Ladies and gentlemen, thank you for standing by. I'm Stuart, your Chorus Call operator. Welcome and thank you for joining the Deutsche Post DHL Group Q3 2021 Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. Presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touch tone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Martin Ziegenbalg, Head of IR. Please go ahead.
Hi, and good morning to everyone out there. Welcome to our Q3 2021 conference call. We are aware that reporting season is in full swing, so thanks for joining. You got the detailed Q3 numbers in front of you. I take it all the news are out, so Frank and Melanie are going to take you through the main findings of the deck, and after that, we've got time for Q&A. Frank, let's go right away.
Thank you, Martin. Good morning as well from my side. I'm happy to start just with the highlights. We definitely have seen, you know, strong support for our business from the market. B2B is fully back, and B2C is, you know, still performing on a significantly higher level than we had before. That leads to what we announced already, an upgrade of our guidance, which I will share later on, and you probably saw that already. The second thing is we can focus a little bit today on one of the two topics we are driving for quite some time now as well. One was the digitalization agenda. We presented more detail last time. Today, I wanna talk a little bit more about our progress on our ESG roadmap.
If we go to the next page four , actually, then you can see what I've just said as an example from Germany. The volumes in parcel have increased, you know, and these are the average, four-quarter rolling number, have increased by 30% roughly. We believe that this is a new base now from which we will continue to grow in the future. I think that's a fundamental change. What happens in an e-commerce world, that people are getting more adapted to that, and I think that will stay for longer. I think that's in alignment with what many experts have predicted already for quite some time. It's very nicely visible here in an example of our Parcel Germany. On the next page, you can see as well that the B2B is coming back.
It's interesting, you know, we are not yet everywhere on the level what we had before the pandemic. The shortfall in supply chain is not coming by, you know, the demand is growing through the roof. It's more coming from, you know, shortages and imbalances in networks, which happened after the strong recovery of the economy. You can see the air freight volume is up, and the driver for that is because shipping vessels are not available. Therefore, people upgrade to fly them. That's the reason why air freight is nicely up. Supply chain is probably a mixture of a recovery of the economy, but also significant gains we have made in the last 18 months. That is probably more driven by, not only by the economy, but also our own success.
In ocean freight, you still see, despite that the nice recovery, the volumes are still below the level of 2019. That tells you as well that you know we have not an unbelievable high demand. We have a fast recovery, and that has led to imbalance, and that leads to the constraints of the supply chains. The same picture you can see with B2B shipments per day and TDI. Overall this is good news actually, not bad news, because we believe the recovery will continue on B2B, so we should not worry that maybe the volumes will drop. Extreme situation in some areas that we're going through our supply chain are coming more from imbalance and this kind of stuff, but not fundamental overheated economics.
That's good news because we believe that we will see a continuation of B2B growth going forward. If you then look into, you know, the outlook, as I said, you know, B2B recovery will continue. B2C has reached a new level, and will grow from there. The nice thing is, you know, many of these things have led to a very good utilization of our network, and that shows the power of scale in our business models. More volume leads to better returns in EBIT, but also in cash flow. That's very nicely visible in the progression of our EBIT and in our cash flow. Also, our global footprint will help us going forward. If you look into the detail, you know, the growth comes mainly from the global business as we operate.
It's not driven just by, you know, German parcel surge or something. It's really a global recovery, and we are well-positioned to capture that potential with our footprint. We are well-established as well in many industries, so we will benefit from whatever happens in the worldwide economy going forward. That's great to see. That all leads to page seven, the increase of our guidance. We move the EBIT up by 10%, actually to more than EUR 7.7. It's not the first time this year that we upgraded that. It comes all from the DHL divisions. P&P Germany is still better than what we have given at the beginning of this year, but we're still in the range. Group function the same. Cash flow is up as well. The tax rate is a little bit in our range instead of around 28%.
We also increased our guidance for 2023 because we believe that, you know, what we have achieved is sustainable. Of course, the growth will be a little bit slower than in the past, but we believe it will generate more profits in 2023 than we would do. For more cash flow generation, we upgraded that as well, despite that we kept the CapEx stable. Overall, we believe this is a good reflection of the progress we have made as a company and the economic outlook we expect. Not included here is the Hillebrand acquisition. Of course, that is something which we are still working on, making good progress, I think, with the, you know, the process of the antitrust authorities in particular.
The deal is to be closed in the first half of next year, but we are optimistic that this will happen by then. This is the guidance. That leads me now to the theme of ESG. Page eight is more or less only a reminder of our goals. I think we have a very comprehensive agenda. I think it's well-received as well that we committed EUR 7 billion, not only by the feedback we've got from investors, but very positive feedback as well we got from politicians, from customers and of course, internally. I think that's a clear statement that we wanna do that. We are progressing along these different dimensions, not only on environmental, but also on a great company to work for and also on highly trusted company.
I come to the detail a little bit later. That's the reason why I think I can conclude here. I think the roadmap is in full swing. If I visit the countries virtually at the moment, I very often hear how much they appreciate the guidance they get from us centrally with our roadmap, and they are in full swing in executing it. Some examples for that on the environmental front are shown on page nine. Not only the order of 12 all-electric aircrafts. I think we never got more global coverage with more people who could read or see that and for these airplanes, which is great. We also have started to deploy now sustainable aviation fuel into our network. Of course, that will continue to grow in the coming years.
We are currently negotiating with vendors how we get more sustainable aviation fuel. On the line haul, we recently announced in Germany that we will put more on the railway, which I think will help us as well to become greener. Last mile is in full swing anyway. You know, I read the other day from another startup which might IPO soon, that they will deliver 10 electric vehicles until the end of the year, electric delivery vans. We deploy currently still 10 a day. Because we have by far the largest fleet, and I think the StreetScooters are really working well. Green facilities, you know, we are in full swing as well. The team is really working all over the place. There are many different levers we can pull, but I'm very optimistic that we will see great progress here as well.
One more example is shown on page 10. You know, we are in constant interaction with customers. Consumers can use more of our lockers to reduce their footprint. The uptake of our maritime fuel is positive. Even some customers are willing to pay for it, and that's encouraging. Among them, retail customers, which are quite challenging in these things. That's good news as well. We have a great initiative in Sweden with freight, which we will roll out now to other countries. As I saw with electric vehicles, I recently visited Nepal, which is a very small operation, and even they have already their first electric delivery van. Despite that, I think they have in total only seven. I think that's good progress as well, and you see the commitment from some countries.
On page 11, you know, you have heard me saying quite often how important in the service industry employees are, and therefore, I'm very delighted that one of our divisions is now the Great Place to Work number one, ahead of anybody else, and that's a great achievement. That puts on also a lot of competitive pressure inside of a company. Our divisions have started the journey now as well, and they are qualifying now more and more for Great Place to Work in many countries. So that's great to see. In total, already 83% of all employees are working in countries where we are getting certified. The nice thing is it's also well reflected in our internal survey, where you can see that we moved up in number. 84% is really a very high number. It's up from 83%.
One of our competitors recently said in an article that they are at 55 with recommending their place, their company as a Great Place To Work. We are actually at 85. So that's great to see. I think we have really made great progress here, and we'll continue to intensify our activities here. Of course, you know, the bonus which will be paid out in the fourth quarter, of course, is also a way how we wanna say thank you to the organization. By the way, it's a very inclusive measure, as I learned from and I get feedback from the countries because we give everybody the same, regardless what their living costs are or the salary bands are. 12 is also, I'm proud about that as well. 1.2 billion vaccines we have delivered around the world.
