DFDS AS

CSE:DFDS

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, welcome to the DFDS Q4 and Full Year 2022 Report Conference Call. [Operator Instructions]Today, I'm pleased to announce Torben Carlsen, CEO. Please go ahead.

[Torben Carlsen, executive]

Thank you very much. Good morning, and welcome to DFDS' Q4 and Full Year 2022 Conference Call. I am, as usual, joined by our CFO, Karina Deacon and Soren Brondholt, our Head of Investor Relations.Despite headwinds in certain areas, most of our businesses performed very well in '22, and I'm pleased to close the year with an EBITDA in the high end of our outlook range. We see, of course, both challenges and opportunities in 2023. We remain confident in our ability to achieve solid results in the new year. This is also, we believe, reflected in the proposed increase in the return of cash to shareholders. And as you no doubt have noticed, we have brought back the share buyback program.We continue to see great potential to strengthen and grow our network further in the coming years. We have assumed that the acquisition of McBurney Transport Group will be approved, and that will, of course, be an exciting and value-creating first step in '23 and expectedly not the last. Our Q4 was in line with our expectations. So we've chosen to focus in this call more on the full year results. But let's turn and have a closer look at 2022.Page 3. Full year EBITDA up 45% to DKK 5 billion for 2022. DKK 5 billion is within our Win23 target range, which we have said we would achieve in '23. So also pleased that we have demonstrated this earnings capability. The growth in '22 was driven by return of passengers and the full year impact of the HSF acquisition. And furthermore, our freight ferry and logistics performance also improved and contributed to the growth. We are seeing increasingly headwind from the Dover Strait overcapacity situation and also the war in Ukraine.On the ESG side, our ferry emissions reduced 4% in line with our 2030 target.With that, I will hand over to Karina on Page 4 for more details on the numbers.

[Karina Deacon, executive]

