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DFDS AS
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Welcome all to the DFDS Quarter 1 Conference Call. [Operator Instructions] Today, I am pleased to present Torben Carlsen, CEO. Please begin your meeting.
Thank you. Good morning, and welcome to DFDS' Q1 2022 Conference Call. I am, as usual, joined by Karina Deacon, our CFO; and Søren Brøndholt, our Head of Investor Relations. The war in Ukraine is impacting us all mentally and DFDS' business is also impacted. We are united in hoping for soon ending to the horrors. Despite this situation, DFDS is off to a good start to 2022. Volumes remain firm throughout our network. Our hard work during the latter part of 2021 to improve our cost coverage measures are serving us well in an environment of energy costs and general inflation. And further to this, our integration of HSF is going well.
But let's take a closer look at the quarter. If you turn to Page 3 in the presentation. As we say, we are well underway to raise our earnings by more than 20% in 2022. Our Q1 results are in line with expectations. Logistics EBITDA was stopped, partly by the addition of HSF Logistics group also higher margins and volumes in our existing business. Ferry's underlying EBITDA growth is positive when we adjust for a DKK 80 million income in Q1 '21 for Brexit standby agreements. Our passenger recovery is ahead of expectations. You can see at the graph that the passenger numbers, of course, are increasing by more than 1,000% from a very low starting point. The war in Ukraine has a direct impact on our Baltic activities and there's an indirect impact on energy pricing and supply chain shortages that is impacting our customers throughout the system.
Turning to Page 4. Headline earnings held back by the '21 Brexit standby income that I mentioned before. But group revenue up more than 50%, EBITDA up 9% to a result of DKK 822 million. Why is the conversion relatively poor with 50% revenue growth and only 9% EBITDA growth. The start-up reopening of our Oslo-Frederikshavn-Copenhagen route is doing better than expected, but it means we now have significant overhead cost that is impacting results. So a negative earning and strong top line impact. On that account, we have rising oil surcharges that are passed through to our customers. So again, a heavy rise in revenue with no margin. And then we have the Brexit standby income, the DKK 80 million that we have lost since last year and, of course, also impacting the margin conversion.
Ferry freight EBITDA is thus down 4%, primarily from the standby income, and then also a negative impact from the war in Ukraine and its impact on our Baltic network. Passenger EBITDA is down 12%, again, as mentioned, due to the cost implication of reopening or Oslo-Copenhagen route. And Logistics on track with the doubling of EBITDA from the HSF integration and margins.
With that, I will turn over to Karina.
Thank you. Let's have a look on Slide 5 to see how the revenue growth of 52% was made up of. We did see a recovery of the passenger volumes, especially due to the Oslo route, where, as you might recall, in the first half of '21 had both ferries laid up. So on those, if we look across the passenger routes, we're about 83,000 passengers last year to now more than almost 300,000 passengers.
In the ferry freight business, we had a 4% volume uplift and also an increase in our prices, which led to higher revenue, but the most significant impact in the growth came from the oil charges as the MTO price was up more than double since the first quarter of '21. In Logistics, we saw the organic growth, which we have split out here in the graph as a reflection of the price increases that we have worked hard to obtain, and that also includes surcharges for fuel and also compensation for the mobility package.
If we turn to Slide 6, just a few words on the P&L. Torben has already touched upon the conversion of revenue to the 9% growth in EBITDA. There is, of course, also the mathematical impact, which we will see going forward as Logistics become a bigger part of our business that we do see a lower margin percentage. Like we saw in Q4, we increased in depreciation, DKK 608 million here in the first quarter of '22. It is around the same level as in Q4, and it's an impact derived from the new charters of -- new routes as well as the impact from HSF. Finance cost down, but underlying interest was on level [indiscernible] just a very small scale. Our special items of an income of DKK 2 million includes a write-down of our activities in Russia. It is a single-digit number. So it's not something that impacts us a lot in terms of asset write-downs.