That makes our colleagues so proud, and we are really making, you know, we are a very important supporter of the whole vaccine campaign around the world. That's fantastic to see. We all feel very, very proud that we can deliver on our purpose. That brings me to page 13, of course, also to something that we are not only doing the right stuff, I believe, we also are transparent and you can measure us against all these goals. You can see that here, not only that it will be included next year in-
My board colleagues and myself. More importantly is we have clearly defined steering relevant KPIs, which is, of course, the carbon efficiency and the total footprint in carbon. Also the employee engagement and, you know, the LTIFR so how many excellence we have and the ratio for women in leadership. All these things we think are relevant for our business, and we are focusing on that, and we are making good progress on all dimensions. Finally, I think compliance and data protection and code of conduct, all these things are fundamentally important, and we will demonstrate as well that these mandatory trainings we are also followed. We have very clear processes for those, and have sanctions if people are not doing that internally, which are working very well actually, because it's linked to their email account. And that works extremely well.
People do the training program because we think we need to push them to do that. We see a very good pickup since we have introduced it, and we are very sure that we will make good, very good progress in the experience and the, you know, understanding of these metrics. Of course, that's important for you as investors, that we are not doing only great business, but we are also a highly trusted company and 100% compliant. Overall, another great quarter. The step-up is not as big as it was in Q1 and Q2, not surprisingly, because, you know, we had last year lockdowns, and we had the start of the COVID-19 pandemic. I think it's still a fantastic reference. Best third quarter ever in our history.
You know, I'm very confident that this is a new level we have reached, and we can continue on that. That's the reason why we increased, you know, the guidance for this year, but also for 2023. With that, I hand over to Melanie for a little bit more detail on the financials.
Yeah. Thank you very much, Frank, and good morning to all of you also from my side. Frank has already talked about key trends, and I think you have all seen that it has been another very strong quarter. I will be rather brief with my comments on the numbers, maybe mainly focus on topics which are also relevant for what to expect going forward. Now starting with the revenue picture on page 15, it was another very strong quarter, EUR 20 billion in revenue, 23.5% year-over-year growth. And you can here see very clearly the trends Frank already talked about, and you're all very familiar with materializing also in the revenue development.
You see that those divisions which have a strong B2C exposure and are predominantly B2C driven, DHL eCommerce Solutions, P&P Germany. There was still growth and for example, on the DHL eCommerce Solutions side, still 13% revenue growth, so not bad. But of course, we now see this leveling out effect running against the high comparable from last year, so fully in line with what we had expected. On the other hand, we see the B2B development really pushing growth in DHL Express, in DHL Global Forwarding, and in DHL Supply Chain. I think all very well known and understood. Overall demand for logistics services is very healthy and strong. We see a rebalancing on the growth side from B2C to B2B in line with our expectations.
Now turning to the EBIT picture on page 16. On a good basis of the continued strong top-line development, we were able to grow EBIT by roughly EUR 400 million or 29% compared to the third quarter of 2020. I think there are, again, a number of record numbers I have to mention here briefly. I mean, Frank already said that, it was kind of like another super strong quarter. For Global Forwarding, it was actually the best quarter ever. I think DGFF clearly stands out with EBIT more than doubling. Also Supply Chain Operations have now clearly recovered from the 2020 dip.
E-Commerce Solutions continues to show year-over-year growth despite already having reached the higher level in the third quarter of 2020. The two divisions on the left and on the right in DHL Express, I mean, in DHL Express, 29% EBIT growth. I think to really appreciate it, you have to bear in mind that we already had more than 60% growth in the third quarter of 2020. This is just an unbelievable trajectory. We can clearly see here how the utilization of the same network for B2C and B2B volumes is really working in a very efficient way. On the P&P side, I think that is something which we already talked about in our Q2 call in August.
We have taken the conscious decision, in the a bit weaker summer quarter, to hold on to resources which we assume we will need for the peak season. That kept the cost base at a slightly higher level than what we normally would have done. That is the reason why this P&P number was slightly down compared to the third quarter of 2020. Now turning to the divisions with a bit more in-depth review. We already flagged in Q2 that we would expect for Express a rather moderate shipment volume growth. Actually happened as we had expected this third quarter, but that we would expect to see continued strong revenue growth driven by rate increases.
That is what you can clearly see here on page 17, where the yellow line shows you the continued strong rate growth dynamic with relatively stable shipments. What do we expect going forward? Going forward, the very solid B2B recovery should continue to support rate growth, while B2C volumes will at some point in time also get back to growth from the higher base level. This volume trend will of course be further supported by our well-established yield mechanisms. I want to use that opportunity to briefly talk about a question we hear quite regularly at the moment. How is the situation in the air freight market impacting Express and particularly Express pricing?
I mean, we indeed see a bit of spillover from shipments which normally would have traveled with the forwarding side. Obviously, when they travel first class on our Express network, that also happens at Express prices. Yeah. I think the fundamental TDI shipments in our network are determined by this regular and very disciplined Express pricing mechanism. The one element we have done on the pricing side here more than a year ago, when the aviation cost increased so significantly due to the COVID constraints, we introduced the emergency service surcharge that is still in place, and we tend to keep that in place as a cost offset until we see a normalization on the aviation production cost side.
If typically air freight shipments end up in Express, they do so in Express prices. The other thing is we sell off excess capacity into the forwarding market, and that's the element where we benefit from the higher rates. That is for us really a cost offset from the Express division view. What does it all mean put together? That means that of course, over time, we do expect eventually and probably not in the very near future, a normalization in the air freight market and the air freight rates. That should not have a detrimental effect on the whole pricing situation in Express. That's leading us to page 18 and the forwarding development. I guess as I already said it was a record quarter for the division.
Quite often when numbers are simply good, we can be relatively brief. You can see here on the air freight side that it was driven by a very good volume development accompanied by still high rates. Of course, on the ocean freight side, as you all know, the market is seriously distorted. We were able to secure capacity and were actually able to realize a 3% volume growth. The main driver in the market is of course the significant rate increase, which we were able to pass on to our customers. That significantly increased NGP and CCP here with the +99% from Q3 2020 to Q3 2021.
When I now turn to Supply Chain on page 19. I want to use that opportunity as a quick reminder. We had another EUR 300 per person COVID bonus. Frank already talked about how well that was received in the organization. The financial impact of that was EUR 178 million booked in the third quarter. The reason I'm mentioning it here on the Supply Chain page is that the impact was actually highest in Supply Chain with EUR 55 million. If you take that out then actually the underlying EBIT was roughly EUR 200 million in Supply Chain in the third quarter with a 5.4% EBIT margin.
A very good performance from our Supply Chain division. They have really recovered from the COVID challenges we saw in 2020. Looking at the right, this is a good pipeline and a good win realization of new business, notably in e-commerce. That is also the key basis for growth going forward. Now turning to page 20 and our eCommerce Solutions division. I think it's an interesting slide because on the one hand, it shows you that things are a bit different between markets. We had the Netherlands and Eastern Europe, where we really still saw good growth from the already strong third quarter 2020 to the third quarter 2021.
While it was sluggish or even a bit down, in the U.K. or in the United States respectively. I think the common theme here is, across the board, you can very nicely see how much ahead the volume is, compared, to pre-COVID levels, and that it's not significantly stepping back anywhere. I think this slide is really fully supporting our hypothesis, which we have talked about for quite some time, that we have seen a structural acceleration in e-commerce penetration, that we have reached a higher level, and that we are not going to fall back. Those rates, as expected, are now stabilizing, as the case is in the U.S. There may also be a negative, or slight small negative, quarter in between.