Yes. Thank you, Torben. I will talk a little bit about the revenue growth. We already touched upon the increase of 45% in EBITDA, and that was achieved on the back of a revenue increase of 47% overall. That was very much impacted by the 2.9 million passengers returning on average. We're now at index 74 in terms of passenger numbers compared to 2019. You might recall that Q1 was still impacted by COVID. But if we look at the various geographies, Baltics was actually above 2019 with the index 104.In freight ferry, the growth was related to the BAF surcharges. Overall, the revenue was slightly negative because the volumes was down by 2.5%, driven by the channel events and the war in Ukraine. Logistics also grew from surcharges, but also after growth in solution sales and new activities like the customs revenue and warehouse activities. Finally, acquisitions, of course, mainly the full year effect of HSF, but also ICT and lately Lucey acquired here in the autumn.If we turn to Slide 5 on the P&L. As mentioned, the EBITDA grew in both Ferry and Logistics. But if we look at the group margin, we saw a slight decline, clearly linked to the higher proportion of earnings from logistics. In '22, we now have 21% of EBITDA from logistics, whereas we had 17% in '21.Going further down in the P&L, a few words on depreciation. We have talked about that throughout the year, higher impact from acquisition and also the impact of the 2 ro-pax vessels that we deployed in the Baltics earlier in the year. So the significant increase in EBITDA trickles down to EBIT as well. So that grew 87%, leading to a margin improvement to 9.1%, up from 7.2% in '21.Finance costs, we saw an increase of 23%. I will say we ain't seen nothing yet because that's just the beginning. We are impacted by the higher interest rates, but also from acquisitions, both due to the debt but also the interest on leases in those companies.But if I look ahead into '23, finance cost is one of the items where we will see a significant increase. Interest rates at the moment are up more than 3 percentage points compared to what we saw in '22. And with the increased costs from acquisition as well, it could be up by something like DKK 200 million compared to the level we saw in '22. But the bottom line for '22, all in all, it meant that the profit before tax more than doubled to DKK 2.1 billion.If we turn the page to talk a little bit about the balance sheet and the cash flow. After Q3, we saw ROIC being back above our target level of 8% and it increased further after Q4. So now we reported 8.6% compared to the 5.3% in '21, driven heavily, of course, by the passengers returning, but also increases in other parts of ferry, mostly significantly in the North Sea.Operating cash flow was up DKK 1.3 billion, but reduced by the additional investments, both in operating CapEx and also looking -- or taking the new builds into account that we did earlier in the year. So all in all, adjusted free cash flow, so meaning before acquisitions was DKK 900 million.Net interest-bearing debt went up 5% compared to '21. But due to the strong earnings, we saw a further improvement in leverage from the 2.9% after Q3 to now 2.8%. And that is, of course, a significant decrease compared to the 3.7% after year-end 2001 -- or 2021, sorry.Turning to Slide 7. A few words on our debt. After Q3, I talked about the ongoing refinancing plans after the repayment of the bonds in September, which we, at the time, replaced with a bridge facility. In Q4, we completed the refinancing of our UN Ro-Ro facility from 2018. That means that the DKK 3.7 billion was refinanced with our 5 core banks and the debt is now due or matures at the end of '26. We have a small remaining part which was extended to 2024. So in '23, we will look for further refinancing as we still have short-term debt on our balance sheet linked to the bridge facility.We will consider whether it's the right time to use our investment-grade rating of BBB- that we got this summer and potentially issue bonds, but that will, of course, be subject to market conditions. So let's see how that develops.On Slide 8, very quickly on Q4. After the significant growth rates we saw in the first 3 quarters of the year, we are back to more normal levels, although 17% and 18% on revenue and EBITDA is still quite significant. That means that EBITDA was again significantly above the Q4 of previous years.Ferry freight was flat. The overcapacity in the channel and the 9% market decline in Q4 on the channel reduced results. But the recovery in passengers continued and in Q4, we were at index 83 versus 2019.Finally, logistics also improved, driven by dry goods, which continued to benefit from the cost coverage initiatives and warehousing activities.Turning to Slide 9 on Ferry. In Q4, we saw a decline in volumes of 11%, and that was driven by the channel. If we exclude the channel, the decline was about 3%. Nevertheless, EBITDA was on level with Q4 '21, driven by strong performance in the North Sea.If we look at the BU Med, we had some one-off costs partly related to a settlement with a customer. And that meant that EBITDA here was a bit below 21%.If we look at the full year, volumes were down 2.5%. But behind that number, there is a significant variation. When we went into the year, we expected BU Med to come out with double-digit volume increases, and that actually happened with 11% for the full year.North Sea was flat, impacted in part with the difficulties for the automotive industry, while, as we talked about many times now, channel and Baltics brought the total number down. These volumes numbers was, of course, reflected in earnings, where we saw solid results in North Sea and BU Med.If we look at the improvement in channel, it was all due to the return of passengers because the freight was significantly down. Baltics for the full year on level breakdown, but also good contribution on the passenger side. And then eventually or finally, BU Passengers significantly up compared to '21, and that led to a small positive EBITDA for the year.Just maybe worth mentioning that total passenger earnings for '22 are now DKK 955 million. So the DKK 1 billion that we have talked about that we were missing from COVID is almost recovered now.On Slide 10, on logistics, we saw a Q4 which was very much as expected for our Dry business, and they continued the significant improvements that they have had throughout the year. Cold chain was slightly below last year. We are impacted by lower volumes to the U.K., also to do with the bird flu that has been in the U.K. But if we look at full year '22, our EBITDA was up 80%, of course, impacted by acquisitions. But if we exclude those, we saw an organic growth of almost 30%.As mentioned, during the year, we saw the improvement from better cost coverage and we saw the new activities, and also a considerable performance improvements in several of our business units and business areas.One of the things that had an impact on our results during the year is the large shift we have seen in haulage capacity. It has really been a roller coaster throughout the year with a shortage in the first half of the year with difficulties to find drivers, for instance, due to the mobility package, but also the war, et cetera.Then over the summer, the demand was lower, and we had a decent balance. Then Q3, another peak, where high demand and shortage. And then Q4, plenty of capacity. So monitoring the development and the supply/demand is very important for us so we can adapt swiftly, which our business has also done.Finally, on cold chain, then -- HSF, of course, has a huge impact. The integration has taken a lot of attention during '22, and it has developed as planned. We have a run rate effect of the synergies of more than EUR 8 million here when we exit '22. And as you might recall, we had said that we were expecting around EUR 10 million. And I definitely see the remaining part to be able to achieve that as well. Just bear in mind when you look at the numbers, that about half of these synergies are recorded under ferry.So that concludes the number review, and then back to you, Torben.

