PostNL N.V.

This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear.

The machine-assisted output provided is partly edited and is designed as a guide.:

00:22 Thank you, and good morning. Thank you for joining us in the third quarter results presentation, which will be given by Pim Berendsen, our CFO, and afterwards, we will open Q&A with Herna Verhagen, our CEO, and Pim as well of course.

00:38 Pim, over to you.

00:40 Yes. Thanks, Jochem, and welcome to you all.

Thank you for joining us today. Let's start with the key takeaways.

First and foremost, the full-year twenty twenty one outlook has been confirmed with normalized EBIT at two eighty million euro to three ten million euro, and a free cash flow of two fifty million euro to two eighty million euro. 01:01 If we then look at the third quarter, normalized EBIT came in at twenty three million euro, and it's driven by a few key points.

Volume growth at Parcels was one point six percent. If we correct that for the non-recurring COVID effect in Q3 twenty twenty, that is actually six pointy four percent.

And if we exclude the negative consequences partly temporarily of the change in value added tax, that would have been actually around nine percent. If we stretch the horizon and look at the growth from Q3 twenty nineteen towards Q3 twenty twenty one, we're looking at a, roughly speaking, nineteen percent growth.

So still attractive growth in our Parcel segment. 01:52 If we then go to Mail, volume growth at Mail was zero point five percent, obviously supported by non-recurring items related to COVID, but also with an improvement of the underlying substitution rate.

As said, stronger than expected temporarily negative impact from change in value added tax regulation for small non-EU goods and other regulations in China. We'll come back to that later on.

Happy with the cash flow performance and also very positive about our ESG and transformation acceleration programs and all of those are progressing well. So positive on the pace of our transformation.

02:36 But before we go into the business developments and financial performance, I want to spend a few words on our -- few of our strategic business drivers. You'll find them on slide four.

Let's start by repeating our value creation model, which aims to generate attractive total shareholder returns. Our mission is to be the leading logistics and postal solutions provider into and from the Benelux.

And in order to live up to that ambition, we've defined five strategic objectives. We help our customers grow their business.

We aim to secure sustainable mail business. Our objective is to attract and to retain motivated people and we set ambitious targets to improve our environmental impact.

03:26 And last but not least, we intend to generate profitable growth and a sustainable cash flow. We have to reach these objectives through our business segments.

And as you know, we'll manage Parcels for profitable growth and Mail in the Netherlands for value. 03:45 Furthermore, we accelerate our digital transformation which is aimed to strengthen our competitive position by further building on our platform and connecting customers, consumers, and solutions through simple and smart digital journeys.

04:04 Let's move to our ESG driver, that's on slide five. We focus on all three sectors of ESG and have embedded these fully in our strategy.

We aim to improve our environmental impact and deliver all parcels and letters in the Benelux emission-free in the last mile by twenty thirty to be a socially responsible employer and to act in transparent, aligned, and an accountable manner. 04:35 In the third quarter, we improved our carbon efficiency by seventeen percent compared with the end of twenty twenty.

What we've also announced is that we will fully electrified our fleet -- until we fully electrify our fleet, we'll offset any remaining carbon emissions from both our own transport as well as that of our delivery partners. We'll be doing this as of the first of January twenty twenty two, and as such, cutting our footprint to net zero as of then.

05:10 Clearly and without any doubt, our people are a key factor -- key success factor actually in our success. Health and safety continues to be top priority in these days of pandemic.

We also continue to focus on strengthening employee engagement as well as workforce optimization and capacity management. This includes having the right people in our overall delivery model.

05:37 We closely monitor and what we can anticipate on developments in the labor market, ensuring we continue to offer our customers the necessary capacity and high quality service, particularly moving into the important fourth quarter of the year. Furthermore negotiations on the new collective labor agreement for our postal delivers recently been starting.

6:04 From ESG towards digital transformation. And as you know, within our Digital Next program, we'll further digitalize our commercial engine, transform our core logistic operations, and scale platforms and find new business models.

All of that is supported by strong IT and a data foundation and driven by our digital DNA. 06:30 We continuously look to enhance our services and information in the supply chain.

Two important examples of that in the third quarter of this year. By now, we've outfitted ninety percent of our roll cages with digital trackers and obviously that leads to a lot of data and insights that we can use to optimize our networks and operations on a real-time basis that will enable us to improve the quality of service even more.

07:01 Next to that, we're very proud and happy that we've opened a robotic small parcel sorting center early October in Nieuwegein, which is highly innovative, equipped with very many different robots and it's unique in its nature, which creates more capacity in our other regular parcel sorting centers. 07:25 Now let's look into our business developments and financial performance, and we're at slide eight.

Let's start with the overall results. Revenue came in at seven hundred and twenty nine million euro, which is a two percent decline in comparison to last year, but there's a few important elements to note there.

