DFDS AS

CSE:DFDS

Earnings Call Transcript 2018-Q3

[Operator]

Hello, and welcome to the DFDS Q3 Report for 2018. Today, I am pleased to present Niels Smedegaard, the CEO. [Operator Instructions] As a reminder, this call is being recorded.I will now hand over to Niels Smedegaard. Please begin.

[Niels Smedegaard, President, CEO & Member of Executive Board]

Thank you very much, and welcome, everybody, to our Q3 call. And joining me as usual, we have Torben Carlsen, our CFO; and Søren Brøndholt, Head of Investor Relations. Let's dive straight into this and turn to Page 3, where we show you on the right-hand side the -- another best-ever Q3 result, DKK 1,045,000,000 in the quarter, driven primarily by the acquisition of U.N. Ro-Ro, boosting revenue with 12% and EBITDA by 7%. As we all know, in the quarter, we have had a couple of things to deal with. One is the Turkish lira crisis in August but also the ongoing Brexit discussion is putting a little impact into our numbers in the third quarter, which we'll talk more about.Based on what we have seen, we have narrowed the outlook range to now DKK 3.0 billion to DKK 3.1 billion on an EBITDA level. And at the very bottom of the page, you'll see our net bearing interest debt over EBITDA is, on a pro forma full year basis, at 2.3%. So we'll continue to pay back debt also in Q3.Let's turn to the next page and let me talk a little bit about some of the headwind we have experienced in the third quarter. Brexit is a key topic, not only in London and Brussels, but something we are following as well. And I think for the first time we are seeing a slight impact in our volume numbers in Q3 that most of the routes [ charting ] the U.K. do not have the same positive growth as we have seen in the past and a few have actually had a little drop in the volumes. And when we talk to our customers, the main explanation we get for this development is the uncertainty around Brexit. We are now so close to a decision and people will not make any major investment decisions or otherwise, big decisions until they have a clarification. So it's fair to say that everybody's a little fed up with the uncertainty and want to have clarity one way or another in order to sort of go back to a more normal operating mode.Good news, I think, in the quarter is that we have seen a stabilization in Turkey and also in the network we are operating there. There were a few raised eyebrows earlier in August when we saw the depreciation of Turkish lira, but things have stabilized somewhat. We have also seen the Turkish lira bounce back after Q3, something Torben will talk a bit more about. But overall, we think in this environment, a fairly robust performance on our key Mediterranean routes. More long term, too early to say what will happen with Turkish economy, but we expect a decline in the growth next year, but that the Turkish export, which has become more competitive, is expected to somehow lead a recovery in the overall Turkish economy. But more about that next quarter.And as I said, we are reaffirming the outlook. We will have an EBITDA above DKK 3 billion, which is a 10% increase versus last year.So with those introductory remarks, I'll now hand over to Torben.