Turning to Slide 7. A little bit on the capital side. We have a significant increase in assets due to the acquisition of HSF as well as the inclusion of the new builds. As you know, we have now received both of the ro-pax' in the Baltcis. Operating cash flow improved 59% to DKK 850 million, impacted by a positive development in earnings but also a positive development in working capital. With the payment for the last ro-pax for the Baltics, we have adjusted free cash flow of minus DKK 500 million. That impacted, of course, also our net interest-bearing debt, which went up to DKK 14.6 billion from DKK 11.5 billion in the Q1 '21, but also an increase compared to year-end.
Looking at leverage on an LTM basis, we saw an increase after Q1 to 4.0. It reflects the normal seasonality of our business, and there's no change in our expectations for the full year leverage. So we expect to decrease towards our target range of 2% to 3%. Looking at ROIC, an increase to 4.5% from the 4.2% at the end of the quarter last year. And of course, it remains subdued by the loss of passenger business. So as it returns during the year, we also expect to see an improvement in the ROIC figures.
Looking at Ferry. The Ferry Division decreased EBITDA by 7% to just around DKK 600 million, despite the overall volume by 4%, very much impacted by the standby agreement from last year. Looking at North Sea, they did also benefit from the standby agreement, but they still reported an increase in EBITDA due to 5% higher volumes and an increase in the RPM. Mediterranean continued to show good results. Now for the quarter, 12% volume growth and results went up by DKK 45 million. We have increased the capacity with 3 ferries compared to Q1 '21. So the EBIT was on level with last year. So obviously, now we need to work on increasing the utilization of these new ferries.
Channel, a mixed bag, but overall down of DKK 5 million. If we adjust for the Brexit, there was an underlying improvement. On the freight side, we were impacted by the overcapacity on the Dover routes. But overall, we saw a volume increase over Q1 '21 after the temporary suspension of from 17th of March. Also impacting the channel positively was that we benefited from the return of the passengers and also a slight impact from the duty-free sales, which obviously goes up when we get the passengers back.
Slide 9. The Baltics, that was, as Torben mentioned, the impact where we see the Ukrainian war, the most Q1 was down in volumes by 10%. And as we have talked about before, it's mainly the route that is impacted in terms of less volumes. That has, of course, a direct impact on the EBITDA, but we also had higher ferry running costs in the quarter, following a number of dockings and the deployment of the new ferries.
Finally, on this slide, our BU passenger, down DKK 47 million. We did, of course, have a positive impact from the increase in passengers, but it was outweighed by the reopening of the Oslo route, which came in a low season market, where volumes are still recovering from COVID-19. So obviously, with the full effect of the cost and in a low season quarter, we were not able to improve earnings, but we definitely expect that as we move into the following quarters. We also saw a negative impact of the bunker cost increase on the passenger side, where, as you know, there is no compensation in the same way as we have on the freight business.
Slide 10, a few words on the logistics. EBITDA more than doubled, of course, heavily impacted by HSF but also due to better margins in this old DFDS as part of logistics. That's seen in the Dry Goods area where we were up DKK 39 million improved -- or driven by the improved cost coverage from increased prices and also the surcharges that we have imposed. The good news was that the improvement was seen in all 3 geographic areas. And we also saw a good development in our new ventures, the warehouse in Sweden and also the start of what we call the DFDS professional, which is the staff agency in Sweden aiming to service both internal and external customers.
Cold Chain, which is the majority of HSF. It was driven by inclusion of that. Overall, the integration of HSF is going well, and we continue to see the commercial and operational synergies that we were hunting from the beginning. If we look at the results for Q1, they were impacted by lower volumes in the Netherlands, we did see less pulp from Denmark going down south, and we also are indirectly there impacted by the war due to less chicken export from Ukraine. The final thing to mention on the HSF side was that we did see an initial negative impacts from top drive shortage in Denmark as well as a negative impact initially from the mobility package in some geographies. Last thing I want to mention is the existing or the old DFDS business in the U.K. in Cold Chain, where we were impacted by seafood harvesting is used in Scotland relating to salmon, but we are hopeful that, that will improve as we go into the Q2.
That ends the review of the numbers and back to you, Torben, for the outlook.