[Torben Carlsen, executive]

Thank you very much, Karina. On ESG, the emissions intensity reduced 7% for the ferry, where we, of course, have by far our largest emissions in Q4 following a number of decisions on route planning. And this gives a 4% full year reduction, which is in line with what we need to achieve to meet our 2030 goals.We are progressing the design of our next-generation ferry fuel vessels with green propulsions. During '22, we now have installed solar panels to deliver 25% of our electricity need, and this is a development that continues in '23.Our trucks are the latest and highest emission standard, and e-trucks have being deployed until now in Denmark and Belgium and soon also in Sweden. We are making slow progress in terms of getting the underrepresented agenda to 30%.Turning to Page 13. As was mentioned, our distribution increases to DKK 586 million this year if the proposals by the Board is adopted by the Annual General Assembly. The increase is based on the strong financial position and also, of course, looking into that we want to pursue growth prospects also going forward.The capital distribution is distributed into a dividend of DKK 5 per share. And then we re-launched the buyback programs that we discontinued in 2018 when we acquired the Turkish business. And the buyback will run from the 10th of February to the 21st of February.Moving to Page 14. The outlook of '23 reflects the strong position we entered the year in, but, of course, also some headwind that we have noted and included in our guidance, not least the slowdown in the European economy. But we, despite this, expect continued growth for passenger and most of our freight activities. The 2 exceptions are Ukraine, where we continue to expect headwind and the full year effect of the war. On the channel, the overcapacity situation is not improving. The market is going down, and we will also see a relatively strong negative impact from this situation.Overall, revenues are expected to remain on level with '22. And the EBITDA range reflects these recessionary indications that we see plus the 2 situations in Ukraine and on the channel. But overall, in light of that, we feel that it is a guidance range that reflects our belief in the resilience of our business model.If we continue with the outlook for '23 on Page 15. Our CapEx is expected to be around DKK 1.6 billion. We have no ferry purchases or new buildings in sight for this year. But then, of course, we have the acquisition that we expect to be completed from end of Q1. That will mean a payment of DKK 1.2 billion.So on Page 16, our priorities for '23, adaptation of capacity wherever. That will be required due to any geopolitical developments that we either have only seen some part of or that develops during '23. Nothing new in that. This is how we always operate.Organic growth. Well positioned, especially in logistics but also in the Mediterranean ferry region. Inorganic growth through the McBurney acquisition and other initiatives for new business. We will focus a lot of the cash flow generation. We'll continue to reduce our emissions, and we will make significant moves forward in terms of getting especially the green vessels on the water.So with that, we will turn back to the moderator for questions.

[Operator]

[Operator Instructions] Our first question is from Dan Togo Jensen of Carnegie Investment Bank.

[Dan Jensen, analyst]

Yes, hello. A few questions from my side here. Maybe Torben, if you can elaborate a bit on the guidance for '23 and your expectation of growth in certain markets? I understand definitely that Baltics and the Channel is under pressure. But what supports growth in Med and in the North Sea as you see it going into '23? And what are we looking for here? Is it, sort of say, mid-single digit growth? Please if you can share some thoughts on that?

[Torben Carlsen, executive]

Yes. If we start with the North Sea, it is modest growth to almost flat. But we just believe with the different cost optimizations and adaptations we make, that we will still be able to show progress on the North Sea.On the Mediterranean, it's really a continuation of what we've seen in recent years, will -- of course, some slowdown from the double digits that Karina talked about just before, given that Turkey is also impacted by the growth prospects in Europe. But a continuing trend of de-globalization, benefiting Turkey and thus also the transport between Turkey and Europe.

[Dan Jensen, analyst]

And then...

[Karina Deacon, executive]

Maybe...

[Dan Jensen, analyst]

Sorry, Please go on, Karina, yes.

[Karina Deacon, executive]

Yes, I'll just add. On the North Sea, I think we also mentioned last time that there is a backlog on the automotive industry. So that helps improvement. And then, of course, you have a little bit darker view from a recession point of view pulling in the other direction. But that backlog keeps a base -- a solid base under the numbers. Hence, we can see a roughly flat development expectedly.

[Dan Jensen, analyst]

Okay. And then turning to one of the more troubled market, the Channel. What is, so to say -- what is the endgame here? Are you just sitting on the fence and waiting for somebody basically to pull the plug here? Or can you do something in between, adjust capacity, do something on the cost base, et cetera, pricing? That's probably difficult in the current environment. But what can you do to mitigate what's going on in the Channel until there comes some sort of breakthrough market-wise?