Within that comparison, we -- obviously, last year we sold Cendris. There was a negative impact also on the revenue side of value-added tax and less non-recurring COVID impact.

So roughly speaking, fifty million euro is caused by those three elements together, and then as a consequence, the underlying business developed positively with thirty seven million euro revenue up. 08:17 The normalized EBIT came in at twenty three million euro, of which five million euro is assumed to be non-recurring and related to COVID.

The impact of value-added tax regulation change are obviously minus eight million euro, which is both visible at Parcels and Mail segments, three million euro in the Parcels segment and five million euro within the Mail in the Netherlands segment. 08:50 On slide nine, we've made a comparison with the normalized EBIT reported in the third quarter of twenty twenty of thirty six million euro and the realized EBIT of twenty three million euro in this quarter.

There are three main buckets that I want to talk about. The first one is the non-recurring impact of COVID, which is three million euro in the quarter positively, but the split between the segments is quite different.

So in comparison to last year, Parcels did not have any positive non-recurring COVID implications, and last year, there was a positive of eleven million euro. The change within Mail is fourteen million euro more favorable within this quarter.

09:36 If we then talk about the value-added tax impact of the changes in regulation, that has had a negative impact of eight million euro, as said, three million euro within Parcels, one million euro in Parcels; two million euro in Spring, and five million euro within Mail in the Netherlands. We believe that is partially temporarily because, let's say, what we see quite clearly is that, both consumers and selling web shops had to adopt their way of ordering, their connections with customers after the first of July.

We see them making the changes and throughout the period from July onwards to the end of the third quarter, we gradually saw an improvement in the volumes. 10:25 Partially, it will be structural because also the regulation in China in relation to fake goods, intellectual property will lead to shake out on some of the volume, but what we do expect is a gradual improvement of the cross-border volume, but certainly in the fourth quarter, we'd still do expect a slightly slower volume contribution than before.

10:57 Then we move to the Parcels segment. Continued growth in the third quarter twenty twenty one, five hundred and five million euro revenue in comparison to four ninety million euro last year.

And that also includes twenty five million euro less revenue from cross border, driven by the same topics we just discussed. 11:21 Normalized EBIT came in at twenty seven million euro in comparison to forty nine million euro.

And if you want to discuss the breakout of those elements, it's basically eleven million euro related to non-recurring COVID in twenty twenty, three million euro negative consequences of the value-added tax change in regulation and five million euro less, driven by other business effects. The most important ones relate to our step-up in costs and step-up in capacity to prepare for the very important peak period in the fourth quarter.

11:58 If we then go back to the volume growth, one point six percent growth; six point four percent, excluding the non-recurring COVID impact, and around nine percent when we exclude the international volumes impacted by adjusted value-added tax regulation. That stronger-than-expected negative impact from adjusted value-added tax regulation, we did expect volume decline, but it was, roughly speaking, two times bigger than our own expectations.

12:33 Positive price effects offset by less favorable mix, growth in Spring in euro parcel and logistics, offset by lower revenues in Spring Asia, which basically accounts for seventeen million euro less revenue, which is part of the twenty five million euro in total less revenue from cross-border. 12:58 The normalized EBIT and the key components of the bridge I've just disclosed.

The increase in costs are in line with expectations. It's all about rebalancing our network to accommodate the volumes within the current infrastructure.

You know that we've added new capacity, including the small parcel sorting center and a regular depot in Westzaan. 13:21 In preparation of our peak season, we've increased the number of people, increased the costs to offer the necessary sorting and delivery capacity in order to accommodate our clients to grow, obviously, with high-quality service, and there's other indirect cost developments, the most important ones driven by a step-up in IT and Digital Next cost, also in line with expectations.

Better result at logistics, offset by Spring, of which minus EUR2 million euro relate to the value-added tax changes as well. 14:02 On slide eleven you'll find our regular Parcels bridge from Q3 twenty twenty towards Q3 twenty twenty one, forty nine million euro towards twenty seven million euro with the buckets that you certainly will recognize.

seven million euro volume effect, minus six million euro on organic costs driven by sector CLA and indexation for delivery partners. Volume-dependent cost of minus two million euro and then the big cost development that has influenced margin in this particular quarter, driven by the changes in the network.

14:41 Then addition of new capacity, six million euro, rebalancing the network of three million euro, preparations for our peak season, another three million euro, as well as other indirect cost developments, including five million euro for IT and Digital Next. In other results, a minus five million euro, positive performance in logistics, offset by cross-border decline also driven by the value-added tax regulation.

15:11 Then let's dive into two main drivers under Parcels performance. And the first one is the growth trend on slide twelve.

And there we basically see the reconciliation of the growth numbers we already discussed. So one point six percent growth, eighty one million euro parcels delivered in the third quarter.

Excluding international, that accounts for nine percent of growth. And if we take the horizon from Q3 twenty nineteen towards twenty twenty one, we see a growth of, roughly speaking, twenty percent, excluding the international volumes impacted by value-add tax.