We are at a new level, and eventually we will start growing this more normalized growth rate from the higher level going forward. That takes me to Post & Parcel Germany. Frank already showed you the right side of slide 21, where you can nicely see how strongly the parcel volume has developed under COVID in Germany. At the same time, the other side of the coin, we have also seen an acceleration in mail volume decline. We have 10% less volume in the network now than pre-COVID. That is all part of the fundamental challenge we have to manage in our P&P division and which we have managed successfully the transformation from letters to parcel.
Where I think the team has shown again in the third quarter that we have managed that transformation both operationally and financially in a successful way. One more bit of additional information about the parcel volume. I still had parcel volume growth, 4.6%, which I think is good news in itself given how strong the third quarter of 2020 was already. As we had already flagged pre-COVID, we see in-sourcing from Amazon in line with our expectations. The reason is that actually, if you take into consideration the negative volume from Amazon in the third quarter, the underlying growth from the very broad base of other customers was actually even higher than the overall reported 4.6%.
Now, turning to page 22, that was a slide we had already put into the Q2 deck when the debate about inflation was beginning to heat up. As we all know, it heated up much more afterwards. We have just put that slide in again. It's nothing fundamentally new. I guess my message here is, yes, like everybody else, we do see inflation in parts of the world and in certain parts of the cost bucket, quite significant cost inflation. That can, of course, lead to some time lag before we are able to pass it on to the customers. All of our divisions are very confident that we can use our well-established mechanisms.
In the network businesses, for example, the general price increases to pass the cost increases on to the customers. That doesn't mean that we take it lightly. Obviously, cost control is always very high on our agenda and in times of higher inflation, even more so. But I think the fundamental mechanisms of making sure that we are able to pass the costs on to the customers has been proven in the past, are well established, and should also work under the current circumstances. Now, that takes me to a page where I think I can be super brief. Despite significantly higher taxes, we were able to translate a good EBIT development also into good progress on the net profit.
When you look at our net profit after nine months, we are at around EUR 3.6 billion. That's, of course, also a very pleasing development. As a good top line translates into good EBIT growth, net flow through to very good development on the net profit side. Which is something I could probably also say about page 24, where you can see our cash flow. I think, again, we were able to translate a good EBIT performance into a good cash performance. Yes, obviously, the year-over-year increase in EBIT is higher than on the free cash flow, which was roughly on Q3 2020. I think there are good reasons for that, well understood and anticipated reasons.
We had significantly higher taxes paid, and we are investing into the business in line with our guidance. We are very satisfied with the cash performance in Q3. Of course, when you look at the nine-month number, close to EUR 3.4 billion, that is probably a number we wouldn't have dared to dream about for a full year, a couple of years ago, and now we have achieved it after nine months. Very happy with the cash performance to date. For the fourth quarter, we obviously expect a continuation of cash out for CapEx, higher cash taxes, but we also have the payout of the EUR 300 bonus in the fourth quarter.
That's the reason why we have increased our free cash flow guidance less than what we have done with the EBIT guidance. To quickly wrap it up, before we come to your questions, I think it is quite clear that logistics is hugely important for the global economy, and that we are very well positioned to serve our customers with all their logistics demands. The third quarter has been a continuation of the strong performance we had seen in the prior quarters. I hope that we could give you a bit of a feeling that, yes, there are elements there.
The market environment is clearly pushing the numbers, but there are also elements, like pricing discipline, increased efficiency in the network or cash focus, which are really due to our internal improvement agendas. I think in combination, eventually markets will get more normal. The question is when that is. I'm sure we'll discuss that in the Q&A. We are very confident that we can manage this return to normality, also thanks to our internal improvement agendas without going back to the numbers we had in the past. We are convinced that we have really achieved a new level of profit and cash generation and that we are going to grow from here going forward.
With that, I think, Martin, over to you, and then it's time for the Q&A.
Right. Over to you, Stuart, for the Q&A, please.
Thank you, Martin. Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question is from the line of Robert Joynson from Exane BNP Paribas. Please go ahead.
Good morning, Frank and Melanie, and thank you for the presentation. I've got three questions, please. First of all, on Express, as you mentioned, the B2B volumes remain down versus the 2019 level by around 4% in Q3. To what extent do you feel that worsening supply chain disruptions could actually benefit B2B volumes during Q4 and in general during the coming quarters? So that's the first question. The second question on DGFF. As you mentioned on the call, air freight volumes are obviously being held by limited container shipping capacity, but nonetheless, the 34% growth that you saw was significantly ahead of the market in general, and also your main competitors as well. So could you maybe just provide some color on what drove that market share gain?
The final question on cash returns. The EUR 1 billion share buyback that was announced in March was completed a few weeks ago. Maybe you could provide an update on the latest thinking on further buybacks? Just finally on the ordinary dividend, just based on a flat payout ratio, I guess we'll be looking at a dividend for this year of close to EUR 2, so a big increase versus EUR 1.35 last year. Could you maybe just provide some color on whether that type of magnitude of an increase would be palatable or maybe it would be preferable to set the payout ratio maybe at the lower end of the range at 40%? Thank you.
Mm-hmm. Yeah. Thank you. Three good questions. I think on Express, I mean, obviously, we see the benefit of having control of our aviation capacity. The planes are very full, and on that basis, I think we will probably have a relatively small volume growth in the fourth quarter. I think the main driver at the moment is weight. There, the colleagues are really also doing optimal yield management. I think looking beyond the fourth quarter, obviously we expect a good and sustained support from B2B recovery going forward. Yeah. On Global Forwarding, yeah, thank you for that question.
We are indeed very happy with the very strong volume growth we saw in Global Forwarding. I think one of the key ingredients to this growth has been that our air freight colleagues managed to get capacity with some forward-looking deals. That was the name of the game also in the third quarter. That really helped us have this very strong growth. On cash returns, yeah, indeed, we completed our EUR 1 billion share buyback in October. As you recall, we only announced it in spring and said it would last up to a year.
We actually used the opportunity of a bit of a reduction in the share price over the last weeks to accelerate the program. We are now done, and we're very happy that we delivered on this commitment. The focus now is kind of like getting the year-end solidly in the bank cash number. Then the discussion will be indeed about the regular dividend. There obviously we will see a significant increase in the dividend. We haven't had the discussions of the supervisory board yet. I think the 40%-60% payout ratio is a good mechanism to give us flexibility to take the right balanced decision here.
Obviously, even at 40%, given the net profit growth, there will be a significant step up in the regular dividend.
All very clear. Thank you.
Next question is from Clémentine Flinois from Bernstein. Please go ahead.
Hi. Good morning. Two for me, please. First, in Post & Parcel Germany, more about competitors. Clearly, there's been a step up in volumes, and how do you currently view the competitive environment and investments in capacity by competitors, and how does that influence pricing as we go to 2022? Second question on forwarding. First, congratulations on the Hillebrand deal. Would I be right in thinking that inorganic growth is now more appealing to you? If so, what hurdles would an acquisition need to clear to be sufficiently attractive? Is there also any scope for acquisition in other business units?
Mm-hmm.
May I take the second, and Melanie, then you answer the first question. Thank you for your congratulations to Hillebrand. You know, why we have done Hillebrand, because we think it's a great addition in our capabilities. You know, all our businesses are well-positioned by scale what they do. We don't need acquisitions to have higher scale because our portfolios and contributions are well-balanced. We are looking for acquisitions which are adding value to our portfolio. Like in the sea freight market with Hillebrand, where they bring us the volume, but also capabilities in broader liquid markets somehow. Of course, it's still an ocean freight market, but sometimes, you know, if you have end-to-end capabilities, and we will look into this also in other parts of businesses.
