beyond the crisis, we will continue to invest into our core capabilities. I think we are in the good position that not only we are in good shape, but also we have very clear focus with our strategy 2025, execution excellence, digitalization are the fees going forward.
The work definitely will become more digitalized and the process will accelerate. That is course, you know, nicely fitting to our strategy. Execution excellence is very much visible at the moment. How important that is, and we can benefit from that even long term. So overall, again, priority is managed for crisis keep the liquidity in place and then focus on what can we And with that, I hand over back to Mark.
Thank you very much. Okay. Thanks, Frank
and Malik for the quick run through. And operator, we're ready now to start the Q and
We will And the first question for today have already come in. Okay. Over to you, Mr. Johnson.
Good morning everybody. I have three questions from me, please, mainly on volumes. If we start with DGFF, you talked about a significant decline in volumes during Q1 throughout each of Air Ocean And Road. Could you perhaps perhaps provide some color on what volume growth was for each of those businesses towards the very end of Q1? Which will hopefully bear more providers with some sense of the current run rates.
And then second question on Express, with much of a passenger fleet grounded at the moment, an airfreight obviously is spiking upwards in recent weeks. Is DHL expressed seeing incremental demand from customers that typically would not use an express service. And then the final question on German parcel volume where what you've obviously seen quite good, and I've got strength recently. Do you have any sense of the extent to which those volumes have been helped by one off parcel? For example, people ordering printers for their home offices or that type of thing.
I I'm just trying to get a a sense of the extent to which volume strength may fade over the coming weeks if the lockdown continues?
Okay. So, first of all, on the on the forwarding volumes, I'm a bit hesitant to give you concrete numbers because it is hugely volatile. So, we saw some encouraging trends on both end on all air and ocean. So I would have said that it got better to the end of the quarter and in March. But 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 new customers. We've seen a strong increase also from smaller shippers over the counter. Which has also helped us on the yield side. So 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 volume, that's a very interesting question because we do see a number of mix effects at the moment.
We see a lot of volume from big traditional B2C customers at the moment. They are, I think in terms of what it's getting shipped, there are differences. So I think fashion is a little bit less thought after than kind of like daily use goods. But in terms of fact, that doesn't make a difference for us. The interesting thing is that we do see relatively strong growth also from small fenders and private customers So 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.
Yes. And overall, I think if you think about a little bit ahead And if you think about what might happen, so 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 are probably pretty reluctant to allow full fledged travel again. What it means is that we will see a scarcity for air freight capacity in Valley space for a longer period than just for lockdown. That's at least the assumption. And that what you should see is that the express operators should benefit and the ocean carrier should benefit to a certain extent.
So we will see up trading, down trading until things are normalized when that happens, I don't know, because that's different decision of individuals, which are very little to predict. It's not companies and mainly passengers, and of course, the carriers can't fly empty airplanes. And that's the reason why we 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. If you, of course, we have to recover our extra costs we have, and that's the reason why we put some surcharges in, but not to extend the market would probably expect if you really see the rates in the market for freighters at the moment.
And the ocean part will probably benefit and the rail, but the rail will not cover that impact. We have, of course, in DJF and for advances value, the sister division is flying white bodies and not every white body is 100% filled on a daily basis. So that gives us some opportunity. So that's the global future. And that's not different from prices before, because we always have seen that Express is a beneficiary from a slowdown in air freight and ocean ocean.
But this time, the impact of the passengers are more severe than it has been in formal crisis. And it's not clear when this will get back to normal. So and And we are nicely positioned for our long term on this because we have the multiple network in Express, and we have a very global network as well in DGFF without, and that helps us well to get freight costs, by the way, because also the big players should have easier is when regional or local players because the people who have carriers are our airplanes, of course, are looking as a long term partner potentially.
Thanks, Rob, for calling. And we continue with the question from, to be acidic.
Yes, good morning. Thanks for taking my questions. 2 for me actually. Firstly, could you elaborate a little bit on the supply chain development, million hit, almost 25% of profit in the quarter seems pretty harsh given that basically the real lockdown you started mid March. So, what's behind that?
And going forward, what should we be looking at in terms of sort would 20% revenue decline have an overproportionate impact on EBIT? Or can you adapt the cost base more linearly going forward because it looks a bit over proportionate there. Secondly, could you explain a little bit the increase in the corporate the cost year over year, is that due to underlying cost inflation or is that a function of lower internal cost allocation? Thank you.