16:00 Within the quarter, we saw a slow start in July. Clearly, as part of, let's say, going back slightly to more normal circumstances, people went on holiday, which has caused, let's say, the volume to drop in July, but was picking up later on in the quarter, particularly in August and September and continuing in the first weeks of October.

16:30 We are not insensitive to global supply chain, so we do see some impact on shortages of raw material. We also see that our clients are sometimes impacted by those, and that impacts the -- well, there are robustness if it talks about volume developments and volume expectations, which creates a bit more uncertainty about the volume growth.

Nevertheless, we stick to our assumed growth rate expectations of eleven percent to thirteen percent CAGR that is starting point on reported volumes twenty twenty. 17:16 After we've discussed the growth driver within the Parcels segment, I think it's good to spend a few words on the margin development.

We're looking at, let's say, three periods on this graph on slide thirteen. We've talked about on the margins pre-COVID around about seven percent.

From there on, we've launched very many initiatives that are improving the margins in our Parcels business. Think about the peak pricing, the pricing metrics on the back of volume and size of parcels.

At the same time, we're creating operational efficiencies by trying to get to a more equal flow within the days of the week. All of those contribute to improving margins.

18:06 Above and beyond that, lockdown led to even more equal flow and more efficiency in our network that brought margin towards the eleven percent mark, of which, we've said that it's not feasible to assume that those margins will continue. And then within twenty twenty one, you see a decline in margins, particularly in the third quarter, which is driven by a step-up in costs for the fourth quarter, and obviously, the addition of the new facilities that will allow us to accommodate the growth of our partners and clients in the important fourth quarter.

18:46 Towards the end of the year and also from thereon onwards, we still believe we'll end up with a margin around about the nine percent mark that we discussed before, which is somewhere in between the seven percent and eleven percent of pre-COVID and partial lockdown. 19:10 Then we move towards the Mail segment, solid performance at Mail.

Improvement in the underlying substitution rate. If we talk about the normalized EBIT, normalized EBIT is up eight million euro.

There is, let's say, fourteen million euro improvement on COVID, six million euro down on other business elements, of which five million euro is driven by the value-added tax regulation. Revenue is down, and that is driven by twenty nine million euro.

Other revenue, mainly explained by the sale of Cendris, around fourteen million euro and less export cross-border mail as well. 19:57 If we talk about the EBIT decline and other costs, it was mainly explained by the integration cost for Sandd and additional payments to people, both in the third quarter of twenty twenty and an improvement driven by cost savings and efficiency improvements in the preparation processes and route optimization.

20:17 Stamp prices are unchanged in twenty twenty two. That was no surprise to us, our projections for twenty twenty two did not include any stamp price increase.

At the same time, we'll continue with moderate price policy for our business mail also in twenty twenty two. The reason why there is no price increase in twenty twenty two is the way the regulation works is based on costs, and then based on twenty twenty and twenty twenty one, twenty twenty actuals, twenty twenty one forecast on volume developments.

And there, clearly, in twenty twenty, we've been benefiting from additional non-recurring COVID volume. That basically is a different trend.

21:12 The system works well if, let's say, we continue down the road of year-over-year, quarter-over-quarter volume decline, but clearly incidental volumes impacted the system. And that's why we're positive about the change in the draft postal regulation that accounts for this change, which will allow us to continue with our pricing strategy from twenty twenty three onwards also on stamp prices.

21:42 If we then go to the Mail in the Netherlands, normalized EBIT bridge on slide fifteen. We see the four million euro compared with the twelve million euro in this year.

No volume effect, a positive price mix effect of four million euro, even bigger positive price impact, partially offset by less favorable mix, five million euro increase in organic costs. 22:12 Volume dependent costs, four million euro down.

It's also partly mix driven as a consequence of the cross-border mail developments and a other cost development, which is sixteen million euro positive, driven by lower Sandd integration costs. Last year, we made additional payments to our staff of five million euro, and at the same time, cost saving step-up and some positive incidentals in the third quarter of twenty twenty one.

Other result, three million euro down, which is explained by the lower result of international mail of four million euro. 22:55 Then moving on to cash flow, positive cash flow development, five million euro free cash flow in the quarter last year, ten million euro in this year.

What we clearly have stated is a step-up in CapEx, which you can also see from seventeen million euro investments towards forty one million euro. And that includes, obviously, capacity-related investments as well as acceleration of digitalization, a more positive working capital development based on strict working capital management and some phasing effects.

23:34 All in all, a strong cash flow performance. That, together with the profit leads to a strong financial position with an adjusted net debt at two hundred and sixty six million euro, a total comprehensive income of twenty six million euro in the third quarter, and a total normalized comprehensive income of twenty seven million euro, resulting in a year-to-date normalized comprehensive income of one hundred and ninety six million euro and that is, as you know, the basis for our dividend policy.