We are doing that only if we believe that really we augment our capabilities to our customers. That's the purpose of that. We are not looking for synergies or something where margins sum, but we are looking at capabilities. In some areas like express and freight, there's nothing to buy. In eCommerce Solutions, we always said that we have still some white spots, but it's also very challenging. There's something available in Supply Chain. Augmenting our capabilities is obvious. In DGF, there might be other opportunities as well. In P&P Germany, you know, we have nothing to acquire somehow. That's the reason why we will continue in two divisions without any planned acquisitions anyway, and the others, depending on if we can augment our capabilities to the customer.
Yeah. On the first question, around competition in the German parcel market. Maybe two dimensions. First of all, on general competition, I mean, everybody is investing into building out network capacity. I think the interesting thing is that the whole cost pressure is probably going to be even higher for our competitors than for us, particularly from the labor side. As you probably all know, we have a new government forming in Germany at the moment. It seems relatively clear that we will see a significant increase in minimum wage to something like 12 EUR as of mid of next year.
For us, having mainly a unionized workforce under a clear tariff agreement, that is not going to lead to a significant cost increase. For our competitors, who are working quite often with subcontractor models, this increase in labor costs will add to the already existing cost pressure in the market. I think that overall, there will be more incentive for the market to increase prices. Even if there is now a build out in capacity from everybody, we think the demand is there to fill it, and cost pressure will prove more to pricing discipline than to price wars.
In terms of growth rates, yeah, as I already said, our growth rate of only 4.9% volume growth or 4.6% volume growth in the third quarter is maybe a little bit misleading, because that is actually made up out of two components. We see the insourcing from Amazon as we had expected. So their volumes are declining, which of course means that underlying growth from all the other customers is actually better. With that, we feel that we are also doing really well compared to the rest of the market.
Thank you very much.
Next question is from Muneeba Kayani from Bank of America. Please go ahead.
Good morning, Frank and Melanie. My first question is on P&P. Your guidance implies that 4Q EBIT would be lower on a year-on-year basis, but you're expecting flattish parcel volumes. Can you help us think about why EBIT would be down? And then on P&P, how much is now Amazon as a % of revenues? Given where volumes are today, do you think that Amazon volumes will continue to decline, or is that kind of done at this point? And then secondly, on the Express side, how should we be thinking about pricing and the moving parts on revenue per shipment next year? The weight benefit would likely continue given your comments on B2B volumes. Surcharges would also likely continue.
Where are discussions on kind of the annual price increase at this point, and how should we be thinking about that? If I may ask one more. Conversion ratio forwarding 39%, how much of it is market-driven versus sustainable? Thank you.
Yeah. Thank you, Muneeba. No, four great questions. On the Q4 guidance for P&P, yeah, I think a lot will now really depend on how much volume will flow into the network. We decided to really focus on quality for our customers, which is why we are prepared for a significant volume inflow. If this comes, that will take us more towards the upper end of the guidance. If not, we will end up with too much cost compared to the volume. That's the uncertainty we're currently facing in DP.
With regard to Amazon, as mentioned, and as anticipated already, one and a half years ago, while we still work with them very closely and, they continue to be a very much appreciated customer of ours, they're continuing with the insourcing. We said pre-COVID, that the share of Amazon in the P&P revenue overall was around 6%. That is now more moving towards the 5%. We indeed expect this trend to continue through the fourth quarter, but also very clearly into 2022. With regard to express pricing, the main element, like in all normal years, is our general price increase, which we have now announced, for pretty much all of the countries.
The average increase is 4.9%. That of course varies quite a lot depending on the situation in the individual country. The base CPI is what always really drives our fundamental revenue per kilo development. What we then have on top is the ESS, which we have always been very clear about. We don't want to use that as a temporary margin booster, but this is really for us a cost offset, which we will keep in place as long as the aviation cost side is so inflated. Current expectation is that it will be there for 2022.
The last element, which we expect to now also see again in Q4, when you look at the delta between revenue and shipment growth, is this increase in heavy weights, which is however, yeah, not linked to the underlying revenue per kilo development, linked to the GPI. In terms of the conversion ratio, I mean, obviously, the 39% is also impacted by the very high and distorted GP situation. That is not going to be sustainable. I don't want to quantify now, is half or one third of it due to the extraordinary market circumstances.
I think the important message is we also see and we track that very closely, how our internal improvement measures are really sustainably driving up GP to EBIT conversion. We believe that obviously when things normalize, we will still end up at a significantly higher level than what we had prior to the pandemic.
Maybe let me add two things. One is more anecdotal, but we did an Express survey as well, and with customers and what they told us somehow that they enjoyed very much our reliability with pricing through the pandemic, which gives me a clear indication that, you know, there is definitely still room for maneuver, because, you know, they have not experienced it with all of us, I would say. But that's great news on that front. On Express and on DGF, I think, you know, in hindsight, we were just ready to go for the pandemic with CargoWise, but we definitely have not captured the opportunity of CargoWise. The organization is busy to manage a crisis, and we have not started really to dig deeper into what we can do with CargoWise better and improve productivity.
Despite that maybe gross profit margins might come down through the pricing, I think there are still opportunity left on the productivity side. How much that is, I don't know, and Tim probably doesn't know either because we are driving the organization to provide great service quality and we have seen that through the crisis as well. That's more of a theme and I think, but that will balance definitely if rates are coming down, that we have an opportunity which we have not captured yet. Maybe partially, but definitely not to the extent we could.
Clear. Thank you very much.
You're welcome.
Next question is from David Kerstens of Jefferies. Please go ahead.
Yes. Good morning, Frank and Melanie. I've got three questions, please. First of all, I think you highlighted that the 2021 guidance upgrade is fully driven by DHL. Is that also the case for the 2023 upgrade, or does it also reflect maybe a slight lowering of expectations on P&P? The second question is regarding potential labor cost inflation in P&P. I understand you've covered at a 2% pay raise for all of 2022, which is great, and understand ver.di is asking for a 4.5% increase with Amazon, and I appreciate they're probably coming from a lower level. What is the risk that wage inflation will be materially higher when you have to renegotiate a pay deal for 2023?
To what extent can this be mitigated now that you have stamp price headroom of only 4.6%? Can you fully compensate that with partial price increases? Then my final question, if I may. You highlighted parcel volume growth in the Netherlands of 76% versus Q3 2019. That's almost double the growth of the market leader. What is driving this strong outperformance of the market? Is that the Amazon contract in the Netherlands? Is it fair to say that you're actually gaining volume with Amazon in DHL eCommerce Solutions while you're losing some volume with DHL Parcel in Germany? Thank you very much.
May, Melanie, you take one, and I take two and three.
Yeah. Okay. I mean, on the 2023 guidance, that is also really driven from continuous strong growth or stronger growth expectations on the DHL side than on P&P side. Yeah, I think we have to be realistic. We'll give you the detailed guidance, of course, for P&P and DHL, for 2022 and then for rolling forward for 2024 in March. I think it is already clear that the big growth driver going forward is not going to be P&P.