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

And on Page 5, we see that we have 12% revenue growth, of course, driven mainly by our addition of U.N. Ro-Ro. EBITDA, as Niels mentioned, record level of DKK 1,045,000,000, up 7%, driven also by U.N. Ro-Ro as we saw our North European freight earnings reduced from the Brexit slowdown and also on the -- from some noncomparable items.Depreciation increased DKK 65 million from the acquisitions and our increased investments in digital and IT, slightly offset by DKK 18 million from change in ship depreciations leading to a close to flat EBIT compared to last year. Finance cost increase, DKK 70 million of that from currency losses on receivables due to the depreciation of the Turkish currency and then also the interest cost related to the acquisition. So all in all, profit before special items and tax, a decrease of 13% to DKK 622 million.Moving to Page 6, a little bit more detail. We see that these U.K.-linked business units that are impacted by some Brexit concerns. North Sea business unit, down DKK 28 million, 2% lower volumes, driven by the Brexit slowdown. And also importantly, a dip in automotive volumes, primarily between Sweden and Belgium. An important negative Swedish krona impact from the Swedish currency depreciation. Baltic Sea is behind DKK 4 million compared to last year with higher pax contributions having partly offset lower freight earnings. Channel, the Dover Strait is up again due to strong pax contribution, a timing difference on our Newhaven-Dieppe route of DKK 13 million negative leads overall to business unit channel being down DKK 4 million.Mediterranean, our new business unit, up DKK 67 million as there was no unit last year. We have the existing route from Marseille to Tunis also here, which is actually dragging down the total business unit.Passenger, down DKK 19 million, of which DKK 16 million comes from higher bunker costs. Logistics, up DKK 5 million, led by our acquisition of our Special Cargo unit, but also positive impact from closure of some of the loss-making activities in Italy and Belfast last year. Again, automotive volumes are hurt from an expired contract. And we are struggling in logistics also somewhat with recovering increased fuel cost and increased haulage cost from drivers.Turning to Page 7, you see the -- again a strong cash flow and a deleverage. Operating cash flow up 9%. Free cash flow up 10% including investments of close to DKK 0.25 billion related to ships. Net interest-bearing debt of DKK 7.7 billion and our net interest bearing debt EBITDA multiple decreased to 2.7x from 2.9x end of Q2. And a pro forma full year basis, the multiple is now down to 2.3x, as Niels mentioned. And board -- taking this strong cash flow into consideration, the board will, in February '19 when we announce our Q4 results, will review capital structure and distribution.Moving to Page 8 with a little impact on the finance cost from the Turkish acquisition, in general, depreciation and -- sorry, inflation in Turkey has been relatively high but have increased further this year with October levels of around 25% inflation. And typically, you'll see the currency depreciating in parallel with this, which we have seen with a huge drop in August, which led to the currency loss in Q3 of DKK 70 million that we showed. Again, this is a euro-denominated business, but we invoice our customers in Turkish lira which means that we have an open position on around 60 days which means that over a year we typically see 1/6 of the depreciation of the currency hitting our P&L on the finance cost, which constitutes DKK 70 million in Q3. That's been a strong rebound in Q4, so the net impact to us is now around DKK 30 million for the year.With that, I will pass back to Niels, who will talk about the volume development in the Mediterranean.

[Niels Smedegaard, President, CEO & Member of Executive Board]

And it's clear we had a few worries in August when we saw this development, a few lifted eyebrows, so to say. But if we look at the volume graph here, you'll see the impact in August partly due to the strong depreciation of the Turkish lira, but also coincided with the 2 public holidays or periods in the latter part of August, which caused the volumes to drop significantly, the combination of those 2 elements. Year-to-date September volumes are still up 3% over last year. In Q3, the volumes were down 0.8%. So those are the levels we are talking about. So a fairly stable situation. And as you can see in September, there is a rebound. Going forward, we expect to have some stimulus to the export volumes out of Turkey, whereas the import naturally will be somewhat impacted negatively due to the decline in the Turkish lira. But overall, our key message here is the situation has stabilized. Torben mentioned the rebound also, the significant rebound in the currency. And we are, I think, set to achieve what we expected with this acquisition back in April for the year 2018.If we turn to the next page, you will see the outlook. I have mentioned that a couple of times already. Outlook is a little bit impacted by the drop in European growth. We expected -- or we not expected, we saw in Q3 the European real GDP growth is now just below 2%. We have seen the slowdown in the U.K. market as Torben also mentioned, and those factors together makes us narrow the EBITDA range to DKK 3.0 billion to DKK 3.1 billion. We also reduced the investment by DKK 300 million. There is some postponement of investments into 2019, goes for some of the terminal investments and a couple of other items. You'll see on the right-hand side the breakdown of this guidance to the various divisions. I'll not take you through that, but instead turn to the last page where you'll see an overview of some of our current priorities. Not surprisingly, we have prepared -- preparation for the Brexit transitioning as a key focus area. We are very clear to our clarification right now. Our main scenario is still that there will be an agreement and the so-called soft Brexit. But we need to prepare for both scenarios. That's clear and that's what we are doing. We have over the past 6 months intensified our preparation for both scenarios and the number of steps are undertaken as we speak. So we can assist our customers no matter which scenario will eventually develop. And I think it's prudent to assume that we will have this ongoing uncertainty at least until mid-end January next year.Then we have a number of items here, customer satisfaction, efficiency improvements, et cetera, which is standard operational procedure for us. We continue those activities. We are working also on the integration of U.N. Ro-Ro. That's tracking very well and we will be done with the integration by the end of 2018. We are deeply involved with both IT and digital execution on our strategy. We have some exciting things being introduced in the market during the next quarter, more on that later. And then we prepare for the first of the 2 new buildings we get in 2019, ro-ro new buildings. The first one we hope we'll be able to deploy towards the end of March next year. And as always, we are looking on the M&A side for any value-creating opportunities.So lots of things we can impact and improve on and develop in the company, and that is our main focus right now. So with this little presentation, we now hand over to any questions you may have. Please go ahead.