[Torben Carlsen, executive]

We will continue to do what we have been doing in '22 and before. And with the capacity sharing agreement with P&O, you've seen that we have taken out sailings, 4 or 5 sailings per day during '22 and still being able to offering our customers attractive schedule with the space sharing with P&O. And we will, of course, continue to look at if we should adopt further our number of sailings and then try to run as lean an operation as possible, making sure that the service levels keep a very high standard, including, of course, that we offer both Dover and Calais, again, with the small strike actions that have been recently -- the value of that is proven. There's never a strike in Dunkirk, so we always keep operating.Our customers value that. And we believe that our product command a premium in the market. So it's all those small things that our team continue to pursue and optimize. Then we also believe that during '23, there will be action from the English and the French governments in terms of creating a level playing field on the cost of the people. So we do what we're best at. We have, of course, not quite, but almost the same market share as the 2 other ferry operators combined. And the economies of scale there mean that all things equal, we should be the ones suffering the least from the situation.

[Dan Jensen, analyst]

And then 2 more questions from my side, if I may, and then I'll hand it over. On the pax side, the passenger side, you're looking, of course, for the 2019 levels again to appear in your numbers in terms of traffic. We are not seeing that quite yet. Is there some markets that are approaching this? Or when should we expect for this '19 level? Is it late '23 or maybe into '24 before we can achieve such a number?

[Karina Deacon, executive]

Actually, as I mentioned, the Baltics, they are already above the 2019 level, and we don't see any reason why that shouldn't continue into '23. If we look at the BU Pax, so the OSC route and Amsterdam-Newcastle, we actually expect them to almost more or less approach the '19 levels. As we've talked about before, it's a slight different composition of passengers on the OSC route. So not the Asian passengers. But in terms of volumes, we expect that we can be more or less back at '19 level.Then we have the Channel, and that is, of course, impacted by the overcapacity in general. So we are relatively optimistic about actually passengers returning. So it's more a question of our market share on the Channel.

[Dan Jensen, analyst]

Yes. And then just a final question here. You have alluded to that you are in talk with Ekol of taking over their international business. Can you give us an update on how that is progressing on and what we should look out over here?

[Torben Carlsen, executive]

Yes. We have applied with the Turkish competition authorities, and they are still looking at the case. They've sent out questions to the market. They are sending us questions every now and then. So we don't have any update on when they will have finalized their work so that we can continue to see if a transaction can be made. We continue to see great potential for Turkey, and an acquisition of Ekol would mean that we would mirror the setup we successfully have in the North Sea, for example, with logistics and ferry routes.

[Operator]

The next question is from Michael Vitfell-Rasmussen of Danske Bank.

[Michael Vitfell-Rasmussen, analyst]

Three questions from my side. First of all, can you talk a little bit about the one-off settlement that you discussed in the Med during Q4? Can you add some flavor on which kind of customer type was this? And what exactly was the disagreement on, just to make sure that this is not something which will potentially spread to other customers?

[Torben Carlsen, executive]

There is no more to report on that. We have -- it's definitely one-off in nature, so you don't have to worry about that coming back. It's a complex matter that have combining elements from several years.

[Michael Vitfell-Rasmussen, analyst]

Okay. Just staying on the Med, if you could, first of all, talk about potential impacts in Q1 from the earthquake in Turkey? And then secondly, if one should assume this gives you a bit of a medium-term boost potentially from the rebuilding process once we are over the current situation?

[Torben Carlsen, executive]

Yes. It is simply too early. We have been focused on seeing how we can help out down there. We have sent the dogs that we normally use for detecting refugees, who have found people buried down there. We've sent -- we've taken a vessel out of circulation to ship heavy machinery and also to help with the cleaning up. I do not think that this will impact the growth prospects for Turkey as such. But of course, the whole country is completely absorbed with this now. And we are doing everything we can to help with the unique capabilities that we have. We do not expect that this is something that either negatively or positively will impact '23.

[Michael Vitfell-Rasmussen, analyst]

Okay. Great. Just my last question is on the proposed Dutch auction share back (sic) [ share buyback ] . Can you just share a little bit kind of your thinking here? Severance is obviously coming down, but it's still relatively high. And you're seeing M&A opportunities. Karina talks about higher interest cuts and refinancing and so on. So what actually makes you believe it's a good idea to go out and do the share buyback right now rather than maybe reducing the debt or keeping it on the war chest for M&A?