Thank you very much. On Page 12, we maintained the outlook except for revenue growth that we raised to around 30% rather than 23% to 27% before. The increase is driven by the higher fuel costs, which shows up with us as extra revenue for oil surcharges, but of course, also similar extra cost. On the passenger side, we were too conservative at the beginning of the year in terms of the recovery, and we now see at least a 60% recovery compared to pre-COVID-19 earnings, where we previously expected 50%.
Baltic activities, as we previously said, are negatively impacted by war in Ukraine. We have previously mentioned around DKK 150 million to DKK 200 million, and that remains our estimate. The channel, we have positive impact from the suspension by a competitor of savings since March '17 and now slowly coming back. But all in all, our range of 3.9% to 4.4% remains and despite the negative impact on the Baltic, which is at least compensated by the stronger passenger and channel performance.
On Page 13, our key ESG focus areas in '21 are more or less unchanged. We will, during this year, announce how we intend to get a Green Ferry on the water by 2025. A number of issues need to be analyzed and concluded on, but the work is progressing well. We are looking into where to deploy the 125 electric trucks that we have ordered, where some of them will be delivered after summer this year or the first will be delivered after summer this year. We continue to look at diversity, not least gender diversity, and we can see good traction in many areas. But we, on the leadership level, especially need more results. Health and safety organization has been significantly strengthened, and we already now have better reporting to enabling us to reduce any safety incidents going forward.
Turning to Page 14. Overall, priorities, of course, to continue to have sufficient cost coverage with the inflation rising and the volatility in demand and supply of trucks, drivers, et cetera. And this includes an adaptation to the EU mobility package, also in terms of adjustment to our operation to optimize. We are continuously monitoring that we have in our forest to make sure that we can continue operations. The passenger recovery is all about regaining the volumes seeing the benefits from duty-free sales as we expected and then optimize the new concepts that we have introduced, for example, in Oslo-Copenhagen following the COVID-19 situation.
Baltic sea, the deployment of the 2 new large areas is going well. And on ESG, I already talked about our main priorities.
So with that, please, over for any Q&A you may have.
[Operator Instructions] Your first question is from Ulrik Bak from SEB.
Firstly, a question on your guidance. It is still a fairly large range, considering that we are now in May, only 7 months left of the year. So what factors do you consider to have the largest variance, which could determine whether you arrived at the lower or upper end of the guidance range? That would be my first question.
We think it's a prudent range to have given the macro situation that is facing us. If we look at the situation right now, we could possibly have narrowed it, but it is too early to see if some of the inflationary pressures and supply chain disruptions could have an impact. But right now, we believe that we are comfortably placed in this range.
Okay. And you said you could possibly have narrowed it, so would that have been lifting the lower end or lowering the upper end?
I'm not sure you're expecting an answer to that question.
Okay. Sure. All right. Jumping to the next one. So you increased your assumption on your passengers' EBITDA from 50% to 60%. So how large impact do you have -- have you assumed from volumes versus earnings from duty free. And if also, if you can provide some color on the duty-free spending level per passenger?
I don't think we have not split it down in details the recovery. It's true, it comes from duty free, and we continue to see, although, of course, in relatively low numbers because they haven't returned in big numbers yet. But that -- the previous guidance around EUR 20 spend passenger is probably still valid. Then of course, the 60% recovery is also a net impact after the negative impact from the increase in oil prices, which, as Karina mentioned before, we cannot pass on for the pure passenger services. So the recovery is bigger, but held back a little bit by the fuel situation.
All right. And then in your report, you note that Easter passenger volumes were approaching pre-COVID levels. But still, when looking at the April volume, passenger volumes, there were still some 30% below April 2019. Can you please shed some light on this passenger recovery trend? And also, if you could talk about the forward bookings that you're seeing for this summer compared to the 2019 level?
We forward bookings where we have the most visibility is Amsterdam new parcel. And there, we see quite strong forward bookings for the summer period. As a consequence of COVID, passengers on the Oslo-Copenhagen have -- are booking much later than they used to do. So the visibility is relatively weak, but what we can see is that it looks promising. And then on the channel, the start was a little bit later in the lifting of restrictions. So we believe it will take a little bit longer to there. Plus we, of course, have an extra competitor on the channel, which means that all the passengers will not come back to us.
