DFDS AS

CSE:DFDS

Earnings Call Analysis

DFDS Navigates Challenging Markets with Solid Results and Promising Strategy

DFDS concluded 2023 with solid financial performance, despite a challenging market. Adhering to the Win23 strategy, they expanded their network, incorporating McBurney and Lucey and anticipating growth in the Nordic and continent cold chain after challenges. DFDS reported a revenue increase of 6% when excluding bunker adjustment factor (BAF) effects, with freight ferry revenue up 3% and passenger revenue surging by 16%. Despite revenue gains, EBITDA saw only a marginal increase of 1% caused by external factors like capacity issues and the war in Ukraine. The adjusted free cash flow target of DKK 5 billion was met as promised in 2019, with plans to deliver DKK 1.5 billion annually moving forward. Logistics faced a slowdown, affected by lower road transport volumes and decreased cost surcharges. Strategically, DFDS aims to reduce leverage to 2.5x by 2026, restrict CapEx to DKK 1.5-2 billion, and achieve a Return on Invested Capital (ROIC) of 10%. Their future focus will be on unlocking network value and transitioning to six green ferries by 2030, enhancing their environmental commitments.

Completion of Win23 Strategy and Launch of Journey to 2030

DFDS has marked the completion of its Win23 strategy, successfully delivering a solid financial result for 2023 and now looking ahead to a new strategic period leading up to 2030. This next phase focuses on unlocking the network value created previously, fostering organic growth, and aiming for an adjusted free cash flow of DKK 1.5 billion per year.

Stable Freight and Strong Passenger Segments amid Market Challenges

The company saw a stable underlying freight ferry result in 2023, comparable to 2022, while achieving a very strong passenger outcome. Logistics was affected by market slowdowns and specific one-time costs. Overall, DFDS smoothly adapted cost levels and strategies to the challenging market conditions but faced some income declines attributable to one-off restructuring activities.

Navigating Elevated Finance Costs and Ferry Volume Decrease

DFDS grappled with significantly higher finance costs, which more than doubled due to increased interest levels. Furthermore, ferry volumes decreased by 8%, but the company managed to post a 2% revenue increase, or 6% after excluding the Bunker Adjustment Factor (BAF) effects, particularly buoyed by the Mediterranean segment and the recovery in passenger volumes which grew by an impressive 16%.

Active Management of Capital Structure and Focus on Cash Flow

DFDS will continue to manage its leverage, targeting a reduction from just under 3x to around 2.5x by 2026. In 2023, this was partly achieved through sale leaseback transactions, which contributed significantly to a strong adjusted free cash flow of DKK 2.8 billion, or DKK 1.3 billion when excluding these transactions. The strategy moving forward includes maintaining a lower level of operational CapEx.

Continued Decarbonization Efforts

The company remains committed to its decarbonization efforts, having reduced its ferry emissions by 5% in 2023. Initiatives such as 'every minute counts' aim to increase efficiency by reducing time in port and maximizing time on the water.

Shareholder Returns and Capital Allocation

DFDS plans to return a total of DKK 600 million to shareholders, comprising a dividend payout of DKK 169 million and a share buyback program of DKK 430 million. The company's approach to capital distribution reflects both a commitment to shareholder returns and a strategic investment into the company's growth.

Outlook for 2024: Moderate Revenue Growth and Strategic Focus

For 2024, DFDS expects a revenue growth of 5% to 8%, driven by the inclusion of the FRS business, organic growth, and ETS surcharges initiated in January. The company will guide on EBIT, with an expected range of DKK 2 billion to DKK 2.4 billion for the year, and anticipates an Operating CapEx of DKK 1.7 billion. Key priorities include executing the revised strategy, integrating acquisitions, and targeting improvements in challenging areas.

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, welcome to the DFDS Q4 Report 2023 Conference Call. [Operator Instructions]Today, I am pleased to announce Torben Carlsen, CEO. Please go ahead, sir.