[Torben Carlsen, executive]

I think it's maybe, first and foremost, a signal to our investors that we are very focused on capital distribution whenever there's room. The size of this is, of course, somewhat smaller than we used to demonstrate in '16, '17, '18. But it is just a signal that now we are back in our range. That is still the way we are thinking that there will be a basic dividend and then we will supplement with share buybacks. We know that investors value the Dutch auction type. When we last had them since -- in a share like DFDS with maybe more limited sales, we give investors a chance to transact larger chunks than maybe they're used to. So it is, first and foremost, a signal that also indicates that when we are even in a better position, we will not hesitate to pay back to the shareholders, and we'll do it in the way that we think most shareholders appreciate the most.

[Michael Vitfell-Rasmussen, analyst]

I'm just hoping that also makes sense. And yes, we also think the share price is a bit undervalued here. So that's all from my side.

[Operator]

The next question is from Ulrik Bak of SEB.

[Ulrik Bak, analyst]

Also a couple of questions from my side. On the guidance, I see that there is quite a big negative delta on the ferry guidance compared to '22 on EBITDA of DKK 300 million to DKK 600 million. If we just take like a holistic view, what does this negative delta imply in terms of volume growth in '23 and also revenue per lane meter growth? If you could clarify that, please.

[Torben Carlsen, executive]

That's very detailed, Ulrik. But obviously, it means that ferry is down in volumes, not least driven by the Channel. Obviously, without Channel, it's a smaller single digit down, very small, but it is down in terms of volumes. And in terms of rate per meter, when you look at this globally, it looks -- it will -- when you start seeing the reporting, it will look great. But that is partly because we are losing volume where the rate per meter is relatively low on the Channel. So probably too detailed to guide you on that at this level.

[Ulrik Bak, analyst]

Sure. Okay. But then a question to the Mediterranean segment. I just noted in your volume report for January that you reported flat Mediterranean volumes year-over-year. Does that concern you in any way in terms of continued growth that you stated earlier?

[Torben Carlsen, executive]

No.

[Ulrik Bak, analyst]

All right. And then this one-off item in the Mediterranean, can you just elaborate how big was that, the impact on that? And does that have an impact on the EBITDA before special items that you report in the Q4 numbers?

[Torben Carlsen, executive]

The amount was around DKK 50 million. It's not in special items.

[Ulrik Bak, analyst]

Okay. So the number we see EBITDA before special items, that has deducted the DKK 50 million?

[Torben Carlsen, executive]

Right.

[Ulrik Bak, analyst]

A question for your Logistics division. How does the price outlook for your services look if we look ahead? You talked about the strategy of truck driver has become less. And with the general demand also declining, should we expect the prices also to come down in this part of the business?

[Torben Carlsen, executive]

The base prices are not coming down. But of course, we have a very confirmed models for some of the surcharges and they will move according to how fuel and other elements move.

[Ulrik Bak, analyst]

Okay. And then in terms of the synergies from HSF, did you record any synergies during 2022? Or will the EUR 8 million that you talked about, will that be a positive delta purely in '23?

[Karina Deacon, executive]

No, we had a lot of it in '22, about EUR 6.5 million of the EUR 8 million were already there in '22. Most of them, as I also said, we're in the Ferry division because it relates to [ ostracizing ] our own ferry on some of the HSF goods.

[Operator]

Our next question is from Ruairi Cullinane of RBC Capital Markets.

[Ruairi Cullinane, analyst]

My first question is, could you talk us through your expectations regarding potential return of Asian passengers on the Oslo-Copenhagen route. And if you are still targeting that customer segment? And secondly, we saw some very weak market volumes, particularly on the Channel at the end of last year. The volume is a bit better in January. But I'd be interested on the insights on what drove that? And finally, can you sort of talk us through the factors which are suppressing the ROIC in the Cold Chain business unit?

[Torben Carlsen, executive]

Well, let's start with the -- the Asian passengers we do not believe will come back in big numbers in this summer season. But we believe that they will be back in '24. But '23, we're obviously then planning for other passenger segments and notably Norwegians are attractive for us there. The whole Asian is only an issue on this Oslo-Copenhagen route, as you know, Ruairi.On the next question...

[Karina Deacon, executive]

The Channel volumes.