Okay. Then my last question about your assumptions related to this bunker spread between high and low sulfur on your guidance. Can you provide any insight into how large part or the delta in earnings compared to last year that you have assumed from this high bunker spread between the high and low sulfur?
Well, as you know from the outset with our margin, it should be even. And then, of course, as you mentioned, when the spread increases and there might be a benefit to us. But we are at such high levels also with the above charts to customers that in some cases, we cannot pass on 100%. That means that on a net-net basis, it's not a huge uplift due to the spread that we see. But that is one of the things that can also change our final results for the year depending on the move in the oil price and in the spread.
Okay. But assuming the spread is maintained at current levels for the rest of the year. Would it be a positive thing or a negative thing for your final earnings for this year?
At the moment, as you see it, it would be a positive thing, but not a huge amount.
Your next question is from Dan Togo from Carnegie.
Yes. Firstly, you lift the guidance in the passenger now in the 60% rather than the 50%. This wasn't exactly visible, you can see in the first quarter results as such. So what exactly is it that makes you certain or makes you comfortable enough to lift the guidance for passenger by approximately DKK 100 million so far. That's the first question.
Well, the first quarter is characterized by very low passenger volume in general. And of course, once we restart the business on Oslo-Copenhagen, that was suspended last year, it looks negative when you just look at the numbers. We can see with the bookings we've had, both on that route, very strong on Amsterdam, Newcastle and a promising situation in the channel, including the duty-free that we will have this recovery compared to our initial expectations. So we realize that Q1 is not the best quarter to see that from the outside, but that is what we are seeing also. Also...
So you have stronger bookings and you have reasons to be more positive on the tax-free part. Is that correctly understood?
It's also the underlying -- our Q1 is stronger than our own expectations.
Okay. And how scary will this -- sorry.
Because you concluded on our behalf that we were more positive on the tax resales or duty free. We are not more positive. We maintain the expectations for the average bin. And then, of course, when passengers higher, then we also expect nominal terms, but we're not changing our view.
Prices are very positive. People pay a little bit more for the tickets now than they did pre-COVID as well as spend more on board, the type of customers that have returned.
Okay. Good. Fair enough. Then how sticky will this be? I mean presumably -- I mean the case of you have lost this DKK 1 billion due to COVID in the passenger part. And now you expect to recover 60%, and then we then expect 40% next year? Or how should we look at it? Will the 60% turn to 50%, i.e., underlying a lift of how much you can recover? Or will this implicitly mean that you will recover less in '23, if you understand the meaning of this question.
We generally don't guide for the following year, but we would still see that if we can get DKK 1 billion back, then we are happy. So don't try to say that because we are faster now, you will get more overall. I don't think there's any -- we don't have visibility for that at this stage.
But I guess, I mean, the price lift that you speak about, Torben, is that must be sticky, I guess, into '23?
That we could hope for, but then we have not seen many returning to the same level. We know that we will use market share on the team. So I think it's assumption to assume that we can get the DKK 1 billion back.
Okay. Could you give us an update then on the channel, how things are looking now, P&O slowly coming back. But I guess with the product that is not really sufficient towards trade clients. So what is your share currently? And how should we look at it going into Q2?
We have a strong market share at the moment. The recovery of P&O has been much slower than we had anticipated. They are only -- last week, I think, ended with 2 vessels, and they're not in full operation. So we are still taking the biggest part of the passengers down there. And it will impact the Q2. It's too early for us to speculate on what does it then mean when they are back in 3 or maybe even 4 vessels. Will they regain their previous market position? Or will this have either on the passenger or the freight side that we cannot see yet or we don't have any insight too.
But I also understand that new regulation might be enforced creating, sort of, say, a level playing field. What is your take on that? And how fast can that be implemented?
Yesterday, when the government announced the priorities for the next year's legislation, this was one of the topics that was introduced that there will be minimum wage regulations for various hitting the U.K. So our expectations are that Irish ferries and P&O will be forced to increase their minimum ranges. The impact will be from that is too early to say until we see the exact legislation, but it is no doubt a good development for us and will help creating this level playing field that we have -- had asked for.