24:12 Then let's move towards our full year outlook and guidance. The outlook is confirmed.

And if we look at the different components, on normalized EBIT, we do expect a two eighty million euro to three ten million euro result, which includes thirty million euro to thirty five million euro costs for Digital Next and an increase in non-cash pension expenses. No changes there.

24:39 Free cash flow, two fifty million euro to two eighty million euro, which includes the cash out on Digital Next. And if you talk about the CapExe, we've assumed one sixty million euro.

That now has been slightly adjusted downward to one fifty million euro to one sixty million euro, also slightly depending on how supply chains work. It is basically also a function of can we get the assets in time delivered to us.

An example is roll cages that, for instance, are still in Chinese harbors waiting to be shipped to the Netherlands. So that could be a slight phasing element there.

No change in delta pension expenses and normalized comprehensive income also unchanged at two fifty million euro to two eighty million euro and developing in line with normalized EBIT. 25:40 Then let's look at the phasing over the quarters on slide twenty.

There, clearly, you see the comparison, in fourth quarter twenty twenty, we have an extraordinary large impact driven by non-recurring COVID, which was in that quarter, roughly speaking, forty six million euro, twenty six million euro, of which at Parcels and twenty million euro at Mail. We've got three working days less than in twenty twenty.

Obviously, still an acceleration of Digital Next and some additional costs for start-up of new facilities that is already in Q3 and obviously will continue into fourth quarter. Higher pension costs and additional cost inflation in comparison to last year.

But as said, also an expected step-up in volumes from Q3 to Q4 on the back of, let's say, the expectations of both our clients and ourselves. 26:44 Still a bit of uncertainty around the impact of the value-added tax changes as to the level of the growth.

And obviously, we need to monitor closely whether or not COVID-nineteen has implications on the last quarter as well. The outlook for the free cash flow of two fifty million euro to two eighty million euro, taking into account tax effects, change in trade-offs, CapEx leases and acceleration of CapEx in relation to digitalization.

27:20 That is basically the key takeouts for the fourth quarter. Then we move to the last slide.

We are very positive about the transformation. We're looking at a strong business that is positioned well for further growth to be the leading logistics and postal service provider into and from the Benelux.

We're building on a solid performance year-to-date twenty twenty one. We're anticipating a very busy peak season.

We're seeing continuing positive trends in e-commerce growth, and we're accelerating our digital transformation to strengthen our competitive position. 28:03 We're progressing well towards achieving our ambitious environmental targets.

We're not unsensible, un -- let's say, unsensitive for, let's say, global supply chain implications that could have an impact on value-added tax regulation and overall global market developments, and at the same time, we are confident to be able to confirm our outlook on normalized EBIT and on cash flow as well. 28:34 And that concludes the presentation on Q3 at least for now before we move over to -- through Jochem to Q&A.

28:47 Thank you, Pim. Operator, can you open the floor for questions, please?

29:13 Yes. Good morning, First of all, on your outlook, do you still anticipate positive non-recurring COVID impact for Q4?

That's a bit unclear to me. And what could be the driver behind these effects, possible effects?

And then secondly, on the Parcels business, of course, quite a bit of upward cost pressure on labor, fuel. Do you see room to pass these on via price increase and what if the price increases for cost inflation are we talking about?

Thank you.

29:47 First question, we, at the moment do not assume any non-recurring COVID impact anymore in the fourth quarter. So if we talk about the roughly seventy four million euro non-recurring COVID, that is also what we expect full year.

30:06 On the second point, yes, on some of the elements, there is cost pressure and through our regular ways that is used to -- for indexation of our pricing points in the customer contracts that we have. That's not to say that we will always -- we'll be able to pass on one hundred percent of those cost increases directly, but over time, certainly, there is ways to, let's say, index -- use indexation in our commercial prices as well.

30:43 At the same time, on some of these cost drivers, we've secured our position before. So on energy, for instance, we've hedged that risk for a longer period in time.

Yes, there is some upward pressure on fuel prices, but that is not that big and definitely not that big in our full year expectations.

31:06 And then could you roughly quantify what kind of price increases across the board are we talking about?

31:15 That's difficult to say. So there is normal indexation in our contractors based on -- quite often on EMEA indexation metrics and that follows the outcome of that index.

That is kind of regular indexation agreements with our customers, and still, obviously, when contracts are, let's say, ended, there are renegotiation of terms. And as we've said before, that is a moment in time where we can adjust prices and all in all, individual price points are still moving up.

31:53 So if I talked about, let's say, the margin development of Parcels on the specific slide that we've included for that purpose in this deck, I said that we do expect a margin of Parcels at round about the nine percent mark of the segment, which is also what we've assumed to continue and it's also in line with what we said when we talked in August.

32:20 Okay. That's helpful.