Yes. I think very good questions. So first of all, on the supply chain side, I do agree with you that the 30 looks relatively large. I mean, 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 are we able to manage the situation in supply chain, with the degree of cost variability It very much depends on the country. So given that we have certain types yeah, nothing is happening at the moment. The key question for those sites is, what can we do to work with our people there? And what does the contractual agreement with the customer say? And that is really very much dependent on the country and on the act 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 you saw in Q1 for a supply chain. In terms of corporate center, our there are a number of more phasing like one off effects. We actually also have a bit of cost increase in corporate center due to COVID-nineteen 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. Didn't over interpret the corporate center or not.
I have one follow-up on the dividend please, is there any quarterly cost or relationship between you paying a dividend and you applying for Coosabyte or or taking any form of support there or what would hinder you from actually paying full dividend this year?
Yes. So I mean, really, if you would get into a situation where the government would take a equity stake in us. I think that was the hindrance element for the dividend that is very clearly not on our roadmap. So at the moment, we don't have any reasons believe that there would be some legal limitations for us to stick to our dividend payout plan.
And, Nara, quotes are bad. I think what is the purpose of the clinical Kotzabide is not to subsidize companies. The purpose of Kotzabide is to keep people employed. And that is, of course, our objective as well. Due to two reasons.
One is our responsibility for the people that we keep as many people employed as possible. And second, it would prepares as well better for the recovery. And you can see that Germany went out of the last last recovery quite rapidly, financial market crisis because there was records of art. And some European countries have now copied that model somehow to subsidize because it's better to keep the people, but and micros like Germany where we had a labor shortage recently. So the objective is to keep as many people as possible, but this is not state aid in a narrow sense, I think.
And I think that needs to be understood as well. But on the other side, talking about the old theme of the AGM, 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 clear that the company goes well to the crisis. We have to keep our shareholders in trust and shape. And I think the timing is important.
We have to keep our reputation in the best of And 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 that's it's a rapid decision of the launch, but we need careful consideration as well. But 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 for this.
Let's continue right away that
David Kerstens from
Jefferies please.
Hi, good morning. Three questions, please, for my time. First of all, I was wondering if you could please shed some more light on the half 1,000,000,000 underlying improvement in free cash flow. I understand you managed to help up adjusted EBIT very low at last year's level. You suggested this was not yet driven by a decrease in working capital.
So if you could please clarify what was the $500,000,000 improvement in free cash flow Secondly, do you have any further detail on the breakdown of the mill volume decline? I think dialogue marketing has initially said that, that would be down more because of the change in regulation. And now you see the impact from COVID-nineteen. So better understanding of what the drivers between dialogue marketing and no communication would be very helpful. And finally, I was wondering what you make of the news overnight that Amazon in the U.
S. Is up in the delivery for 3rd party customers. I don't think they're doing that yet in Germany, but do you see any pressure on their network in the current situation able to benefit from that? Thank you very much.
Yes. So may I know you can take the first and I'll take the second. So overall, I think it's too early to say is the lockdown only started in the 2nd week of March in Germany. What we really see is that people are just stopping advertising. If you have and you have a lot of local customers who have stores and sending them out special in buying for sale, sales they have, and they have not re slot.
It made that change as a game in the future because actually, dialogue marketing or direct mailings need to be increased to get knowledge from your own store. If you want to do now some sales online, and whatever, but that has not happened yet. And on mail, we have not seen a major impact yet on our volume. So it's it's an acceleration, but it's one effect is, of course, continuing that we have a reduction due to the change in regulation, which is trade into, mail communication. And we see that trend.
We have seen that trend in the 1st weeks, and we have seen our acceleration because people are just stopping advertising. There was a second part to that.
I didn't write, unfortunately. Amazon.
Okay. Amazon. So I think too early to say. What we definitely see is that some customers are we see more volume coming out sometimes direct That is what we can see. And, anecdotally, if that's a trend, we will see, and course, there is a limitation on how much volume we can digest.