[Torben Carlsen, executive]

The Channel volumes. Yes, we saw a market decline in demand for the Channel last year. And we have not seen a reversal as such of this. And of course, in combination with the overcapacity, we are looking into a bleak '23. Nothing so far that I have seen at least indicate that, that will all of a sudden see a growth overall on the Channel. Yes. I don't know if that -- and then just the third question?

[Karina Deacon, executive]

ROIC in Cold Chain.

[Torben Carlsen, executive]

ROIC in Cold Chain. Do you want to cover that, Karina?

[Karina Deacon, executive]

Yes. We have made some investments into warehouses, et cetera. And also, we have made some investment -- normal CapEx investments. But you're right, it is a lower ROIC than what we would hope for and what we expect actually. So it is something that we are working with Logistics to see what we can do in terms of the asset base. But of course, it's a total mathematical thing that when we make the investment in the warehouses, it does take a while before we have the sufficient return in. But I can assure you that is on our agenda.

[Torben Carlsen, executive]

And will be embedded in the forecast for '23. We'll also see an improvement of that percentage.

[Operator]

The next question is from Chris Lewis of Freight Business Journal.

[Chris Lewis, analyst]

Hello? Can you hear me?

[Torben Carlsen, executive]

We hear you fine.

[Chris Lewis, analyst]

Yes, sorry. I was wondering if you could elaborate a little bit on your plans for Ireland. What do you hope to achieve in the market? And also do you operate ferries from the continent of Europe into Ireland itself? And how -- if so, how is that segment performing?

[Torben Carlsen, executive]

Well, I can start with -- our plans for Ireland is that we for many years had a logistics business that is doing well in Ireland, both in Ireland and Northern Ireland, including also some container traffic actually from Ireland to the continent. Then last year, we acquired Lucey, a contract logistics company in Ireland with domestic distribution and warehousing, where the integration is doing great, is performing better than expected.And then the 29th of December, we entered an agreement with McBurney, a cold chain logistics operator based in Northern Ireland with a lot of traffic also to the U.K., where it connects neatly to our existing cold chain business. So we are hoping that, that transaction gets approved by the Irish authorities in this quarter. And then we will have -- then we'll be a significant logistics operator in the island of Ireland.With regard to ferry routes, post-Brexit, we opened a direct route from Rosslare in Ireland to Dunkirk. This was to give customers an opportunity to bypass the land bridge, which is, of course, characterized with more paperwork and more unpredictability than such a direct ferry route. So the plans are, of course, to continue and develop that route, plus make a successful integration of the McBurney acquisition once it goes through.

[Chris Lewis, analyst]

Yes. Have you noticed any shift away back to the land bridge route away from the direct continental route as people get used to the complexities of customs clearance? Or is our volumes on that direct route holding up?

[Torben Carlsen, executive]

We asked ourselves that question or we asked that very much before we started. And I'm happy to report that the interest for the direct route seems to hold up. In all honesty, we have had some challenges in providing the right tonnage for that market. But I think we are getting there. And it seems that customers are very loyal and have some advantages from using this route. The drivers come to the continent rested. Some of them ship 2 or 3 trailers and one driver, and then the driver can deliver more of the trailers when he arrives. So no signs that it's reverting back to pre-Brexit mode on that.

[Operator]

Our next question is from Jens Logstrup of Expon ApS.

[Jens Logstrup, analyst]

First of all, congratulations with the result and the nice growth in the EBITDA, actually much better than I expected in the beginning of the year. Nice to see that. And I'm also happy to see that you are starting of this year a buyback program. But I do not understand why you choose this Dutch auction. I think it's quite an uncommon way of doing it. And I think that when you have a situation like this where the stock price is obviously too low, it is much better to have a daily activity on the stock exchange and it's much better to have a longer period.So it may not be a question because you already said a little about this. It's just a comment for me that I think this is unusual. You don't see it very often in the Danish stock market. And I clearly prefer the normal way of doing this.

[Torben Carlsen, executive]

Thank you for your views, Jens. We -- for DFDS, this is the usual way to do it, if you look back. And we think actually because of the size of our daily trading, that, as we said before, this offers an interesting opportunity for larger investors that want to be able to transact larger amounts where they normally would have to expect to only be able to do that over maybe a month. So we will -- we are very pleased with our choice here. If one day we have more money to return, we'll probably also go back to, as we've done in the past, a combination of the 2 methods of buybacks.