Thank you very much.

32:31 Thank you. Good morning, everybody.

I've got three questions please. First of all, you highlighted the Parcel's volumes growth of nineteen percent versus 3Q twenty nineteen.

I think your largest competitor in the Netherlands recently called out seventy eight percent growth over the same period. What was driving that big difference in volume momentum?

Is it due to the launch of Amazon in March twenty twenty? Or were you impacted by capacity constraints?

And now with the small parcel sorting center open, do you expect to regain some of that share? 33:06 Second question is around the Parcel volume growth outlook for the fourth quarter.

I think some of your customers have talked about product shortages due to the global supply chain disruptions. As a result, volumes could be down in the fourth quarter.

What is your expectation in terms of volume growth? And will you still see also that impact from the higher VAT impacting volume?

33:29 And then a final question on the Mail side. You highlighted labor negotiations have started.

To what extent will you be able to mitigate potential significant step-up in wage inflation in light of relatively more limited stamp price headroom? Thank you very much.

33:49 The parcel volume growth in comparison to DHL, I think a few ways to explain it. As we did present our Capital Markets Day in twenty nineteen, with the -- of course, the increases in costs, which -- or the increases in tariffs, which we announced at that moment in time, we did see an effect from that which we expected, and that effect was a small shift in market share between us and our competitors.

That's also what we presented first quarter twenty twenty. As of that moment in time, we don't see shifts in market share between us and the others.

And of course, when you have small volumes, growth percentages are different when you compare it to ours. But as said, big difference was because of the Capital Markets Day and [indiscernible] result of that, which we already discussed in the first quarter of twenty twenty one.

34:51 Okay. So basically shares have been more stable.

34:56 Sorry. Sorry, David.

34:59 So I understand you indicated that recently, the market shares have been more stable. So that shift mainly took place during the second half of twenty nineteen and the first quarter of twenty twenty?

35:09 Yes. Correct.

35:14 Yes. On the second question, the pace of growth in the fourth quarter potentially impacted by product shortages.

Well, if we talk about, let's say, growth, let's say, not corrected for non-recurring COVID in twenty twenty, we do not expect growth, we more or less expect the same volume than last year, including COVID. If you then take out the fourth quarter, non-recurring COVID element, you're looking at a growth base that is small, I would say, roughly speaking, fifteen percent to seventeen percent within the fourth quarter.

35:59 And well, the way we look at it is, let's say, there is -- there are a few customers, and there's also a few product categories that are impacted by potentially raw material shortages that is predominantly so in the electronics branch. And that was included obviously on the numbers I just talked about and our growth expectations are based on, let's say, our broad customer base and the conversations that we've had.

36:34 What we do feel is that, our clients are slightly more cautious or uncertain on the level of volume development and that somehow obviously plays into our own expectations as well. Within those growth rates, it's a few percentage points decline of cross-border driven by value-added tax that we've taken into account.

37:03 So that's in the flat volume assumption for Q4?

37:09 Uncorrected -- uncorrected, I would say, flat in comparison to last year.

37:15 Yeah. Understood.

Very clear. Thank you.

37:16 When it comes to Mail, of course, CLA negotiations just started. So let's not give away too much about the mandate we've given our team.

Of course, we -- when we look into the market, when we look into price -- sorry, tariff increases or increases in CLAs, we do see the differences in the Netherlands. So it's not everywhere the same, to be honest.

There could be a potential step-up, as you do know, in our strategic plans and therefore also in our forecast, we do take into account step-ups in cost -- because of inflation or CLA negotiations like we did this time. So for now, I would say when it comes to our cost savings, when it comes to a normal CLA negotiation, which we expect, it is doable for the year twenty twenty two, but as said, let's not walk too much ahead of the negotiations at this moment in time.

38:17 Maybe can I ask a quick follow-up on the pricing side? What type of pricing headroom do you have on the mail -- on the business mail side?

38:27 On the business mail side, it's not regulated. So it's not a case of having headroom.

That means that we expect normal tariff increases on our business side. And as said by Pim, as of the year twenty twenty three, we expect modest increases on stamps again.

38:50 And what is the normal rate for business mail?

38:55 What we did see in the last few years was well above inflation. Looking into the enormous high inflation we currently have, I would say, more or less on inflation.

39:07 All right. Thank you very much.

39:19 Thank you for taking y questions. First, I would like to come back on the guidance, Pim, that you gave on the nine percent margin for Parcels going forward.

That's a bit underlying the guidance towards twenty twenty four, but I thought there was also some additional uplift in the margin coming from the digital investments and the extra -- we get new depots, small parcel exports, et cetera, et cetera. So just in your eleven percent to thirteen percent volume growth, and the fact that you have some digital investments that at some point should yield a return, half of which would come back into a bit, I would expect then also the margin to see some progression.

Can you explain a bit the path towards twenty twenty four? Thank you.