It depends a little bit on how much additional volume is now coming into the market. The capacity of the the delivery of the combined industry is not sufficient to deliver as much volume as usually a solveraged on my non offline because Ecommerce was about 20% of the market. So we can now assure 80% increase in volume in the whole industry So if that happens and everybody goes online, then the definitely the capacity of the industry will not be sufficient. And I'm not talking at last about how I'm talking about everybody. And it will not be sufficient.
It's not that people who make the deliveries, it's more of a certain 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.
So to the first question. Why was free cash flow so much better? And I think there are 2 elements. The first one is the improved quality of our underlying foreman. I mean, just looking, for example, as the P and P result, even improving the COVID impact it was 100,000,000 up in terms of growth.
And this is really also materializing in the operating cash flow. So the first element is the better underlying performance of our business. And 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 through site in January than what we had in January 2019.
David, clear enough. Yes, great. Thank you very much.
Great. Thanks. And we continue with Andy Chu from Deutsche Bank.
Good morning. Just one question for me, please. Just just in terms of the of 'nineteen, if actually, it's very difficult to say what's going to happen for the year. But but do you have any sort of flavors to what the sort of short term impacts of COVID-nineteen could look like for April and May because clearly that's very near term, we're obviously in April. We know what's or you know what's happening to to volumes across the group, but the sort of ramp up in the add 50 to March 150 number What do you think that that could actually max out at at short term as possible to give us a flavor or flat or or not?
Thanks.
I would love to have the answer, but I think it's really not impossible to that question, with some form of solubility. When you just look at the development we saw in March, and how much it changed from week to week in March, now looking at what we saw in the 1st week of April, to extrapolate that even for April, I think it's really impossible I mean, for example, when you think about the speed with which the volumes finally came back in China in the course of March. So do we now assume that something similar happen in Europe, in week 2, in week 3, in week 4, of the quarter, I think it's really impossible to predict that with any form of you.
Okay. Andy, that's what we have right now. And we continue with the Santelkom from UBS. Thank
you very much. Three questions, if I may. The first one is coming back to question. So the weekly numbers, the weekly call numbers, you know, for express and for cost for direct marketing, I mean, very useful One thing that it's obvious is that the week 14, the level of volume declines seem to be more to be higher than the average is seen in March. So I guess just based on that comment alone that would indicate that the headwinds the profitability at least 38% seems to be higher.
Is that fair to say? Or do you actually see on the cost offset? Do you actually see more actions that that you can make. And you're seeing most more benefits from that side. Secondly, I remember you mentioned previously that the strict scooter situation would allow for a bit of working capital release.
It doesn't seem to be case that this had a benefit in Q1, but do you expect over the next quarter, there's a bit more cash inflows from the working capital related to scooter? And if you can help us quantify that comments. And the last point, if I may, please, I believe that the direct marketing revenues and please correct me number, I have my mother around 1,000,000,000 of private market development. You talked about the double digit clining volumes as we enter April. Can you give us a bit more color are you talking about 30%, 40% decline in the volumes in the dairy market?
Thank you.
Yes. May I take the first and the last and Melanie, the middle one trip 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 And that's why I would abstain to share, we share, 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 the website.
So I'm not sure if not, you know, certain things will happen rapidly that if the lockdown is continuing, that stores will say, okay, I need to send out materials through the customers, I need to make people aware that I have a website. They will not be found in the internet without actual extension So they might come to the conclusion, okay, it's better that I sent, a direct marketing mailings out because that raise attention and maybe local people would say, okay, by there instead of buying on the portal somehow. So 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 then the market already talked about massive volume increase since early March for online, nothing happened.
Why? Because the people say at home and watch Just Media, what's going on with Corona. Now we see in other extreme that people say all Easter is coming, and they are used to that. And now they start ordering, because they are bought at home and we might see a way which will diminish again if people are getting, again, normal or they are allowed to go back to the office. So it's so unpredictable that we can only describe what we have seen.
If that's the basic for the April numbers, I would seriously doubt that this a prudent assumption. And that's the reason why I think we have to be very careful, and 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 we are doing that. We are transferring people from Mayor to parcels. We are transferring from people from supply chain to parcel.
And so on, it might be the other way around soon if volumes are covering to normalize over lockdowns finished in Germany. So that's the reason why we had a discussion in our senior team shipping off shoulder percentage point. If we go into the conclusion, all these percentage points are misleading because if you take 1 as to positive when you are wrong and if you take 1 to negative, you are wrong as well. And that is what the reality is at the moment. I can't tell you what will happen in the next 2 weeks with volumes.