[Torben Carlsen, executive]

Thank you, and welcome to DFDS' Q4 and full-year 2023 conference call. As usual, I am joined by Karina Deacon, our CFO; and Soren Brondholt, our Head of Investor Relations. I'm very pleased to deliver a solid result for '23 in a year where markets have been challenging.Let us turn to Page 3, as this reporting also marks the completion of our Win23 strategy. Through the last 5 years, we have expanded our network, both in terms of geography, but also in terms of the products and services we offer to our customers. Now we enter a new strategy period moving together towards 2030, where we initially focus on unlocking the network value we believe has been created in the previous strategy period. We unlock the value by continuing to deliver on our acquisitions. We are in a very good starting point for acceleration of our organic growth. And we want during this period to deliver an adjusted free cash flow of DKK 1.5 billion per year.After the initial unlocking value period, we'll continue with further emphasis on the green transition by constructing 6 green ferries that will be in operation by 2030, will reduce our intensity of the emission on land by 75%. And in this period, we will continue to deliver the DKK 1.5 billion free cash flow.Turning to Page -- the next page, more specific financial ambitions. We expect the ROIC to be around 10% when we reach the end of '26. We will restrict our CapEx of between DKK 1.5 billion to DKK 2 billion annually in this period. And then as mentioned before, deliver adjusted free cash flow of annually DKK 1.5 billion. During this period, we will also gradually reduce our leverage from just under 3x to around 2.5x by 2026.Turning to the next page. The '23 result was achieved in a year with many challenges. As mentioned, we delivered the '23 promise said in 2019. In '23, our freight ferry result underlying was close to level with '22 and we were able to post a very strong passenger result. Logistics was impacted by slowdown generally in the markets and also one-off cost specific to DFDS. Through the year, we have engaged in capacity adaptation to fit demand, cost controls and pricing initiatives to maximize the situation. Customer focus has been prioritized, as it always is, to support our organic growth ambitions.The headwinds are well known, the overcapacity on the channel, the overcapacity created by the war in the Baltic Sea. Turkey was hit by a devastating earthquake early in the year and elections and other developments in Turkey, kept consumers and investors a little bit holding back, while higher interest rates in general curb demand from primarily the consumers in Turkey. On the road, what has mostly hit us is the slowdown in construction and the volatility and unpredictability of the meat flows that we carry. Customers have seen that there's overcapacity in the market and has engaged in unusual high tender activity, which, of course, put pressure on margins.Again, in '23, we expanded our network, McBurney and Lucey are performing well based on -- was acquired in Q3, and we have moved some of their ferry volumes to our own routes. We continue to see some challenging in the Nordic and continent cold chain, but expect some recovery during the first quarter. And then, of course, we closed the acquisition of FRS early '24 and expect good results, from an FRS during '24, and we'll report further on this when we talk again in May.The cash flow focus means that the adjusted free cash flow is a key metric, as you heard also before. We have engaged in some sale leaseback transaction during '23, and we may see more of that during '24. Our leverage has stabilized and is set to go down, all things equal. We are challenged by the increased finance costs, which more than doubled due to of course, the high interest levels.Turning to Page 6 and Karina now.

[Karina Deacon, executive]