40:08 Yes. Clear question, Marc.

What I intended to explain first and foremost was the development from Q3 towards the end of the year. And indeed, it's around nine percent.

And over time, when the digital initiatives kick in, and certainly, they won't contribute a lot in twenty twenty two and twenty twenty three as we talked about before, because they mature towards second part of twenty twenty three and twenty twenty four. Over time, you should expect a little bit of uplift of the margin.

So that's unchanged in comparison to what we discussed in August.

40:54 Okay. Okay.

That's clear. And then maybe on Q4, you had a guidance for the Parcels for the second half of ninety million euro to one ten million euro EBIT.

That means that you need at least, say, sixty -- one hundred and sixty million euro in Q4. Last year, you had seventy five million euro.

You tend to have, say, flat parcels volumes at best, but you will have still the impact from VAT in the cross-border. You will probably have the eight million euro that you called digital and IT that will continue.

Basically, that means that it will be quite a struggle that you need to have some extra EBIT somewhere else to make that number. Or am I missing something here?

41:50 I could not -- from the starting point, reconciliation of your number, but the element that I at least have not heard, which could be missing is the other cost development in the bridge, which was quite high in this quarter, is not at the level that you should expect in the fourth quarter. That will not be more than half of that number.

42:13 Okay. Yes, that was one, in the EBIT I was referring to and the other one was the VAT impact.

42:19 Yes. So if you look at the average, that's roughly speaking, eight million euro to nine million euro.

Normally of a cost development, there is a step-up in the third quarter driven by the key elements that I've explained, so a step-up in facilities and rebalancing the network and it will not be that big, will be half of that in the fourth quarter.

42:43 Okay. Okay.

That is clear. And then maybe on the impact from the VAT, the three million euro, you lose twenty five million euro of revenues and it has an impact of say, three million euro on your EBIT.

That seems quite a high margin for that business. I thought that the margin on that business was lower.

Is it something that will be lower going forward because now you maybe have planned for more, so there was a bit more extra cost in the system? Or how should I look at it?

43:19 Here there is a couple of components and revenue is revenue, but it doesn't relate to the volume definition always. And indeed, the cross-border mail business is relatively high margin.

So if we talk about the value-added tax impact of eight million euro, it's partially Mail, and that's high-margin business and partially within the Parcel segment. And within the Parcel segment, it's the Spring Asia trade lane, which is also above average in margin profile and the implications at international parcels of -- parcels of bigger sizes that go into the parcel network that kind of contribute towards kind of the average margin of the parcel segment.

So you should not, let's say, apply the kind of Spring margin on the overall revenue implication because it has big components in international mail and international parcels as well.

44:27 Okay. I was referring more to the parcel impact of EUR3 million euro and then related to the revenues that you showed on the parcel sheet.

But okay, I'll --

44:36 Yes. But that's a combination of Spring revenue and Parcels revenue and the Spring revenue is from the trade lane Asia to Europe, which is on margin profile, the most attractive trade lane.

And international parcels basically is with the same margin profile as domestic parcels, roughly speaking.

45:00 Okay. Okay.

And then a final one on the mail volumes, I'm a bit confused because I see that you have plus 1.6 percent growth in the quarter volumes. And you say July was a weak month.

So I'm assuming that it was a negative, but if I then reconcile --

45:19 [Multiple Speakers] volume share, Marc. Mail volume...

45:23 This is Parcels. You started your question on Mail, but maybe the numbers are right, you want to talk Parcels.

45:32 No, I want to talk Parcels. I was not talking about Mail.

It's about parcel volume, on the plus one point six. And then July started out weak, so there was probably a negative number.

But if I correctly remember, in Q2, I recall that also Q3 started off quite strong and that the volume was still healthy. And then we were still looking to the eleven percent to thirteen percent and then plus one point six comes out and I'm a bit wondering how can there be such a big deviation.

Is it that you simply don't see the volumes quickly enough to have a good possibility on those volumes? Or -- and then with [indiscernible], how then we should reach zero or flat revenues for Q4.

Is that indication better than what you had at Q2? That puzzles me a bit.

46:20 On Q3, let's say, on -- let's say, the one point six, that is the volume not corrected for non-recurring COVID, to be clear. I'd say if we look at -- well, in any event with or without correction, July was really slow and then a step up towards the normal kind of, roughly speaking, eight percent growth in August and September and continuing into the first weeks of October.

So if, let's say, corrected for non-recurring COVID, the growth is six percent. Then you know that July was actually very far off the mark from the average of the quarter.

And we believe that's driven by people really moving into -- the biggest part of the country was on holiday already in July. People coming out of the COVID era and going out much more, taking holidays much more, that did have an impact on volume clearly.

47:30 And what we did say when we presented Q2, Marc, is that when we look into July, we did not see much deviation from what we expected, but what we also did say is we do not know how that will translate to the rest of the quarter because it's always difficult to give an indication on only the month of July. And what we did not know by that time is if VAT would continue to be low, like it did in period eight and nine or not.