And have you any insight to when this could be implemented, how fast?
They had a working group now. I don't know if it's before summer, after summer, but for us, the important thing is that it is very high on their priority list when they introduced it in connection with the Queen's speech yesterday. And they sent out a press release to the Department of Transport stating that this was now going to happen. We expect since it's a conservative government that there will not be problems getting support from labor for such legislation.
Right. And then just to understand, so to say, the impact on guidance because all things equal, you should have kept the top end of the range by DKK 150 million to DKK 200 million. But then you have some relief from passenger that's around DKK 100 million. And then from the situation in the channel, providing the rest, but are there anything else impacting here either from a net or logistics that we should be aware of that you have mentioned or that impacts sort of say, how you view the rest of the year?
No. I think we are -- those are the main variances and then underlying things are looking good in the different areas, both in Logistics and...
And then just finally, maybe, you stick state to your expectation and we on average for the group will -- and question at least is 10% in '23. You are at half of that at the moment. Where do you see, so to say, the biggest impact in that quite big jump to '23 in the ROIC. What should we be looking for? What are the most important steps in reaching the 10%.
The recovery -- the full recovery of passengers will alone provide 2.5, 3 percentage points of the gap. And then it's all the other initiatives that we have discussed here that will provide the rest, hopefully.
Your next question is from Ruairi Cullinane from RBC.
A couple of follow-up questions on P&O. I was interested in roughly when you expect to assume that sort of P&O ferries will be operating with 3 ferries on the Dover-Calais route? And then that when could your sort of planned partnership agreement with P&O become fully operational? And then sorry, it sounds like you mentioned it previously in the call, but what roughly is the earnings contribution from P&O ferries disruption that we should expect in the second quarter or full year 2022?
We believe that P&O will be running with 3 vessels sometimes during May. We will resume the partnership once they have as a minimum 2 fully operational vessels so that it's a meaningful cooperation that gives the extra frequency that we look for with the partnership. So that's the situation on that front.
In terms of money, I don't think we, in another call, has guided on how much this is. And I'm not sure that we can do that at this stage, but it is, of course, helping us a little bit in March and a little bit more in Q2.
Okay. And perhaps one final question on the Baltic Sea. Can you just sort of recap the measures you've taken in response to and the reduced Russia-linked volumes and where we should see the outlook from here?
There are several things that impact. And now when you talk about the Baltics, let's address that first, we have indicated that we expect volumes between Germany and Lithuania to be down to the extent of like maybe 25%. And that seems to hold pretty much true at the moment, the volumes we see right now. And that is the effect of not taking Russian trailers and trucks on board at all. So that will be the impact. Then there's a smaller impact between Sweden and Lithuania as well. But that's about -- or maybe up to 10% on the volumes of that.
And then we have in the other parts of the business, obviously, the impact on -- from ICT, where we did acquire a company with significant activities in Russia and the countries around it. And obviously, that has stopped and we are exiting Russia.
In terms of the monetary impact of that, it, of course, lowers the expected DKK 20 million EBITDA. We thought we would obtain from the acquisition of ITT. But again, the numbers are relatively small. So if we can keep that at around 0 or something to the tune of that, that would be our expectations.
And then we have tried to increase our reach around the Baltic Sea to compensate for the loss of volumes and manufacturers different areas. And we can see that flows change a little bit following, of course, that Russia has been cut off and we are able to pick up some replacement cargo in the system, but we'll be wise on this when we are little or some months further ahead of time.
Okay. And my understanding is you've deployed a ferry away from the Baltics is that correct?
Sorry, I didn't hear that question, Ruairi.
Have you diverted any capacity away from the Baltic Sea?
We have -- well, we first diverted away. And then, of course, with the addition of Luna and Oral, we have more capacity than before because they are very large ships, but it's 2 instead of 3, so we have reduced costs and also on the German corridor reduced some capacity. So we are able to compensate to a certain extent for the reduced volumes.
Your next question is from Stefan Roehle from KFW IPEX Bank.