Yes. A few comments on the last quarter of '23. So in Q4 alone, we saw an increase in revenue of 9% if we adjust for the bunker surcharges. This was driven by higher revenue from both ferry and passenger and then also, of course, from the acquisitions and logistics. The increase in revenue didn't quite show up in EBITDA, which declined, but this was also expected because we knew we would have a significant negative impact from the lower oil price in Q4 '23 versus Q4 '22. Looking at passengers, we saw a 6% more passenger volume compared to Q4 in '22. And on a like-for-like basis, that was very much above '22. If we look at the EBITDA, where we had some one-off income in '22.Logistics also improved in terms of EBITDA, but it was driven by acquisitions. We faced a challenging market that Torben just described with lower activity. And then we also had some one-off costs, for example, relating to adjustments of the capacity.If we turn to Slide 7, if we look at the entire P&L and look at the items below EBITDA, we had a significant one-off income. We have already explained that. It was the DKK 95 million from the sale and leaseback of the 3 ferries that we did in October. In Q4, we saw an increase in depreciation. I've talked about that throughout the year, but the increase in this quarter was mainly driven by acquisitions, but also the impact of the sale and leaseback, which gives us higher depreciation. Then we had changes in metal deployment. So when we lease on IFRS rules, we get higher depreciation than when we own the vessels. And then we also had a few write-downs as we have on an ongoing basis. But in Q4, they were perhaps a little bit bigger than what we normally see, nothing dramatic in that though.Acquisitions also impacted amortization. So that meant that we saw a decline in EBIT to DKK 358 million. As mentioned also throughout the year, finance cost was up when we compare like-for-like, we saw a doubling of the interest rate. So, of course, that has a huge impact. Then unfortunately, looking at foreign exchange differences, a rather large impact because in Q4 '22, we had a large positive whereas in Q4 '23, a lot negative. So all in all, when you look at the changes, it is rather big.A few words on the full year '23. So revenue up on -- if we look at Slide 9, revenue up 2% but if we exclude the BAF effect, it actually increased 6%. And of course, also in freight ferry, the impact from the BAF is seen, so we had a negative development in revenue. But if we exclude this BAF effect, it was up 3%, and that was mainly driven by higher revenue in the Mediterranean. Our passenger revenue increased 16%, driven by all 3 business units with the passengers after the recovery in volumes, where we, in total, '23 was up 19% compared to 2022.Logistics revenue declined 8% organically. So that was related to the lower road transport volumes, but also we saw lower cost surcharges where, as you recall, in '22, they were particularly high driven by the higher energy prices. The acquisitions, of course, has a large impact, not least due to McBurney that was included from Q1.If we turn to Slide 10 and look at EBITDA, I think for the first -- last time, we can talk about Win23 because we delivered again on the target of DKK 5 billion. So the target we set out in '19, we can now say, yes, achieved, and we also managed to increase EBITDA by -- although not a lot, but about 1% compared to 2022. As we talked about a lot during the year, we were negatively impacted by the external events on the channel with capacity and the continued war in Ukraine. The expected negative impact of the decrease in oil price spread, of course, also had a significant impact on the freight ferry income.On the other hand, we saw a significant increase in passenger activities, not only driven by the increased volume that I talked about, but also healthy increases in onboard spend, not only duty-free but also generally onboard our vessels. Logistics, as mentioned, benefiting from acquisitions, but the underlying earnings were below last year.Looking at Page 11 on the P&L. It's a little bit the same explanation that I gave for Q4. We had an increase in depreciation. It was mainly due to acquisitions when we look at it from the year-on-year basis. And the acquisitions also impacted the amortization, which together meant that the EBIT were down by 6%. Finance cost, we already talked about. So the last comment I'll make is on tax. Effective tax rate was -- if we adjust for one-offs relating to prior year was 7.5%. So that is in line with what we normally see. You might recall that we have a large one-off in Turkey relating to the earthquake tax. So if we adjust for that, we are at a normalized level of 7.5%.Page 12 on ferry. Volumes for the year was down 8%, but we were still up in freight value revenue by 6% if we adjust from surcharges. Main reason was the tender activities but also higher revenue in Mediterranean and higher rates in some market areas. The EBITDA decreased slightly because the expected negative impact from the oil price could not be fully compensated for -- by the higher passenger results. If we look at the results, they were relatively stable for North Sea and Med, but as we talked about now many times, Channel and Baltic Seas were, of course, impacted by the external events. Passenger earnings increased significantly, as I said, more passengers and more spend and then also a slight benefit from the lower [indiscernible].Logistics, as mentioned, especially the second half of '23 was tough, where we saw a decline in road transport volumes, particularly linked to the U.K., but also in certain industries like construction and the meat sector. And that impacted revenue, which was down 8%, but earnings also declined 5% when we measure organically. Throughout the system, we have adapted cost levels to the new level of activity. And in most cases, we were successful in maintaining earnings compared to '22. But we had in a few of our areas we had declining income, not least due to one-offs related to, for instance, closure of the various operations and other restructurings.Turning to Page 14, a few words on the capital side. We ended the year with a ROIC of 7.6% and 10.4% if we exclude the acquisition-related intangibles. So with the impact of the sale and leaseback, which of course, was significant, we received adjusted free cash flow of DKK 2.8 billion. But when we exclude that, we still saw DKK 1.3 billion excluding this sale. That was because we saw operating cash go up. So it was at DKK 3.8 million, but not quite at the '22 levels because it was reduced by a negative change in working capital, but also the higher interest and tax payments. But this operating cash flow that was compensated for by a lower operational CapEx than we saw in 2022. And that is, as we have also talked about with the strategy, something that we look into having a lower level of operating CapEx.Net interest-bearing debt up 4%, but with the increased EBITDA, we only saw a marginal change in leverage moving from 28% to 2.9%, so maintained in line with our policy of being in the range of 2% to 3%.And with that, I will close the [indiscernible] and back to you, Torben.