Yeah. Mainly on stamp and wage inflation. The fundamental challenge with P&P has not gone away through the pandemic. You know, all postal operators face that with a decline in mail volume and a surge in parcels. That mix, of course, has put pressure on the P&L every year, as we know. You know, the stamp price is at the lower end of our expectations. But you know, in a year where you know, we go from record to record, you know, very many, including our regulators, confusing what is happening in Germany and what is happening in the world, which is good news as well for you as an investor because the dependency on the German results is getting smaller and smaller every year.
You know, if you think about where we started a decade ago and even a couple of years ago, importantly, success of the P&P business for the success of the group has significantly reduced. Actually, if you multiply the margins, P&P becomes now dilutive to our margins instead of accretive, which is interesting if you think where we come from. Overall, that means that with regard to the stamp price, yes, it will cover our wage inflation we have next year, but not beyond. Of course, that will be also an argument in conjunction with the negotiations with the union. Let's see where we stand by the end of next year. Of course, the more successful we are next year in our P&P business, the higher the demand might be.
Finally, parcel volume growth. We have a fantastic team in the Netherlands and extremely good positioning of our network. The investments we have made, there's a significant investment we have taken, and this is brand new. It's well-positioned. I think we are really doing an outstanding job there. It's not coming from Amazon. Yes, Amazon as well, but it comes from many customers. I think the team is just outstanding, I have to say, and they have gained market share quite a bit. It's really great performance of our folks in the Netherlands. By the way, that helps as well, the proximity to our huge German business, because there's a lot of outflow as well from the Netherlands to Germany.
They have found very good concepts how we provide fantastic service quality outbound. Of course, if you sell outbound, we sell also domestic, and that has helped the business from a market perspective as well. I think we are really on a great run in the Netherlands, having a great team there.
Sounds good. Thank you very much for the color. Much appreciated.
Next question is from Andy Chu from Deutsche Bank. Please go ahead.
Hey, good morning. Thanks for taking my questions. Three, if I may. First one is, could you give us a view, please, on the COVID bonus or potential COVID bonus to be paid again, for next year? Would you consider sort of third year in a row, for that payment? Secondly, is it possible to give us a flavor of the 4.6% parcel volume growth? What is that sort of excluding, Amazon? And then on the cash flow guidance out to 2023, it kind of looks a little bit conservative, doesn't it? Because you're kind of saying that profits are flat, cash CapEx will go down.
If you're right that the air freight and sea freight and the freight forwarding business will normalize, then surely that will be a business that could significantly release working capital. Yet your EUR 10 billion cumulative guidance is at a run rate below the EUR 3.6 billion for this year. Thanks very much.
May I start with the COVID-19? You know, I definitely will get that question internally more frequently. You know, of course, we are never planning with kind of bonuses and guidances and whatsoever. You know, why we have done that? Because the job our organization has done was just exceptional. That's the reason. I hope that COVID-19 will be over next year after winter anyway, and then we definitely not have to pay any longer for any extraordinary efforts. You know, that we might let our colleagues participate in the future. You know, we have to decide when we get to the point. You know, we are not planning for something like that. I think it should be a nice, you know, give back if we really outperform significantly what we have expected like this year.
You know, we have increased our guidance several times, so why not let our colleagues participate? We have done the same in 2020. I think that will more be the logic. We really do much better than we actually, you know, expected, then we might have a chance, but not as a regular payment. Despite that, the pressure will go up. People might ask, you know, why not this year? You know, we are making record results potentially and whatsoever and, you know, that is we have to deal with. Outlook, we don't assume that we have that not in our guidance or in our plans.
Of course, if we do extremely well, whatever the reason is, then we might have to consider that because, you know, at the end of the day, we know who has delivered that, you know. This great performance was delivered by the colleagues around the world. I think if we raise the guidance so often, so massively, I think that's only fair to give back to the, to our colleagues.
Yeah. On the parcel volume question. I mean, yes, the volume growth would have been higher excluding Amazon, but it would still have been a normalizing volume growth. I would say it's all totally in line with our expectations. I think the good news for me is that we really see this broad customer base beyond Amazon continuing to grow very solidly despite the already high comparison base in Q3 2020. With regard to the free cash flow guidance, I mean, first of all, we are now delivering a free cash flow this year, which I guess probably none of us would have expected for the year 2021.
We have a couple of elements that we know that cash outflows will go up, for example, on the cash taxes paid. There are some beneficial elements, like, for example, on the forwarding side, we indeed expect that some of working capital build-up is coming back. At the same time, we also have divisions that are extremely optimized on working capital, like Express, where with continued business growth, given the optimized position, we will also see some outflow. I think overall it is probably a balanced number. I think already an increase to EUR 10 billion is not bad because that shows very clearly that we will solidly stay above EUR 3 billion going forward.
Right. Thank you very much.
Thank you.
Next question is from Carolina Dores from Morgan Stanley. Please go ahead.
Hi, good morning, everyone. Thanks for taking my question. I have three. In Express, is it possible to quantify for 2021 what is the benefit of the emergency surcharge? Also in Express, if you could give us some color on regional growth, U.S., Europe and China, and how is the competitive landscape? Are you gaining share in Asia or in Europe versus your, I guess, your main U.S. peers? Could you also give an idea on when we think about acquiring companies, what sort of level of M&A you would be considered? Could you do something well above EUR 2 billion-EUR 3 billion or do you have a cap? Thank you.
You know, I talked already about M&A. I think to put a cap in here again, you know, we are more driven by, you know, does it add value to our long-term growth story? That comes from, do we have better service qualities for our customers potentially? That's a driver. To say, you know, it's now a limit by EUR 1 million or EUR 1 billion or EUR 5 billion or whatever, I think would be a wrong approach. We would look into those things by really saying, "Okay, does it add value for the customers?" I have learned that from many acquisitions myself, having been around for quite some time. You know, what I've learned is if you really do acquisitions which are augmenting your capabilities, you really have a successful acquisition.
If you do that just for cost synergies, it's probably not worth the effort because you overpay that typically. Therefore, I would refrain or, you know, from giving you a number what the cap might be.
Yeah. On first question, the ESS, I mean, we don't disclose the detailed impact. What we really look at very closely is to what extent does the ESS offset the additional costs. That is across all quarters a very good match so that the ESS really does its job offsetting the cost so that it is relatively neutral on the EBIT line. With regard to regional growth, I mean, you can see some data in our stat book where you can see that in terms of revenue we have double-digit growth in all the large regions. Europe 21%, Americas 27%, Asia Pacific 18%.
When you then look at the volume developments, you see that against a very strong comparison in Q3, Europe and Americas were also up in volume, particularly the Americas. We see a very strong growth also in the U.S. Asia is the one region where growth in volumes was slightly down. That was driven by the extremely high comps we had in the third quarter and also by some of the capacity constraints and challenges in parts of the quarter. For example, in China, I think the underlying demand for outbound from China and Asia is still there and very strong.
In terms of competitive landscape, yeah, our competitors have their strength on the Transpacific, and they are obviously at the moment, whoever has capacity is able to sell it. We're definitely not falling behind in terms of market shares. In terms of rest of the world, I think, we are leveraging our very strong footprint compared to competition.
Yeah, maybe, you know, in Express, we have recently done a market survey, not only asking customers, but also about all dimension, how our brand is perceived regard to the touchpoints, along many different touchpoints. We have a page where we show, you know, who is the best, where the market is equal or where, you know, we are lagging. That became much more red and yellow in the last year, much more red and yellow. We are leading the pack by quality by far, and that will help us. I said it right, we prize the reliability. Without a doubt, Express had been able to sell air freight capacity at a higher price than what they get for the normal product, and we haven't done it.