First of all, as a follow-up on P&O. I mean you said a lot of topics on this, perhaps some point to look at the new route. I wonder how important the Dover-Calais route will be also in the future with respect to the new unaccompanied service to [indiscernible]. So do we expect that while you need this important to Dover-Calais like in the past, it will contribute so much given that a lot of freight business now is while turning to this new route or how do you see it in future the importance of both services?
Well, to put it in perspective, I think that we have around 1.2 million trucks on our Calais and Dunkirk services. And we'll be happy if we could get 50,000 on the Calais [indiscernible] route. So it's more a complement than something that replaces the channel routes. The need for speed is what drives this Dover-Calais, Dover-Dunkirk routes, and that cannot -- those who need the speed cannot use the Calais [indiscernible] route. It's more a complement to the routes also from Holland to the U.K. and Belgium to U.K.
Okay. Understood. Understood. And well, another topic is on the Logistics side. I mean, you said you could not -- you were able to pass on bunker prices to our customers as well. So to what extent do you think it will be possible also in the future? I mean, the Logistics business is much more fragmented, much more competitive compared to your ferry business. So how easy will it be in the future to pass on higher bunker costs or other costs due to inflation to your customers? And how -- to what extent will it then impact your EBITDA in this business line?
I think we've demonstrated during the last couple of quarters that as long as it's transparent surcharges that the whole market is hit with like energy costs, fuel costs, driver shortages, mobility surcharges, then it's every logistics provider that passes this on to their customers. So we are confident that, that will continue in the past also to be possible.
Okay. And with respect, you said you had some logistics issues for some products at HSF. For instance, with elements, as you mentioned. So do you see any impact from the Ukraine-Russia war with respect to agriculture to, of course, then the production of meat and other products that in future could impact also your HSF Cold Chain business in 2022 and coming forward?
No. just to clarify, the aquaculture was our existing business, the Scottish salmon business that had some reduced volumes, nothing to do with HSF. To the contrary, we think that maybe some of packaging solutions that we have acquired with HSF could be introduced in the aircraft culture business in Scotland.
In terms of the implications for meat production and meat logistics from the Ukrainian war, we do not think that that's a significant impact. But some of the price variations we see in German, Danish meat prices could, of course, be derived from some of the unstability over there, but nothing permanent or worrying that we see at this point in time.
Your next question is from Lars Heindorff from Nordea.
Regarding the Logistics division, 30% organic growth, I think you're reporting, I assume that's on the back of what you've been stating here on the call that predominantly that is done by price increases. But could you give us any indication on volume development and if there are any such impact on the organic growth there? That's the first one.
Yes, we do see volume improvements in logistics as well, adding to this organic growth. So it's not only price increases. The volumes are -- it's measured just looking at one number because it depends very much on what kind of goods you're producing. But if I were to give an overall estimated, we see volumes up around 10%.
Okay. And does that -- and have you -- I know, again, that you have added quite a bit of capacity because of the acquisitions. But from an organic perspective, have you been adding similar amount of capacity that's because that you are transporting more and have a higher load.
So I didn't quite get when you said added capacity, do you talk about the Logistics business?
Yes.
We have, since last year, worked on getting more drivers in-house where we think we have quite an okay level right now. But of course, it's still a balance between how much do you want to have in-house and how much do you want to cater for increased volumes by using third party. So I think we have quite a good balance at the moment, learning from the crisis last year, where we were in shortage. We have in-sourced a bit more.
And we have very strong traction on our contract logistics, where we have opened new warehouses with back-to-back contracts, with customers that want to follow us or in different markets. We are filling the warehouse capacity we have. And so that is also a part of -- as we get these contract logistics customers in, we're able to pick up a good chunk of their transport needs as well.
Okay. So the 10% organic growth, if I understand you correctly, is mostly driven by more warehousing?
No. It's also more transportation, so we see good growth. But again, we are -- as you recall, we launched this commercial organization, ICE industries and time engagements that focus on industry solutions. So we're just seeing a lot of traction where we are able to make larger agreements with customers that use more parts of our network.
And then, of course, I think when Karina talked about the organic growth. That's the real growth, then there is an addition in the 30% recovery from the Brexit spikes and troughs last Q1. But we see real commercial traction with these different services and this more holistic approach to our industry clients.