[Operator]

[Operator Instructions] Our first question comes from the line of Dan Togo of Carnegie.

[Dan Togo Jensen, Research Analyst]

A few questions from my side. Firstly, on U.N. Ro-Ro, could you give a number for the depreciation that you had here in Q3 in U.N. Ro-Ro and also a bit on the seasonality in U.N. Ro-Ro? Because to reach the DKK 350 million you initially guided for at EBITDA level, you, in my calculation, still need a healthy Q4, so to speak. That's the first question.

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

That's a long question, Dan. The -- let me start with the second part first. The seasonality -- there is some seasonality in U.N. Ro-Ro, but -- which means that Q4 is one of the strongest quarters. And we are quite confident that the DKK 350 million will be reached on that. In terms of the depreciation -- sorry, the -- yes, the depreciation, then I am not sure we have the exact number here.

[Niels Smedegaard, President, CEO & Member of Executive Board]

It's just above DKK 25 million per month.

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

So yes.

[Dan Togo Jensen, Research Analyst]

And then -- okay. And then could you just remind us a bit about your -- because clearly you cannot be satisfied with current return on capital invested in U.N. Ro-Ro and there's some improvements needed. What are the most important, so to say, tools that you will introduce and how rapid will they have an effect? You mentioned here yourself a new ro-ro vessel is delivered, for instance, in March. So what are sort of the steps to take return on capital invested above WACC in this business?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

The return, we definitely expected to be above WACC even in the current situation. Do we reach our 10% threshold the first year of acquisition? We don't think so and that was also what we communicated when we made the acquisition. We have no concerns about reaching the cost of capital. The measures that we are taking is that we are going through with the integration, identifying synergies with the remaining business. That work is progressing well. In addition, we are, of course, seeing how we best adjust our fleet and operation to the new reality, which is that there is growth on the export lag from Turkey and some reduction on the import side. And local management, together with the group, have made various decisions in that relation. And we are quite confident that we will come out very close to our original expectations on this transaction after maybe 1 or 2 quarters more.

[Dan Togo Jensen, Research Analyst]

Sounds good. Then a question on the automotive volumes on -- in the North Sea that you mentioned. There's an old contract that has run out, a new contracts has replaced it. It has commenced here in Q4. Can you elaborate a bit on the size of these contracts? How big is the new contract relative to the old contract and also in terms of profitability?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

We don't guide that specifically, but the new contract is ramping up during Q4. And we are quite comfortable with that contract plus other new contracts and initiatives that we'll be back on a growth path in Q4.

[Dan Togo Jensen, Research Analyst]

Okay. So growth -- you mean growth -- so I guess when you say that, Torben, it means growth vis-a-vis Q4 last year?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

Correct.

[Operator]

Our next question comes from the line of Finn Bjarke Petersen of Danske Bank.

[Finn Bjarke Petersen, Analyst]

I have a couple of questions regarding the U.K., not surprisingly. The English Channel, could you -- the one-off you have down there on the concession route, could you explain a little bit of the mechanism that affects these DKK 13 million on the English Channel? What's going to happen in the next quarter?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

In the next quarter, we expect it to be more or less in line with last year. This is a catch-up of the preceding quarters this year and it has to do with how the cost is split with the concession grantor. So this should not be something we are seeing going forward.

[Finn Bjarke Petersen, Analyst]

It is a nonrecurring thing. If that's something that happens next year, then you have a catch-up certainly in the quarter or is it...

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

You can say year-to-date, it's on level with last year. So it is a quarterly timing difference.

[Finn Bjarke Petersen, Analyst]

What about the North Sea? It is -- I understand that the -- I understand what happens on Ghent. That's clear, and that would return when the Volvo contracts resume in the fourth quarter. But could you say a little bit about how the development had been in the southern part of the North Sea and the northern part of the North Sea? And do you see any movement from the Channel to the North Sea? And the last thing is, of course, that we just received the numbers this morning for October for Euro Channel, which shows quite a significant rebound of 7% in the trucks volumes. Is that something you see as well?