We have not squeezed the orange to an extent that we say, you know, make now before, you know, we could easily make more money in Express by selling air freight capacity to horrendous prices. We felt we have a responsibility to our customers to provide them great service, and we have done that. What we have done is actually we have given this capacity to DGF. Maybe that's a driver as well for the market share gain because, you know, we are just controlling more capacity. Of course, customers have been thankful for that. I think, you know, the ESS, yes, we have done that to cover our additional costs because a freighter is more expensive than a belly space, and we have also ordered or, you know, you know, rented or leased more freighters due to the pandemic.
Overall, I think we have done a very reasonable job to help our customers to get through that crisis, and I think that is very much appreciated.
Right, Stuart, let's continue.
Okay. The next question is from the line of Sam Bland from JP Morgan. Please go ahead.
Hi. Thanks for taking the question. I have two, please. I think the presentation says the B2C volume in Express was only up 1%. I was wondering, I mean, do you think that that's kind of a reflection of the market slowing down or your capacity constrained now in Express, and so you've shifted the capacity to the air freight volume with higher yields? The second question is on the revised 2023 guidance, could you give some indication of sort of how, you know, if we take the EUR 8 billion, how kind of normal or similar to pre-COVID the world is assumed to be at that EUR 8 billion level? You know, both on that, the air freight piece in Express and also on CNF rate unit margins in forwarding. Thank you.
Melanie, you take the first and second. Our 2023 guidance assumes that in 2023, things will be pretty much back to normal somehow. It's not any longer based on assuming that we are still in a pandemic and very constrained capacities. I think this is what we said at the beginning, that we believe that we have reached our sustainable, you know, level now. Of course, the growth will be different because some positive impact to help us through the pandemic will not be around in 2023, but we will compensate that by, you know, improvements we can do ourselves.
The number is assuming that in 2023, the world will be relatively normal again, whatever that means, but it should not be based on it's still we are still in extremely tight markets in air freight and ocean freight.
Yeah. On the question with regard to the B2C volume growth in Express, it was indeed only 1%. I think the main reason was that we were already at a super high level in the third quarter of 2020. That's a little bit corresponding to the pictures we showed for the other B2C businesses for Parcel Germany and eCommerce Solutions. There you can see that we now have a plateauing effect. As that washes out over time, we expect growth to pick up again for B2C going forward.
Actually, that is still 1% is great news and not bad news because we had such a high level last year. Maybe some of you have thought six months ago, if the lockdowns are over, you know, that volume will disappear. You know, people pack stuff and ship it by express? You know, everybody felt probably this is only if it's urgently necessary. Now, with normalization of retail stores and all this kind of stuff, it might go away. It didn't go away because we have opened new markets to people, to sellers and buyers, and that will definitely help going forward. I'm actually pleased that the volume was still 1% up and not, well, not down, because that shows what we always thought, that this is a structural change of the e-commerce market.
Okay. Understood. Thank you.
You're welcome.
Next question is from the line of Sathish Sivakumar from Citigroup. Please go ahead.
Hi. Thanks again for your presentation. I've got two questions here. Firstly, on the freight forwarding, on TMS rollout very specifically. I assume it was completed in Q1 this year. Is it fair to say that the big upside in conversion ratio will be in current quarter and possibly in Q1? And what will be the marginal improvement thereafter? Secondly, within the P&P, more specifically in parcels, could you please comment on the capacity dynamics, i.e., what level of excess capacity you see outside of peak season? And then do you see a potential to accelerate your PUDO offering given the rising labor cost? Thank you.
May I take the first with the system. As I said, you know, we are not focused on really now calculating, you know, what kind of productivity level and so forth whatsoever. You know, interesting enough, we were able to manage more volume without adding additional people somehow. There is plenty of opportunity. Tim and I said, let's not dig into that. You know, the organization is busy with managing the stuff, so let's focus on that instead of now thinking about that. There's definitely opportunity to come. We will see that going forward. As I said already earlier, when rates are coming down, we should balance that somehow with any gains we have in air freight and ocean freight. This is a journey, you know.
Just that you have the system doesn't mean that everybody understands how we can leverage the system in a smarter way. It needs adaptation of processes and different behaviors, and that is all to come. I think the more important thing was, it was the system in place when the pandemic hit us and we can really, you know, manage that. We have not added people despite that we have higher volumes. That's encouraging and that shows me what to do about the new system.
Can I have a quick follow-up here? How much of your actually 2023 guidance assumes that there will be a further margin improvement from the TMS or optimization of TMS system?
We have not, you know, made a map. You know, on that level, we are not for 2023. I think we have a good understanding what could happen, but we have not made on that level assessment.
I mean, we have of course different models. I think there are some factors, like, what do you believe in when the rates are going to normalize, which are also having a material impact on the 2023 number. I think the different ingredients between what is happening in the market and our internal improvement levels make us very confident that the guidance for 2023 is very robust also with regard to the DGFF contribution. In terms of P&P capacity, I mean, obviously we are continuing our build-out of capacity for parcel Germany like we had prior to the crisis. There are elements where we try to accelerate things. However, you have to be realistic.
For example, if you want to build a new parcel sortation center, that takes time. You first have to find the plot of land, you have to get the building permit, and so on. I think one key focus for us continues to be how can we leverage freed up capacity, on the letter side, for smaller parcels. That has really helped us tremendously over the last four quarters. That is something which we had already planned, due to the general shift from letters to parcels prior to COVID, which has now been accelerated. I think that is going to be a very important factor in whole capacity management going forward.
With regard to last mile, I mean, we already have a very broad parcel locker network. We have recently announced that we're really going to speed up the build-out and that we are targeting 15,000 lockers by the end of 2023.
Because, you know, there are some questions with regard to the guidance and of course, you know, we are pretty sure that our guidance is solid, but of course, there is so much uncertainty. You know, of course, internal discussion, you know, for us is somewhat what is more important is to think first what is our relative position in the respective markets to the competition now in comparison to two years ago. I think we made in all five divisions significant progress. Our competitive positioning is better. The name of the game is now going forward, how, you know, we. We as a company are much stronger than before the pandemic. We gained strength from the pandemic. The game is now to perform better in all five divisions than our competitors.
Because we don't know what will really happen in the future, but we know what we can control. We can control that we provide better service, that we are more focused on customers, that we are well-balanced with our portfolio. That's the name of the game now going forward. The better we do that, the stronger we behave in the market and more competitive, you know, then the number, whatever 2023 will bring is when, you know, the number we will deliver because we can't change the circumstances. What we can do is we can perform better than our competitors. I deeply believe that we have positioned all our five divisions in such a spot that they can perform better than the competitors relatively. That gives me very much confidence that the EUR 8 billion are achievable.
Okay. Got it. Yeah. Thanks very much.
You're welcome.
Next question is from Alexia Dogani from Barclays. Please go ahead.
Yeah. Good morning. Thank you for taking my questions. I also had three. Just firstly, to follow up on Frank's comments now. I mean, clearly, it's very positive to see the competitive position of Deutsche Post Group post-pandemic. But I guess when you look at sort of future growth, are there any levers that you can pull to go back to kind of a mid-to-high single digit normalized EBIT growth, you know, be it from 2021 or from 2023? I mean, is there some areas that you can actually invest to capture more growth and further basically build on your competitive position to deliver this kind of normalized growth rate we've become to expect, notwithstanding the significant step change in the past couple of years.