48:04 So there was reason for us saying that by that -- by the moment we talked to each other beginning of August, we did say it's too early to give a view on Q3 with only the month of July behind us because of the fact that we do know that summer periods, together with the uncertainty around VAT, didn't give us enough clarity to give clear guidance at that moment in time. What we are happy with, of course, and that's what Pim just said, is that, volumes came up to the normal levels in August, September, and we also see them developing beginning of October.

48:45 Yes. [indiscernible] that Pim was referring to, that's not an adjusted -- is it an actual number or is it a COVID adjusted number?

48:52 That's an adjusted number.

48:55 Okay. Clear.

Thank you. Those were my questions.

Thank you so much.

49:00 Thanks, Marc.

49:10 Yes. Good morning.

So just wanted to follow up and then -- on October volumes. So those have continued in that eight percent to nine percent range, or are they better than that rate?

So just following up on that previous question. And then secondly on slide eleven, so the sixteen million euro increase in parcel costs in 3Q, can you help me think about which of these you would consider one-time and which will continue into 4Q?

So how should we be thinking about costs in the fourth quarter? 49:46 And then you also mentioned that costs were impacted by the indexation of delivery partners during the third quarter.

Can you talk a little bit about that and how we should think about that going forward? Thank you.

50:25 If we talk about, let's say, the slide eleven bridge on other costs, there is a minus sixteen percent -- sixteen million euro and let's say, that's also what I've tried to explain in one of the questions of David is that sixteen million euro -- or Marc, is let's say, you should expect, roughly speaking, half of that in the Q4 bridge. That's not to say that those costs are incidental because, let's say, the network has expanded with the small parcel sorting center and has expanded with the Westzaan facility.

But clearly, let's say, those locations will become more efficient as more volume gets put through the network. So you should expect positive volume and volume dependent.

The balance of those two will be positive in the fourth quarter and a slightly less negative other costs development, basically expected to be, roughly speaking, half of the minus sixteen million euro.

51:41 51:41 And then your third question on cost impact by indexation for our delivery partners. That mainly had to do with an increase in the CLA of BGV, which is the CLA followed by our delivery partners.

So it's normal CLA indexation, which took place over there, but that CLA has a different rhythm than the negotiations on our own CLA.

52:12 Thank you. Just a follow up on that.

Is that CLA -- what's the time frame for that? And how much was the –

52:21 Yes, I don't know by heart. So we'll look into it and we'll send you an email.

52:26 Great. Thank you.

52:37 Good morning, Herna and Pim. I've got a couple of questions left.

First of all, in the [Technical Difficulty] landscape, do you see any differences there? You said -- Herna, you said earlier on, you don't see continued dual shipping.

And I can imagine with all the spikes in volumes we have, it's very -- as a center of e-commerce you are glad that your stuff is being delivered. So there's no stimulus to change to another supplier.

Do you expect any changes now that growth is obviously returning to a more normalized level? 53:18 Second question is also related to competition.

I was reading the Transport Online, an interview with the sector institute for the transport and logistics industry. They noticed that in August, there were ten thousand four hundred vacancies for shelters and fifteen thousand three hundred vacancies for people in the logistics sector.

53:46 Now you're using a lot of subcos and you were referring to the BGV increases and that sort of things. But I guess for these kinds of shortages, what is the risk of competitors paying us simply to lock in the capacity on the last mile?

Do you see any evidence of that? And could that be an additional driver for costs?

54:12 And then my last question, Pim, to you. In the half year numbers presentation, you said you expected underlying growth in Parcels of around twenty percent to twenty three percent.

If I understand your [Technical Difficulty] to deviate or was it [Technical Difficulty] is it fair to assume a growth rate -- underlying growth rate of thirteen percent, fourteen percent for the full year on the back of the zero growth you expect on a like-for-like base on a reported basis?

54:51 Okay. Thanks, Henk.

First, on your competitive landscape, what I did indeed answer is that as of Q2 twenty twenty, we did not see a shift in market share between us and competitors. I think important to that is, of course, the capacity we have and the capacity we will have during Black Friday, Cyber Monday, Santa Claus and Christmas.

Also important and that remains to be important going forward is to remain to be different, to remain to have a competitive advantage above our competitors. That's partly in quality.

That is partly in our app. That is partly in services we deliver to customers.

55:38 And you have to keep developing those. Therefore, I think that underpins the importance of our Digital Next strategy as well because, of course, competition is speeding up and so we are speeding up as well.

So we do not see at this moment in time that the growth we see currently is a stimulus to change. That's not the case, but as said, remaining to keep our competitive advantage is crucial.