There might be even a stabilization or increase in direct market mailings, due to the reasons I have just described. We just launched the process of where we help now to get small shops online. We are we have developed that with partners in 9 days, but we are too late. Customers are flooding us with volume already. So if because there isn't any longer they can't solutions to get online service done, So I think the reality is it's so volatile that don't make any assumptions in your models because they definitely did be wrong.
So with regard to StreetScooter, I mean, what we said is that we expect a P and L burden of between 1000000000 to 1000000000 from StreetScooter. But the impact on cash is going to be limited. And why is that? Because we actually had quite a lot of cash burn from in 2019 also through the buildup of working capital. So we have lots of finished and not 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, answer. Perfect. Let's continue with Mark McVicar from Barclays, please.
Yes. Good morning, everybody. Two two questions, please. First of all, I think for Frank, can I just come back on this issue of the AGM and the the dividend, what what sort of delay do you and the board, have in mind are we looking at? 1 month 3 months, 6 months.
And and 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 €1.25. That's the first question. And and the second one is you know, 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, you know, their their network running as best they can, given rising absenteeism. Are 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.
Yes. So maybe on the second person, I'd comment on the so the absenteeism actually has stabilized. We see that we have not we obviously arise and start and we now see stabilization absatism and the markets who are already longer in coronavirus. So that 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, in we really have to come that if volumes are dropping massively and we are at 20% or 50% level, of course, then we can't provide the same service.
In Germany. And of course, I think there will be acceptance from the public for these kinds of things, but be 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 but we are providing full service to Africa. And of course, customers are happy that there's still some service, but I think that's depending on the competitive situation, but I think we have everywhere still best in cloud services. On the AGM, We have not given a date yet because we don't know how long the situation will last.
We want to have her stabilization. Our priority would where we have a AGM with people being present and that needs, still then the prerequisite that governments are allowing that we don't have any visibility on that at the moment. That's why I don't want to speculate then 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. Of course, we are looking into and trying to book already facilities on certain days, but it's too early to come and which one probably finally the right one.
So I think there is a time lag between that the governments allow a meeting and how much how when you can really perform. But on the dividend, that's just speculation. I always said to stay speculation, but what we can't do for sure not, as a company, if out for state aid and then pay the dividend, that is probably are something I would not do because you can't explain that you are taking the money and pass 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 So if all our customers are going bankrupt, then we might have a problem as well or everybody doesn't pay any longer, any bill, then we might have a problem.
If that doesn't happen, I can't see any other reason why we're getting a problem like I just described that we need government money to to survive. And that would be a moment where I would say, you know, shareholders, I can't pay a dividend if I need cash from the money to to keep up and running, and I convert the money I've just got to pay it to the shareholders. I think that would not be threat to build on the public, and I think we would make a big mistake. But as I said, Mark, a lot of things have to happen before that really comes even in our hands. And I'm not sure if then the government still have enough money to stabilize all the companies who have a liquid you probably.
That's great. Thank you.
Fantastic. Thanks, Mark. And we continue with Adrian Pail of from Commerzbank, please.
Yes. Good morning, everybody. Three questions from my side. First of all, on P and P, assuming that the volume trends in your 2 subdivisions are staying as they were last 2 weeks I. E.
Week 1314. I mean, is there a potential that actually structurally pass may compensate for the decline that you saw in volumes in mail. And the second question is on pricing, pretty much in this division, but probably also with regard to all the other divisions. I mean, you probably are discussions with a lot of your business customers on pricing changes. So I was just wondering whether it is continuing in the current situation or are you postponing that as you partially want to support your customers also to some degree or what's the steady year.
And lastly, on StreetScooter, you booked obviously Q1 impact of EUR 230,000,000. I was just wondering if there's a chance that actually that is the hit you're taking from it. More or less. I mean, it's obviously already quite a big chunk of it, but I would have expected you to provide actually for the whole impact maybe in Q1 and then work some of it off, but maybe you could give some clarity what components actually you did book in Q1 on the street scooter $230,000,000? Thank you.