Secondly, I'm interested in your comment of, you know, expecting in 2023 things will have normalized. I mean, at the moment, supply chains are more expensive, less efficient, less timely. Do you think things can improve materially quickly without affecting, kind of the normalized demand expectations and the kind of usual GDP multiplier? Finally, in terms of your ESG committed investment for green technologies of EUR 7 billion by 2030, can you give us an update of how you are positioning that spend with, building partnerships with suppliers or governments that you alluded to at the start of the year? Thank you.
Okay. Yeah, three great questions, starting with future EBIT growth potential. Obviously we see good potential for further growth after the normalization phase. Starting from the top line, where after the normalization, we expect that both B2C and B2B will continue with the trends we had seen prior to the pandemic, which was already giving us some good top-line growth. We still have a strong pipeline of internal improvement levers. I think by far the biggest opportunity is still on the digitalization. There also during the pandemic, we have not stopped pushing our digi initiatives. There's so much happening.
I think that is going to be the big lever on the EBIT side. Logistics was not at the forefront of digitalization, but we're really catching up very rapidly, and that's a fantastic opportunity for us going forward. With regard to when the supply chains get back to normal, I think the one thing which is for sure is that eventually it will normalize. I think it is also relatively clear that this is not going to come overnight. We obviously expect continued distortions also on the ocean freight side, well into 2022.
On the air freight side, particularly with regard to intercontinental flying, it doesn't look likely as if we will see a full recovery in 2022. That is clearly going to stretch out to 2023 and beyond. Things will normalize, but it will really take time going forward. Finally, thank you for the ESG question. It's good that we are also here now beginning to talk about this super important topic. When you look at the EUR 7 billion over the decade to 2030, the biggest component in there is the buying for sustainable aviation fuel we will have to do to decarbonize in express and in global forwarding. Two-thirds of our CO2 emissions are from aviation.
There is no new revolutionary technology on the horizon for new jet engines until 2030. The name of the game will be getting Sustainable Aviation Fuel into the current aircraft. Here we are indeed talking to suppliers and we are also thinking about a partnership concept because obviously given how much focus is on the topic now it's more to be expected that there will be a shortage in supply and that it will be important to secure enough for the next decade.
Maybe that's an interesting question anyway, because, you know, that will very much, you know, depend as well, you know, how serious investors and consumers are about that they want to invest in more carbon cleaner companies somehow. If that really takes place, and the interesting figure is that the cost for carbon neutrality is lower than the rates we see at the moment. If the rates are coming down and the markets are really saying, "Okay, now let's take that money and invest it in more carbon efficiency," then we will definitely see a tremendous momentum as long as people can deliver, you know, sustainable fuel, which is probably then the bottleneck pretty rapidly.
That is very encouraging because the rates customers are paying at the moment are significantly higher than the rates they would pay if they had to be 100% carbon neutral supply chain. That's good news actually, because that will now drive the market because, you know, if that is visible
We start thinking about that. Many of our customers have carbon reduction targets, and they have to deliver against those. Many of them have we are their scope three numbers, so they have to move on. That gives me the belief that when we see the first sign of that, customers will pay for the higher cost of sustainable fuel or maritime fuel. That is great, I think, because that will move the needle quite much more than any regulation whatsoever. I think we are now at the tipping point of that. Let's see what will happen in the next two years. The bigger challenge is do we find enough energy companies who are capable to produce more sustainable aviation and maritime fuel? That's probably the bigger problem than the demand we will see.
We have customers who are paying the extra price already for, you know, fuel, sustainable fuel, which is good to see.
That's very interesting. Thank you.
You're welcome.
Thank you.
Next question is from Christian Obst from Baader Bank. Please go ahead.
Yes, hello. Of course, a very strong set of numbers, and I don't want to go into any detail about that anymore, but you are investing approximately EUR 10 billion until 2023. What kind of that CapEx you need to keep up your current network up and running at sustained quality? This is the first one. Is there any special IT project included? What is the main challenge to control such high investments, as I think that there are many ideas within the company to grow, and how has this focus changed over the last two years? Thank you very much.
Before Melanie answered your question, the second question I can answer probably. If you have a great CFO, you should not worry too much about.
Thank you for the question. Well, I think on the investments, I mean, we have EUR 3.9 billion in CapEx this year. As you can see from our medium-term guidance, we don't expect that this materially increase now. We don't expect any spiky development here. I think we have a relatively solid, to a certain extent, maybe boring pipeline of things which you have to keep doing to run the network. Aircraft fleet building up new hubs. I think that is not revolutionary, but more of an evolutionary progression. We have an established investment process.
The one interesting feature which we have now added this year is the ESG component. We had a CO2 statement in our investment approval process for many years, but we are now really taking that to a new level, and that is then also linked to really tracking against EUR 7 billion. This is leading to lively debates now. For example, when we have a SAF buying opportunity, how does that compare to what we would spend on regular jet fuel? Or if we have a building where we are of course already doing a lot of green stuff, if we kind of like go even beyond that, what's the right trade-off between additional CapEx and an even greener return?
I think that's probably in our otherwise very well-established investments, the new feature where we are also still a learning organization.
On the IT, there is no major IT project. Of course, we have to renew our SAP platform, but I think that's something which is, you know, many companies have to do that, but we don't have something we had in DGF way back. You know, nothing of the operational systems needs to be replaced. They all need to be augmented by new features. You know, the interesting thing is where we are with IT now than we were in a couple of years ago is if you listen to the ops people and they tell you and tell me, because I'm chairing the ops board as well, not only the IT, what they said, "Don't give me more functionality. I need to digest what I've got." My people have to learn and to adapt to the features.
That is where I wanna have IT. IT should be faster than the agility and adaptability of the operation. That's a spot to have, because then you are, you know, always faster than waiting for IT features.
When you move in maximum speed.
Yeah. This is the best you can get because, of course, you can't overwhelm a Korean warehouse colleague giving them new feature, and they have not digested the last release already. That, I think, is where we are. The second is Melanie didn't mention that we have a very clear process. First of all, despite that we are more profitable, that we are spending more, we have not changed any internal approval process. The board always looked at anything above EUR 25 million, and we will continue to do that. Not in the year, cumulative for the case. We get a lot of cases, we see, and that's the way how we keep that because, you know, of course, if people come now and it's twice the price, why is it twice the price and all this kind of stuff?
That is a very clear process in the finance organization, and then finally the board sees that. We have not changed that by intention just because we are more profitable. Why we should give people more headroom for making investments now? We keep the same intensive process, I think, for managing that.
Okay. Very interesting. Just one additional question on that. When it comes to IT, have you changed more from external to internal IT or the other way around during the last two to three years?
I think, you know, this is, you know, it's too difficult to say generally, but in principle, we have more converted to cloud-based software we buy, and not proprietary technology. But that's different by division. Of course, in Express, we have more proprietary for the network and P&P, the same in e-commerce solutions. We have standard software CargoWise. In the supply chain, we work with two major vendors, you know, who are our warehouse management system somehow. So it's different by division, but for others, for, you know, the sales, for customer service, we went more to for in these functions, more to the software and very often even cloud-based software.
Okay. Thank you very much.
You're welcome.
Next question is from Johannes Braun from Stifel Europe. Please go ahead.
Yes. Thank you for taking my questions. I also have three, if I may. Firstly, what is the magnitude of the volumes in the Express network currently that would normally have traveled with air freight? Any rough quantification or idea would be helpful there. Just trying to get a sense of the volume headwind in Express as markets normalize. Secondly, you mentioned the new government in Germany, which is still forming as we speak. Do you expect any new developments from the government in terms of the potential change of the universal service obligation or indeed the 20% government stake that still sits with KfW?