[Torben Carlsen, executive]

Thank you very much. On Slide 16, we see that the decarbonization of our very ferry and logistics operations continue to progress. Our emissions on the ferry side reduced 5% across our route network in '23. Our every minute counts program, which is to reduce the time in port and increase the time on the water delivered more than what we had hoped for. We had 90 of the 125 ordered e-trucks deployed by the end of '23. We continue to have the ambition of 6 green ferries by 2030 and we are tracking [indiscernible] divisions for our short-term emission reduction targets.If we then move to Page 18. Then for the year, we are proposing a total capital distribution of DKK 600 million, which equals DKK 10.67 per share. And this will be split a dividend of DKK 169 million, DKK 3 per share and then a share buyback of the remaining amount of DKK 430 million, and we will commence the buyback on the 12th of February and run it until -- the DKK 431 million has been bought.Our outlook on Page 19, '24 reflects the continued flat overall market environment, there's financial -- there's geopolitical uncertainty, and it remains elevated, especially for the first half, we only see a slight rebound in European growth. So overall, the freight markets are expected to be flattish. We think that in '23, we'll see the start of the Turkish growth again once the measures to curve inflation start to kick in. Passenger markets not fully recovered after COVID, so hopefully, still some upside from this segment. We will -- when we report Q1 report, the new acquisition, FRS Iberia/Maroc as part of the passenger ferry results.More specifically on the Outlook '24 on Page 20, we expect a growth of 5% to 8% in revenue. It's the addition of the FRS business, but it's also organic growth and the pass-through of the ETS surcharges that started 1st of January. We have decided to guide on EBIT rather than EBITDA, with IFRS, EBITDA is no longer a proxy for cash flow generation, and we believe that ROIC and EBIT are the numbers that better reflect our value generation. We have an outlook for '24 on EBIT of DKK 2 billion to DKK 2.4 billion, midpoint, slightly lower than '23 as we in '24 are negatively impacted by non-comparable one-off items in '23. Operating CapEx of DKK 1.7 billion expected for '24.Turning to Page 21. What are our key priorities for '24. It is, of course, executing on the revised strategy, unlocking value, continues to deliver reliable and efficient services to our customers, make sure that our capacity matches the demand, organic growth focus, integration of our acquisition in Strait of Gibraltar and focus on improvement in some of our challenged areas.With that, over to Q&A.

[Torben Carlsen, executive]

[Operator Instructions] Our first question comes from Ruairi Cullinane from RBC Capital Markets.

[Ruairi Cullinane, analyst]

My first question is what's the rationale for the shift towards returning more cash through buybacks rather than dividends? My second question is there's been quite a strong start to the year for freight volumes, whilst your guidance in that regard looks more cautious. So is there anything one-off in January? That means Northern European freight volumes may not continue to increase. And then finally, your adjusted free cash flow target suggests another sale and leaseback is likely if the Ekol acquisition goes ahead, should we expect one if it doesn't?

[Torben Carlsen, executive]

Yeah, the voice was a little challenged there, but I think the outlook is when you say we have a strong January volume wise. We do not see one-off things necessarily in '24, we had some elements in '23 that are not recurring, which is part of the -- which of course is taken into account in our guidance for '24 with the DKK 2 billion to DKK 2.4 billion. So I think that's the -- in terms of the adjusted free cash flow, the DKK 1.5 billion, you can say is something that we think we can achieve also without further sale leaseback elements. And acquisition of Ekol is not hitting the adjusted free cash flow as that would be an acquisition if it were to happen.So -- and then your first question about why we -- or what our thoughts are around the capital distribution? I think we are pleased to see that our board agrees with us that it's a good time to give capital back through share buybacks. And that's what this is reflecting and is a shift also from maybe what you've seen before, that we will attempt to maintain a very limited direct capital distribution through dividends around this DKK 3 and then use share buybacks as a residual for the capital we want to get back.

[Ruairi Cullinane, analyst]

Just on the question as to the strong start of the year for freight volumes. So I was just wondering why we couldn't look at that and think that, that might continue into the rest of the year. Clearly, your guidance implies flattish Northern European freight volumes.

[Karina Deacon, executive]

I think the answer to the strong January is very much relating to the channel, which came in higher than what we expected. When we look at our competitors there, there were some dockings and January is the period for dockings. So if competitors take more out for docking and we maybe gain some more, it's not representative for the entire year. So, I don't know if you can call it a one-off effect, but it's just part of the cycle. Then when we take ours out for docking, we will lose a little bit more volume as well. So it's not a proxy for how the year should be.

[Torben Carlsen, executive]

And January, it's a relatively slow month since the start of the year. So it will often be a little bit bullish to just assume that that's what happens the rest of the year.