Yes, Melanie answered the last and the first because I tried to do my best already on first one. So maybe Melanie can add something. How much decline you can accept in marketing volume compensate that compensate the parcel. On the pricing, generally spoken, I think what we are not doing is we are not screened into orange and say, we don't care. It's a time after that crisis.
And you should be very careful not to maximize your profits short term. I said that already, you know, liquidity is important, so a customer shall pay for the services they bought, but we should not maximize EBIT numbers. That will not go a long way than any cash results, I think. That's the reason why what we are doing actually, we put a surcharge in Express in to recover the higher costs we have for commercial at the moment. But we are not doing that for our own airplanes.
We are doing that for the additional costs we have for freighters. We are hiring. The prices are going through the roof. And of course, we have to compete off of the protection measures we are taking. If you split your team, we have higher costs.
The IT cost is 1. 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 I expressed. In forwarding, of course, we can't do if the freighters So expensive, we have to push it to our customers, but we are not doing premiums on top of that somehow.
And P and P post we are regulated anyway and on parcels, what we might have to do going forward is that we put limits into that account give everybody the maximum volume, and therefore, we have to then if you want to give us more volume, we have to pay because we have to work around to manage their volumes. And that's, you know, it's always driven by the idea not to maximize the EBIT at the moment but trying to compensate, get compensation for the higher cost we have. That's the logic. And I we are in fully agreement and the board, but we are not squeezing the orange now because there is a time after the cross. And people are happy and don't forget, they have to accept that you have to pay higher prices if we incur higher prices as well like in forwarding, and they are happy to own 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 DGS because we can't provide the same service of the service standards and for the same price. And that's the only way to do that, but we are not maximizing profits all of that. I think that would be a huge mistake if you do that.
Okay. So the first question, so for P and P, In March, we saw earlier decline in the mail volumes than the uptake on the half of volume. And what we now have to see in April is, a, how does that balance out on the top line, but also how do we manage it on the operation side? So I think on the operation side, we obviously have to look at the development of the thickness rate where we see encouraging signs of things now stabilizing. But, all of a sudden now with regard to the parcel volume, we have to go into our pre Christmas schedule, So I think for me, it's a triangle equation between the mail volumes, 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, but I wouldn't over interpret the March trends of things into April. With regard to strict quota, we booked indeed quite a lot of the balance sheet topics in Q1, but we couldn't book everything in Q1. And there will be more come from StreetScooter, particularly in Q2. So our overall number of between 30500 is still the full year, guiding for the but
it has nothing has changed with regard to what we said at the couple of weeks ago. And of course, the good thing is, as Melanie said, it's mainly non cash that moment, I think it's an important message as well that is write offs of something we have already paid before.
Okay. All right. Thank you. Yes.
Perfect. So two callers left. I can see. Christian Oates from Baader Bank. You're next.
Yes, good morning. Thank you. Just a small balance sheet questions. I heard now from some companies starting getting in talks with their auditors that they are asking for higher risk premiums, concern cost of capital, and so on and so forth. Do you also have these discussions with auditors?
Do you see any, difficulties going forward keeps the current intangibles
at the
current level? Or do you expect some kind of impairments going forward for intangibles or PPA? Thank you.
Yes. So with regard to intangibles and goodwill, we had a lot of headroom we don't foresee any issues in that area yet. Or we don't foresee any issues here. I think the balance sheet topic we are most focused on at the moment is the receivable side there. Again, we didn't see anything in Q1.
But that is the balance sheet item to watch in Q2, and we are all over that.
Getting closer to the full hour or only one caller left, Daniel Reskup from Bernstein. Up to you now.
Good morning, everybody. I'll try to fit it in the the 3 minutes. Maybe a little bit longer term color. So you're keeping the 22 guidance. And I'm sure you thought about the pro and contra on this.
And is this more an expression the limited foresight that's possible at this time or a sign of a strong conviction that by 22, the world economy will have worked through the current Secondly, maybe also kind of long term dynamics in the German market. Do you think 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 9 to 12 months. And maybe longer term on Amazon, as they're building out their infrastructure across Germany, how do you assess the risk price based competitor responses on parcels in Germany. And then maybe the last one for Melanie on the cash flow. If we consider your midterm CapEx point, it's kind of EUR 9,000,000,000, doesn't crisis currently present a good opportunity to revise that budget? And what percentage of projects within those 9,000,000,000, would you actually be able to review change for a cancel compared to projects that are more or less set in stone for the next 3 years.