56:09 Yes, I did read the same article in Transport Online on all the vacancies. And I was happy by that time and still am that we -- when it comes to truck drivers, we changed our approach already two years ago to hire more and more truck drivers ourselves.

That means that at this moment in time, more than fifty percent of truck drivers is employed by PostNL. That helps us, of course, in general, but also during peak season.

56:38 And secondly, what we did do, and that's what you heard, Pim, telling about Q3 is that, we already started to ramp up our capacity end of Q2 and then especially in Q3, which gave us the possibility to offer the extra capacity we need to not offer it only for a few weeks, but for a relatively long time. That makes us confident that we do have enough capacity, capacity in the sense of volume, but also capacity in the sense of transport, and of course, delivery.

57:16 Then back to our deliverers, I think the fact that we have deliverers who are employed by PostNL and deliverers who are employed by our delivery partners makes us flexible, flexible in the sense that we are able to ramp up not only in capacity, but also in the amount of people, the amount of vans, et cetera, et cetera. So yes, labor market is tightening, but the fact that we have a combination of own hiring and hiring via our delivery partners makes that we have lots of pools in labor market where we can pull people from and that helps us enormously in making sure that we have enough people.

58:03 So I do recognize, of course, the trends on shortage and tightening of the market, but I don't see it as an issue for our organization at this moment in time in Parcels and also not for the ramp-up we need in the direction of our Q4 peak.

58:25 Your third question was about growth rate, and just to make sure that we're answering the same question, you are saying, is it fair to assume a thirteen percent to fourteen percent full year growth, right? So it's not about the fourth quarter, but the full year?

58:43 Yes.

58:43 Then I would say you're a bit too low with that. Our estimation is slightly higher, I would say, roughly speaking, at least two hundred basis points higher than your estimation.

58:58 Okay. No, that's a clear answer.

Thank you.

59:12 Good morning. I've got two questions on the Mail division.

So the first one is on your underlying mail volume decline. You clearly -- last time, you reduced your [Technical Difficulty] long-term volume decline from 8 percent to ten percent to eight percent, now it's five percent.

So just curious on your latest thinking on that. 59:33 And second, if you could please clarify what's the formula for price we take into consideration?

And what I'm thinking about is more what sort of price increase we should expect in twenty twenty three and twenty twenty four. Are the one-off volumes that we have seen in twenty twenty one going to have an impact on twenty twenty three and twenty twenty four pricing as well?

Thank you.

60:02 Okay. Yes, let's say, halfway through the year, let's say, our, let's say, previous assumption on substitution volume decline in the Mail business was eight percent to ten percent.

Halfway in the year, we said, well, that is -- the way we look at it, around eight percent. And then within the quarter, you are right, it's around five percent.

And what we say is that we see a slight improvement in the underlying substitution rate, even on the -- let's say, an improvement towards the around eight from the -- let's put it differently. Compared to the around eight, we see a slight improvement, but obviously, we need to see how it plays out in the fourth quarter.

We did not give a specific and clear answer on our -- on a number for twenty twenty two, and we'll refrain from doing that until we've seen the fourth quarter, but underlying it is a slight improvement of the substitution rate, which is positive for the Mail business.

61:11 61:11 And when it comes to your second question, which is the formula for price increases, it's important to make a distinction between an increase in universal service obligation and an increase in our business mail. As already said, when it comes to business mail, it's non-regulated and we follow our pricing strategy over there, which we have followed for the last, I think, seven to eight years.

61:34 When it comes to universal service obligation, we have a maximum return on sales of nine percent. That's one.

And secondly, the increase cannot be higher than half of the decline of the year before plus inflation. That's the formula we have.

And then, of course, it depends a little bit on where are we in the direction of the nine percent together with the formula, as just said. 62:03 When you think about twenty twenty, then of course, we had a good year for the Mail division and that is shown in the fact that there is no price increase for the year twenty twenty two.

With the decline, as just explained by Pim and also the underlying decline, we expect that there will be an opportunity for price increases in twenty twenty three and twenty twenty four for universal service obligation mail, but too early to exactly give you a clear point where -- what the increase will be, but as said, it will be a modest increase expected, moderate pricing increase as expected from twenty twenty three going forward

62:52 Thank you.

63:22 Andre, are you by any chance on mute?

63:30 Probably yes. But –

63:33 Okay, operator. I think we will contact Andre afterwards to see what his question was, and I think we're going to conclude the call.

I would like to thank you all for participating today. Looking forward, we have a plan to have a deep dive as we have organized in twenty twenty one.

We hope to be able to invite you and welcome you to the brand-new small parcel sorting center in Nieuwegein early next year. I have to add to that that the corona numbers at this moment give a reason to pause with making the plans for that.

So stay tuned for that. And of course, we will present our fourth quarter, full year results at the end of February next year.

I'm sure we'll be in touch beforehand. If you have any further questions, you know where to find us.

Thanks again and see you next time. Thank you.

Bye-bye.