[Operator]

Our next question comes from Ulrik Bak from SEB.

[Ulrik Bak, analyst]

I'll take them one by one. So the first one is if you could provide a status of the potential acquisition of Ekol and also in that connection, how we should think about the announced share buyback? Could it be reduced if you acquire Ekol or could it be increased if you don't?

[Torben Carlsen, executive]

We have no news on the Ekol acquisition. We will go to the market once there's news to report on that. I would not expect the share buyback program to be impacted by an Ekol acquisition, positive or negative.

[Ulrik Bak, analyst]

So obviously there's a lot of uncertainty about the market outlook, but if it turns out more favorably than you're currently seeing, could that provide a step-up in the share buyback potentially?

[Torben Carlsen, executive]

No, this would be the share buyback for '24.

[Ulrik Bak, analyst]

Then also a question on your volume expectations, in the January volume report, you saw another month with negative growth for the Mediterranean segment. In your outlook section, you state that you expect Southern Europe volumes to be higher than the Northern European volumes. So can you just explain what provides you that comfort, given that we entered the year with another year-over-year decline?

[Torben Carlsen, executive]

We are in close dialogue with our customers in that area. We've seen how the Central Bank in Turkey has increased interest rates to curb inflation. So it is not surprising to us that demand is somewhat sluggish in the beginning of the year. But we do expect that seen in '24 as a whole, that these measures will also mean that growth will be back in Turkey.

[Ulrik Bak, analyst]

And then my final question. What have you factored in from -- in your guidance from the FRS Iberia/Maroc acquisition? And also you book it under the passenger segment, but in your volume reports for freight, you also include FRS volume. So would that imply that revenue per lane meter will decline significantly in '24 versus '23?

[Torben Carlsen, executive]

I think that, yeah, we have for -- just to answer this, FRS is coming in with something above DKK 100 million EBIT in their outlook. And then, sorry, then we had a little activity here, so I didn't hear the second half of your question if you repeat that.

[Ulrik Bak, analyst]

Yes, sure. You included in your ferry passenger segment, but freight volumes obviously impact your ferry freight segment. I see from the January volume report, you include the FRS freight volume in your ferry freight. So the revenue per lane meter, if you don't include any earnings in the ferry freight, that should decline in '24 versus '23.

[Torben Carlsen, executive]

The revenue per lane meter, because you have more lane meters from this and you don't have revenue. We have not looked into that. We will -- let us have a look Ulrik and make sure that you are able to compare these numbers that we're not skewing it by some reporting.

[Operator]

Our next question comes from Lars Heindorff from Nordea.

[Lars Heindorff, analyst]

The first one is also on the guidance. Torben, you mentioned that the 5% to 8% increase is partly caused by the ETS surcharges, and yet you expect volumes to be largely flat. It's at least the cargo volumes. So how much of that growth ballpark will come from the ETS surcharges? That's my first one.

[Karina Deacon, executive]

I'll take that one. It's equivalent to about 1.5% of the increased revenue.

[Lars Heindorff, analyst]

Okay. And then secondly, maybe sort of a housekeeping question. That's for you, Karina. You mentioned throughout the presentation there's a number of one-off items, both in terms of restructuring costs, closure activities, as I understand it also a bit of write-down here in the fourth quarter, in logistics. Can you specify how much that is both on the depreciation line and how much is above the EBITDA?

[Karina Deacon, executive]

I will not give you an exact number. As we've stated that if we exclude these one-offs, we are about on level with last year in the quarter, but it is a number of various one-offs. So of course, you could say it's part of the business to have restructurings and that's also why we do it and it puts us in a better position when we adapt our organizations. So it's more of a, sort of, you could say, almost like a service information saying, by the way, this is not the underlying business that is delivering the results. We have a number of restructurings and one-offs because we adapt to the volume situation that we have.On the depreciation line, we have in total maybe something like to the tune of DKK 25 million, DKK30 million. So it's not massive amount. But again, it's one of the explanations when we look at a quarterly figure.

[Lars Heindorff, analyst]

And the DKK 25 million to DKK 30 million, is that all in logistics or is it split between --

[Karina Deacon, executive]

There's also something in ferry.

[Lars Heindorff, analyst]

Okay. And then a follow-up on that. So maybe you can also, given the sale leaseback, which obviously cause higher depreciation, the run rate and the depreciation chart that we have seen here in the fourth quarter, is that sort of the run rate we should expect throughout the course of '24?