So kind of what's your CapEx headroom of flexibility that you may want to consider?
So let me take the first 3. So, the assumption for 2022 update on 2 assumption, yes, we should be back to normal. And we shipped, in our industry, be relatively stronger than we went into that. So as you know, we have great market positions in all our divisions anyway. And I believe that the stronger gets stronger in such crisis and the weaker will face more problems.
So and 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, but definitely both is assumption that we will be stronger after the crisis than a relatively to our competitors when we went in, and we are going to be back tomorrow. The long term market shift, we had a test case 5 years ago, then we had a strike for 52 days. So we are much shorter into this crisis so far. And we had no major impact our acceleration of volumes after the strike despite that.
Of course, we had massive, reduction at that time as well. So Let's see. That's the only comparability I have. I doubt that this will make a massive change. And that's our assumption at the moment as well.
With Amazon, they will continue to build their work activities What I can say is from customers that we probably are the best performing, again, by quality. Some others are struggling with symptism and service quality. So the crisis will learn and tell people that working with us is quite important for their business. And I think that's I think they're far away from price war in that segment anyway because we just changed it years ago and we have worked through that, increasing prices and that has worked pretty well. And I can't see any reason why that might change going forward.
And we that, Amy, Melanie, you answered the last question.
Yes. So with regard to the CapEx headroom, I mean, looking at the 3 year period, there's obviously see a lot of variability and flexibility in there because we don't have many multiyear CapEx projects. So with regard to how much is actually already committed 22. We have a clear understanding of directionally what we would want to do, but there's a limited commitment. So I think the more relevant question probably with regard to the short term CapEx, how much flexibility do we have on the CapEx outlook for our 2020?
And we have, of course, categorized all our CapEx projects for the current year into the category. What committed, what is not yet committed from the non committed staff, how much do we really want to hang on to and how much could we move forward? And we also have a certain natural delay because certain projects just get pushed out because not much is happening on certain construction sites and full on. And also for the current year, there is quite a bit of a delay postponed. Don't do flexibility.
We are at the moment approaching this on 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 a problem, for example, in the next Christmas team. So it is a balanced approach. The flexibility for the current year and you're currently re assessing how much do we have to postpone and pull But at the moment, we are still doing it in a very balanced way.
Yes. And I think you always have to, as a senior team, and and I'm very happy with it. I see my board colleagues, myself, and below that, the agility to respond to what's happening is a massive But at the same time, the willingness to think about long term and midterm is equally valid for all senior people. So 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, and 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 on your workforce on a daily basis, absenteeism and infection and protection that we discuss on a daily basis, which we offset. Then we have to look into liquidity and the finance organization is looking into it. On a daily basis, what's happening. When we discussed twice a week as a board, what else we need to do short term, mid term, long term, And we need to think all these in these 3 horizons on different scenarios.
And actually, that is what the team is doing in a very agile world and very collaborative way. And that makes me very confident that because there will be an entry to this crisis as well, hopefully sooner than later, that the DNA of the organization is great for managing that and getting through that. And that makes us so confident what I've said before, we are in great shape before we entered into that. And we will be in a very good shape as a company afterwards, even if I would wish that we would not have such a crisis, but I see, you know, I'm very, very proud of what the organization is doing at the moment, and therefore, we always have to say maybe it's wise to spend most of the 1,000,000,000 because that will make our company even stronger. And again, I you know, we might have to compromise on EBIT on certain ways, shorter, but we will never compromise on the long term prospects and that reason why we are confident that we could deliver 5.3 in 2022, and we continue to invest into our business model.
And we can because we have enough liquidity. Thanks.
Okay. Thanks, Daniel. And thank you, operator. I think that concludes the Q and A round with no further questions out there.
And I think I summarized already that anyway, I think.
That's a good kind of words.
Yes. Okay.
Well then, thank you Frank Melanie for your time. Thank you out there for your interest. Looking forward to catch up with you and whatever. Is going to happen now over the next weeks and months. And with that,
I wish you a good rest of the day under given circumstances. Stay healthy and safe. Thank you. Bye, bye.