[Jens Logstrup, analyst]

I have to say that I'm not quite sure that you're right that this was the way you did it. I mean, for example, in 2017, it was one in a 12-month period. I think should consider here...

[Torben Carlsen, executive]

I'm quite positive that we've done this before. But let's take that offline, Jens. We have done 3 auctions before.

[Operator]

[Operator Instructions] Our next question is from Lars Heindorff of Nordea.

[Lars Heindorff, analyst]

A question regarding your earnings visibility. You talked about the outlook for the -- at least for the first half and the early part of this year. And you mentioned that you have automotive backlog. However, there's also quite a bit of inventory correction going on, at least globally. So I want to share -- I mean, hear your thoughts about the seasonal development. I mean, do these 2 levels [indiscernible] other out here in the first half of this year? And what do you expect for the second half? That's my first question, yes.

[Torben Carlsen, executive]

Yes, it's a complex question. If we had the answer to that, it will be a surprise, I guess. But I think Karina's comment before about the automotive is simply that when we look into a recession, it is good for us to see that our large automotive customers have these backlogs and that their supply chains are starting to flow better than before, because it means that we have this base -- these base loads coming to our vessels primarily.Then of course, we also see from some of our customers and hear from the market that there is some destocking going on. The destocking still means that things get shipped from the warehouse to the market and typically through our vessels as well since a lot of the warehouses are on the continent. So I don't think with at least the sizes of this that we've seen so far that we are too concerned about this. And of course, during '22, we have heavily increased our exposure to contract logistics, and we continue to see very high demand for warehousing and cross-docking operations that we offer.

[Lars Heindorff, analyst]

But can you see -- I mean, in terms of the automotive, if we stay with that, do you have a visibility which extend beyond, let's say, 1, 2, 3 months, and I don't know how far you can see.

[Torben Carlsen, executive]

No, we don't have firm bookings or -- the larger of our customers share their plans, but they are, of course, not better than what happens in reality. And during the whole supply chain disruptions, we saw a lot of changes to the plans that got shared with us. But at least it shows that -- and if we try to order a truck today, it's a 9 to 12 month delivery time. So we know that the order books are in a shape, which means that there will be -- if there were no production issues that there will be a relatively steady volume flow from these automotive manufacturers, especially on the truck side.

[Lars Heindorff, analyst]

Okay. And then the other one is regarding ETS, which is now going to be implemented across Europe and applied for the entire shipping industry. I want to hear your thoughts about that. And I'm sure that you're going to say that it will be a pass-through. But I want to hear your thoughts on it anyway.

[Torben Carlsen, executive]

It will be a pass-through. So, you got that right. But it has some...

[Lars Heindorff, analyst]

Yes. Sorry. I mean, what will that -- I mean because it's -- I mean, one, it's a pretty high number, what I've been able to calculate. And what will that mean in terms of if you need to pass that on in terms of price increase?

[Torben Carlsen, executive]

Well, it's a couple of EUR 100 million when fully implemented in [ 2027, '28 ]. And that sounds, of course, like a lot of money, but the market has seen big shifts and changes in fuel costs as well. So it's nothing extraordinary or unusual compared to what our customers have seen before. I think we welcome the ETS. We are a little bit concerned that it is not equally applied to the land transport at the same time.On the other hand, we have seen with the heavy fuel prices we've had recently that there has been relatively little modal shift to the land even despite these situations. So we have seen in '15 when the SECA area went to low sulfur, heavy pass-throughs to customers. We saw it for the Mediterranean area when that area also came under the low sulfur regime. So we are not too concerned about it. We will, of course, much rather spend the money on green initiatives than to pay it as this ETS tax.So that's also why it allows us to speed up some of the initiatives in that area so that we can pay it to do something good rather than pay it to the EU, where we can be concerned how fast they are able to recycle it to the industry.

[Operator]

Ladies and gentlemen, this concludes our Q&A session. And I hand back to Torben Carlsen for any closing comments.

[Torben Carlsen, executive]

Thank you very much. Thank you for the many good questions and your interest in DFDS. We enter, as you can hear from this, '23 with great confidence due to the strength of our freight network which both cover ferry, road and rail, confidence in our contract logistics solutions and also in the return -- or further return of our passenger business. So we look forward to speaking to you again, and thank you.

[Operator]

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.