Okay. All right. And then a question regarding Mediterranean. If I understand you correctly, you've been previously been losing a bit of market share towards roads and up through the -- yes, on the road side, any status on that? Have you been winning that back? Or -- and then that's the first one. Then the second one is on the situation in If I understand it correct, you're still missing some capacity there? And I mean, any signs that you can solve that any time soon?
On the first one, we continue to have lost market share to the road. Even as we grow with this speed rose the same speed, which we see as a strength because we can address the It's if nothing else, we can do it with the price if we need the volume because it's not a competitor that fights back obviously the road. So underlying, it's not because we are winning market shares that we have this more than 10% growth in volumes.
Then on the Trieste side, we have been able to get some extra land for parking of trailers, et cetera. We will still like more, and we're still struggling, but it's not an element that at this stage, limits our ability to grow. We have also moved, as you know, or we have intensified the service to set, which has moved some of the volumes from Trieste, which is also the background of our announcement last week that we'll start a train service from [indiscernible] to Calais, which will then, of course, connect our networks.
Okay. And then the growth that you talk about, is that -- because if I recall it correctly, I think a very, very large part of what you do down there is automotive related. Is that what is driving the growth? Or are there any other verticals that sort of sticks out?
It's -- again, it's, of course, indirectly because our direct customers are freight forwarders and [indiscernible]. So we don't have the industry insight fully, but it's also textiles. It's very much export-driven our growth, but it's automotive, it's all the machinery and it's textiles that are the main customer segments. Automotive had some challenges in Turkey, like we see it in other parts of Europe with production stops -- frequent production stops. So it's not mainly driven by automotive growth. I believe that we -- it becomes more and more reality that manufacturers are moving production to Turkey from Asia and other places to secure the deliveries.
[Operator Instructions] We have a follow-up question from Ulrik Bak from SEB.
Just a follow-up question on the Mediterranean volume growth. You have previously mentioned that you expect double-digit volume growth for 2022 in the Mediterranean segment. Has anything changed related to this assumptions given that we are seeing weaker -- maybe weaker automotive production and so forth?
No. And we also see it in Q1.
Okay. That's very clear. And then a question to the EU mobility package. You mentioned that, that is affecting capacity on the European trucking market. But what are you currently seeing maybe not in your own business, but more broadly in the European Logistics market? Are you seeing bottlenecks increasing? Or is it just something that you think may arrive later on in the year?
We are not seeing our ferry customers impacted at this stage, not at least something we can monitor.
[Operator Instructions] We have another follow-up question from Ruairi Cullinane from RBC.
Just one sort of slightly longer-term question. You mentioned the green ferry that you have planned on the call. And I was wondering if we think to late 2020s, there may be pickup in investment related to similar CapEx projects and whether on a sort of 2- to 3-year view, you had an ambition to be towards the low end of your guided range of leverage?
It's very hard to hear your question. but Karina...
Yes, I think you're aiming at our CapEx or leverage. And when we look into the investments that we will have over the next 3 years, we still see that we will get into our target range between 2 and 3, even with the necessary CapEx investments, for instance, relating to the green transition. So we don't think that there's any reason to expect that we will not reach or target.
Certainly, that's very helpful. Since it wasn't clear. My question was whether in the late 2020s, there could be a significant increase in green investments? And whether you had any sort of aspiration to be at the low end of your guided range for leverage, perhaps a 3-year view ahead of this? So any sort of follow-up thoughts would be helpful.
I think that we just want to be in our range. And I think it's speculative, of course, looking very much ahead. But we think that our earnings generation will allow us to also adequately spend CapEx on the green transformation and still stay in this 2% to 3% range, not necessarily the lower end of it.
There are currently no more questions in queue.
We will not take any more questions now, sorry. Okay. Great. Then thank you very much for joining the call and all your good questions and detailed questions. The volatility to address some of your questions in our markets is unusually high and present our business with both challenges and opportunities. We are very pleased to see that DFDS continues to show resilience in this site. We monitor events closely and we are ready to adapt to further changes in our markets. We look forward to speaking to you again soon. Thank you.