[Niels Smedegaard, President, CEO & Member of Executive Board]

A lot of questions here, Finn. But overall, we see an impact on the North Sea, both South and North. And it's, of course, difficult to say exactly what it is. But when we sort of talk to our customers, we sort of get the Brexit uncertainty as a contributing factor. It is not huge dramatic numbers, but it's enough for us to detect it and we can see there seems to be a slowdown. I'm not sure we are seeing the movements to the same extent from the channel to the North Sea which we have seen in the past. I think that seems to be leveling out somewhat. There is still a driver issue. It is difficult for the haulers to get the drivers and they are optimizing as much as they can. And there are still some concerns also on the migration security issues around the Channel. But I think the main factor is with increasing bunker costs, as we have seen also in Q3, it puts the Euro Channel in a slightly better competitive situation given their electricity power operation. And it is our impression they have used that advantage to increase their market share. I think we are doing reasonably well with vis-à-vis the other ferry competitor. But the Channel is gaining market share.

[Finn Bjarke Petersen, Analyst]

And that's because they are lowering prices or...

[Niels Smedegaard, President, CEO & Member of Executive Board]

Yes. But you can say with the increased oil price and the [ dock ] mechanisms we have in all contracts, we are effectively increasing prices to our customers. And if they keep their price stable, then it translates into a higher market share. And we need to get our bunker cost increase covered so we are very careful to compromise on that. In recent weeks, you can say the oil price is heading a bit south. So that will hopefully improve the situation without us having to do any sort of dramatic changes on the pricing.

[Finn Bjarke Petersen, Analyst]

And then hard Brexit, how do you prepare for that? And what is your worst-case scenario?

[Niels Smedegaard, President, CEO & Member of Executive Board]

We have a long list of things and initiatives. We have had during the year a Steering Committee, which is organizing the efforts we have. Monthly calls with all operations. We have dedicated pre-sessions at the recent management conference for top 200 managers with external experts and workshops, et cetera. So all of this work is ongoing. And I'll not go into the long list of actions we are taking. But just to give you a few examples. Of course, we are increasing, to the extent we can, on-site and off-site capacity in the terminals. If we need to have trailers standing for a slightly longer period while the custom works is handled, we have delayed our docking of our freight vessels trading to the U.K. from typically Christmas, New Year, first weeks of January to now the summer period where freight volumes are low. So if we do get a hard Brexit, we can accommodate the needs of our customers. We would expect that volumes would pick up significantly during the first quarter as people are trying to fill up inventories to be able to handle if you get, let's say, x number of weeks or breakdown until the system sort of clears itself. So we have a number of things and it goes into IT, goes into training of colleagues, getting special status with the custom authorities, et cetera, et cetera. So all of that work is ongoing for progression for hard Brexit, if that were to occur.

[Operator]

Our next question comes from the line of Lars Heindorff of SEB.

[Lars Heindorff, Analyst]

The first one is regarding the CapEx. You're postponing a little bit of the CapEx. You said DKK 300 million. Do you have any -- can you give us any indication of what kind of CapEx you expect for next year?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

We are not at this stage guiding for next year on CapEx.

[Lars Heindorff, Analyst]

Okay. The graph that you show us on Page 9 with the volume in the Mediterranean, is it fair to assume that, that pretty much reflects the seasonality in earnings that you have in connection with the U.N. Ro-Ro?

[Niels Smedegaard, President, CEO & Member of Executive Board]

Yes, I would say so, correct. When you look at the '17 volume graph, yes.

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

It's also where you see that Q4 is a strong quarter.

[Lars Heindorff, Analyst]

Okay. Yes, yes. And then a follow-up on the previous question that was regarding the preparation for a potential hard Brexit. How many days and what kind of costs you set up normally associated with dry docking in the first quarter? And what -- I mean, what kind of movement in terms of operating days and earnings should we expect then from being moved from Q1 into Q2 next year?

[Niels Smedegaard, President, CEO & Member of Executive Board]

That's probably too detailed for here. I suggest you reach out to Søren to give you a little insight into that. We don't have the exact numbers present right now, Lars.

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

It's also still being discussed with the yachts, so we don't have the final, final docking schedule either. But we can -- you can talk to Søren to get more intel.