Lastly, just back to Amazon, just to double-check, I think you said you would now expect the parcel growth run rate going forward being rather 5% instead of 6%. The Amazon impact is basically one percentage point. Is that correct? Just making sure I understood that correctly.
Yeah, may I take the middle one? Of course, we don't know yet, but we're finally decided, you know, there are different elements to that. Of course, you know, what we are arguing for is somehow if we do have postal reform, it needs to reflect the declining volumes on one end and the other, you know, the, you know, what all three parties are saying, the transformation to more green. Of course, you know, if we still need to fly stuff in the night or can't use more railway because the expectations are so high from the universal postal service obligation, the question is that really sustainable given the environmental friendliness of the business going forward? These will be the discussions we will have, not knowing what the final decision on that whole aspect will be.
It will be a discussion for the next four years we will have anyway. I think that is something where, of course, we will monitor. You know, we don't know yet what the final agreement about that might be. The second is also not clear. You know, we don't know and we never knew what the government, and it's right that the government never told us. We don't know what the government and the political parties have different views on that. It's unclear at the moment which one will be, you know, more driving a sale or keep it. I think that's something they might even not agreeing in their coalition agreement. We don't know. You know, we are, to be honest, perfectly relaxed as we have been in the past. It's a great shareholder.
They have benefited quite a bit. You know, we are not only have driven the value up quite a bit, but they got every year a quite sizable dividend, which they probably need as well going forward. We don't know what the outcome might be, so it's unclear. It's also good that we don't know the outcome because otherwise we would always have a problem how do we explain that? That has been the professional behavior of the government in the last 20 years since we IPOed. I don't expect any change with regard to that. The new chancellor is a former finance minister, and he knows all that detail because he is in charge for the holdings through the KfW.
Then to the other two questions. First of all, magnitude of air freight volumes in Express. It's not so much volumes because those are heavy shipments, but in terms of volume counts, they are relatively negligible. I think the impact is more visible on the weight side, and that will mean that eventually there will be a time when we probably see a weight normalization. But we are quite confident that we can also manage that in a way without having a detrimental impact on the profitability. With regard to Amazon, yeah, thank you for asking that question. I was obviously not clear enough.
What I meant was, prior to the pandemic, in March 2020, we talked about the share of Amazon in the P&P revenue being around 6%, and that has now come down to more something like 5%. Over the period, they have actually grown because of the very strong growth in the market. What we are now seeing in third quarter is really a decline in volumes. You know, the overall share of Amazon is more around 5% of P&P revenue.
All right. Understood. Just as an add-on, I mean, clearly that share cannot go down to zero because in rural areas, Amazon does not maintain a network. What would be a realistic assumption of that 5% going down to?
We don't have a target number. I think the important thing is, and that has also been evident now in numbers, we are able to fill up free capacity with a very strong growth from the other customers. We are quite confident that we will be able to manage this over time. It may lead to an impact on the growth rate in parcel for one or two quarters. Ultimately, I think we can refill the capacity with growth from other customers.
Yeah, but you're right as well. You know, with the assessment, you know, there are certain elements where we are by far better than anybody else, which is for lightweight products, for return solutions due to our network, parcel lockers business where we have a tremendous platform, rural areas. You're right, you know, if you know. Amazon is very rational and not irrational, so that means, you know, we have a very valuable value proposition for certain segments and, you know, and I think that's a good assumption. What finally will happen, we will see. In principle, we are not, you know, we are not naked. We have capabilities which are unique to us.
Yeah. I think that is what we also said earlier. I think they are an important customer of ours. We have a very good and constructive relationship. I think there are elements which are really unique to our product offering. I think it is, like we said, prior to COVID, something which we have to manage, and I think we do it in a close collaboration with them also.
Okay. Thanks very much.
Right. Stuart, as delighted as we are about the strong amount of interest, I think we've got time for only one last caller, please.
Okay, thank you. The last question is from Sumit M. from Societe Generale. Please go ahead.
Thank you. Frank, Melanie, I would like to invite your views for what you think about 2022 and onwards. The impact of inflation, we can see everywhere. Everything is getting expensive at the stores, gas prices, utilities, China, the wealth effect, from real estate, Evergrande crisis, et cetera. What are your views about volume growth in 2022 and 2023 across your, whether it's B2B or B2C, cooling down? Yeah. For example, do you see already China inbound volumes getting affected? I would like to hear your views about the global GDP growth actually getting impacted by these inflationary pressures. Secondly, thank you for slide 22, where you show the impact and how you deal with inflation.
Am I right in my assumptions that the DeCS business is the one that is probably more susceptible to inflationary headwinds, and the margins are going to be more exposed than other disparate businesses in India, China, U.S., quite a lot of subcontracting model. I'd like to know your views on these aspects. Thank you.
Maybe on the general outlook, again, as I said already earlier, you know, I think we should expect a normalization of growth rates around what we have seen before the pandemic. Overall GDP growth at 3%. The global network businesses will grow in line, in alignment with that. We said that already before. I think we will go back to that level again. How fast we get to that growth rate to be seen, but in principle, long term, I think we see a normalization of the growth. E-commerce is a more tricky one, because, you know, the fundamental structural change that there are more participants and how much really that will be in a stable state situation, how much growth we will see. Is that lower single digit or higher single digit, you know, to be seen.
You know, we can see that probably in the next year's Q3 for the first time, because then we probably have a relatively clean comparability, because, you know, Q1 of this year and Q2 of this year were still pretty much distorted. The Q3 of this year will be the first relatively clean with regard to volumes in B2C e-commerce. I think, you know, the general growth rate should be at the same level as pre the pandemic after the pandemic is over, and e-commerce should grow single-digit. Lower or higher will depend very much on how much of the new users of the e-commerce are really using that more intensively, and I think we can only judge that second half next year.
On inflation and what that means for the supply chain business. We have different types of contracts, so we have open book contracts where we basically charge cost plus a margin to the customers. That is, of course, in a high cost inflation environment, the ideal situation. It is more challenging with closed book contracts. Here we also experience that in the current extreme environment there are opportunities to have sensible discussions with the customers. It is something which clearly is on the watchlist for supply chain and has to be tightly managed. I don't expect this to have a dramatic impact on supply chain profitability.
Sorry, Melanie. I mentioned e-commerce solutions for the latter. Thanks for the comments.
I think on the e-commerce solution side, I mean, this is a business where like in Express, in parts of Germany, cost inflation is passed on as the price increases to the customers. There is a time lag impact. Of course, we also feel the labor cost pressure in the U.S. at the moment. Medium-term, the team is very confident that the cost inflation can be passed on to the customers.
Thank you so much.
Yeah. Thank you.
There are no further questions at this time, and I would like to hand back to Martin Ziegenbalg for closing comments. Please go ahead.
Yeah. Thank you all very much for your questions. Thank you, Melanie and Frank, for your very helpful answers. For closing remark, I hand over to you and look forward to see you out there over the next couple of weeks.
Thank you all for your questions. Participants love to stay for, you know, more than 1.5 hours, which it's good. Thank you very much for the questions. As Melanie and I said, you know, we are in very good shape. I think we have you know gained a share in the market. We are performing well, and I think we have two solid bases going forward. We know that not only e-commerce is a driver, but also digitalization, sustainability, and we are diligently working on that. That makes me optimistic that we not only reach our guidance for this year, but also for 2023. With that, I would like to thank you. Hopefully, we see each other sooner or later in person again. With that, bye for today.
Thank you. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.