[Lars Heindorff, Analyst]

Yes, yes, will do that. And then lastly, regarding the Baltics, now we had 3 quarters here but close to 0 growth in lane meters for you guys. I think we've been talking about this before. One of your competitors is growing quite a bit. They've been adding capacity. Is this a trend that we will see in the coming quarters? Or do you intend to do something to, I think, regain some of that -- volumes that apparently has been grasping? And what kind of average market growth do you see in the Baltics?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

We have seen some challenges in the northern routes, our newest route, you can say, in the Baltic and quite healthy demand from our Swedish and German routes into Lithuania. We did have a challenge with one of the vessels. But in general, we see continued market growth in -- on those lines, whereas we are still seeing how we can reverse the trend in the most northern route that we have from Estonia to Finland.

[Niels Smedegaard, President, CEO & Member of Executive Board]

We have one vessel, you probably read about that early October, who had an engine failure. And it is something -- the spare parts will now be manufactured. It's something we can repair while in operation. We have switched the vessels around, so it's now on a shorter route in the Baltic. We needed a few days in dock to remove the propeller and the same when it's supposed to go back in. So there will be a little impact in Q4 of this but then we'll be back in full operation. But I think market growth is, as Torben mentioned, following the sort of the general GDP.

[Lars Heindorff, Analyst]

Okay, okay. And then the 2 new buildings that you have coming in next year, you said the first one is in March and the second one, I don't know when that will come. Is it still the plan that those will be -- vessels will be deployed on -- is it -- I think it's Rotterdam to the U.K. or where is the plan to put those vessels in?

[Niels Smedegaard, President, CEO & Member of Executive Board]

I'm not sure we have mentioned that. It is not -- the location you mentioned there is not the first priority. We have a couple of other competing interests, but we will determine at the very end which location will get it. But one place could be Sweden and another place could be Turkey, but we -- it's still up in the air.

[Operator]

Our next question comes from the line of Marcus Bellander of Nordea.

[Marcus Bellander, Senior Analyst]

A question on pricing on the North Sea. It seems like it has been pretty flat, if I take revenue and divide it by the number of lane meters. For quite some time now it's flat compared to Q3 last year. It's flat compared to Q3 '16, which is a little bit concerning, of course, given that bunker costs have risen quite substantially. Could you talk a little bit about the pricing dynamics on the North Sea?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

Swedish krona is down in this period 8%-ish, which is, of course, hitting our rate per meter. But of course, also reducing some of our cost although the impact is, of course, bigger on the revenue. So the Swedish krona demise is part of the explanation. And then, of course, you can say in a market where we see these Brexit concerns and little growth in volumes, it is harder to get price increases. But we actually don't see the price as our main challenge. We've been able to hold onto prices in general and also gotten some smaller increases. It is the volumes that have been our challenge more than the prices.

[Niels Smedegaard, President, CEO & Member of Executive Board]

There's also been the closure of the Rosyth route, which you should adjust for versus last year.

[Marcus Bellander, Senior Analyst]

Okay. Yes, understood. And also a question on ship operation and maintenance costs. I realize U.N. Ro-Ro may cause some difficulties with the comparisons, but it seems it's pretty high in the quarter, especially as a percentage of sales. Is there anything -- is that just fuel cost increases or is there anything out of the ordinary in there?

[Niels Smedegaard, President, CEO & Member of Executive Board]

We do have Finlandia, which was the vessel operating on the Rosyth-Zeebrugge route, as Søren just mentioned, which had a big major engine failure, and we have been struggling for a while to get the spare parts. And should the engine be completely replaced, we have found a solution and it was introduced back into operation beginning November. But it has been out since that incident in April. And given what we experienced with these critical spare parts, we changed everything on a sister vessel as well in order to avoid the same incident there. So there are in the quarter significant impact around that in the tune of DKK 15 million, if I remember correctly, just associated with what I just mentioned here.

[Marcus Bellander, Senior Analyst]

Okay, that's helpful. And then a slightly broader question. I guess, I mean, we're seeing for the first time the EBITDA margin decline significantly, if we adjust for U.N. Ro-Ro at least. At what point will you start thinking about some kind of efficiency program or cost cuts?

[Niels Smedegaard, President, CEO & Member of Executive Board]

We are thinking about that night and day and that's, of course, continuously performed and there are exercises ongoing as we speak. There are, however, in the quarter a number of noncomparable items or just things impacting the quarter, which one needs to sort of look at. You have the ship maintenance costs, the impact of Finlandia I just mentioned. You have the Swedish krona, which Torben mentioned, you have increasing bunker costs in the tune of DKK 16 million hitting the passenger business. There are the Newhaven-Dieppe and timing difference. There's the V60 Volvo project, which is ending earlier this year and ramping up and will be ramped up, we believe, like December this year. So there's a number of actions or a number of items explaining this. But of course, we are not just sitting back. We are trying to counter this with various initiatives, both on the passenger side and on the freight side as we speak. So we are not just accepting the decline in margin. We will do whatever we can to make sure this bounces back.

[Operator]

Our next question comes from the line of Ruairi Cullinane of RBC.

[Ruairi Cullinane, Associate]

A couple of questions, please. Firstly, could you expand on the increased competition that you're seeing between Turkey and Italy that was mentioned in the release? And I think you've got ongoing talks with your Turkish customers on billing in euro rather than lira. Should we expect them all to move across to euro next year?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

The increased competition, I think, is a function of one line, which is our Mersin line to Istanbul. And there's -- sorry, to Trieste, of course. There's no competition directly in Mersin. But customers who are located a certain number of kilometers from the port in Mersin versus Istanbul versus Izmir have decided to move volumes to one competitor, in particular, to his own route network. So we are not seeing any new competitors in the Turkish market as such, and we do not expect this -- any competitive increase in the market as such.

[Niels Smedegaard, President, CEO & Member of Executive Board]

The main impact on that route is really what is happening in Syria and Iran and the sanctions also now in Iran. This is in the Eastern part of Turkey and a lot of transit goods have been coming to that route. It's the smallest route occupying 2 out of the 12 vessels in the Turkish operation.

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

The other question was...

[Ruairi Cullinane, Associate]

On billing in euro rather than lira?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

Sorry. The -- there, we have carefully tested out the sentiment in the market with our customers on this topic and have engaged in discussions with the market. The idea is not necessarily that this is a cost that we think our customers should absorb, but it is a cost that manufacturers primarily should absorb. So there are 2 chains here that needs to work together to make this happen. But we are somewhat optimistic that from Q1 '19, there will be some movement in this area.

[Operator]

Our next question comes from the line of Finn Bjarke Petersen of Danske Bank.

[Finn Bjarke Petersen, Analyst]

Yes, just 2 follow-up questions. One, all the one-offs, the list was long. How much is it in Danish kroner in total affecting EBITDA?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

Some DKK 80 million, DKK 90 million.

[Niels Smedegaard, President, CEO & Member of Executive Board]

DKK 83 million.

[Finn Bjarke Petersen, Analyst]

DKK 80 million, DKK 90 million, okay, okay. And then you -- I think it was you Torben who said on the question about pricing in the North Sea, you said you have kept prices. But is that just because you exclude berth from your pricing or...

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

Yes, this is excluding berth. With berth, they would have gone up.

[Finn Bjarke Petersen, Analyst]

Yes, if you -- yes. So your prices are down. All-inclusive is unchanged, but excluding berth, prices are down. Is that the correct answer?

[Torben Carlsen, Executive VP, CFO & Member of Executive Board]

Well, if you adjust also then for currency and closure of the longer route, prices are flattish.

[Operator]

[Operator Instructions] And our next question comes from the line of Ruairi Cullinane of RBC.

[Ruairi Cullinane, Associate]

One more question, please. I was just wondering perhaps what we should expect in a soft Brexit scenario if there is a deal based on your customer conversations. Do you think we should expect to return to normal growth or perhaps a rebound in volumes on North Sea routes?

[Niels Smedegaard, President, CEO & Member of Executive Board]

It's difficult to say. I think it could lead to a small rebound because then the time line will be pushed sufficiently into the future. So that's sort of the optimistic view. The pessimistic view is, of course, that there can be hiccups along the way. So it depends on how solid and how much backing the soft Brexit agreement will get. So I think we need to see that and then we can be a little firmer at that stage.

[Operator]

And there are no further questions at this time. Please go ahead, speakers.

[Niels Smedegaard, President, CEO & Member of Executive Board]

Well, thank you, everybody, for joining us this morning and for some good questions. And we wish you all a great day. Goodbye.

[Operator]

This now concludes our call. Thank you for attending. Participants, you may disconnect your lines.