[Karina Deacon, executive]

I think you will see higher depreciation in '24 because we have -- as I mentioned, we have some changes in our vessel deployment where we have some that we are having in on a lease, where we get added depreciation from that. We also have added depreciation from some of our relatively expensive ship dockings that we have or will make, and we have from terminals as well. And then of course we have the acquisition impact. So all in all, you should expect to see higher depreciation in '24.

[Lars Heindorff, analyst]

And then last, maybe also a housekeeping question. The CapEx for '24, will that be DKK 1.5 billion or DKK 1.75 billion? There's two different numbers in the report.

[Karina Deacon, executive]

I hope not. But our intention is that DKK 1.75 billion is the guided capex. I'm not sure where you see the DKK 1.5 billion or whether we made a mistake, but it is DKK 1.75 billion.

[Lars Heindorff, analyst]

Okay. In the guidance table on Page 10, it says DKK 1.5 billion. And on the table on Page 11, it says DKK 1.75 billion.

[Torben Carlsen, executive]

Well, at any event, it's DKK 1.75 billion.

[Operator]

[Operator Instructions] Our next question comes from Dan Togo Jensen from Carnegie.

[Dan Jensen, analyst]

Also, just a few questions left here, on the CapEx side, the DKK 1.75 billion. Is there any flexibility in that number? Could it be revised, postponed, whatever? All depending on how you are hit during '24? That's the first question. Second question is on the ETS. How does that impact the passenger side? Are you able to compensate the high ETS in passenger prices so to say?

[Torben Carlsen, executive]

If we start with the passengers, then we -- the honest answer is we don't know because the year has to pass. But we have introduced an ETS [ chart ] for passengers that -- that will cover this --

[Dan Jensen, analyst]

And that is included in guidance, I expect that you mentioned --

[Torben Carlsen, executive]

We assume that there is a net zero impact from ETS. So it is included in the guidance, yes. And we have started selling [ tickets ] with the surcharge. So, so far it looks as our assumptions are correct. In terms of flexibility on the CapEx side, DKK 0.5 billion of those investments are green investments, so improving the fleet's green profile. So in principle we do have flexibility, but it is not something that we are intending to use unless something dramatically different than what we expected should occur in '24.

[Operator]

Our next question comes from Jesper Nielsen with Transportmagasinet.

[Jesper Nielsen, analyst]

It is about the green transition of the logistics and ferry division. I know you're driving this kind of very ambitious project of this green traffic corridor of electric trucks. How is this going at the moment compared to the CO2 emissions? And my second question is, can you get the customers to help you finance this transition?

[Torben Carlsen, executive]

As you could see in our report, we have now deployed by the end of Q4, [ 19 ] of our electric trucks, and they partly take part of these green corridors. The green corridors are complex discussions and not something that is established overnight because they also require green vessels and green fuels. But we are progressing according to plan with our emission reductions and our green plans for both logistics and ferry.

[Jesper Nielsen, analyst]

Can you get some customers to pay more by using these green trucks?

[Torben Carlsen, executive]

All the customers that are using the green trucks, they pay the corresponding cost.

[Jesper Nielsen, analyst]

Okay. So it's a partnership you're doing with them?

[Torben Carlsen, executive]

Correct.

[Operator]

Our next question is a follow-up from the line of Ruairi Cullinane from RBC.

[Ruairi Cullinane, analyst]

Just one on the channel, I was wondering if we could have an update there and if the capacity sharing agreement has now been extended to cars and passengers and if that was one area where further capacity management actions could be made. And then finally just net interest, what's the best guess for the outlook there in 2024?

[Torben Carlsen, executive]

If I take the channel question then Karina can comment on the net interest. The channel situation is stabilized, I guess is a good word. We continue to enjoy what we think are quite attractive market shares, given our deployment of assets. So the capacity sharing with P&O has not been fully implemented on the passenger side. We expect it to be ready for the high season. But we, of course, continue to see that we can better utilize our capacity through that capacity sharing. So nothing other than that dramatic to report on the channel. There's still lower capacity. And it seems that our initial ambition of the capacity sharing agreement with P&O to be more competitive vis-a-vis the tunnel is somewhat working, at least we can see that the tunnel have lost little market share and that the ferry sites have picked it up. So nothing to report there.

[Karina Deacon, executive]

And on your questions on the financials, as I mentioned, the Q4 is impacted by some negative effects and obviously we don't predict that we will have them. So if we just look at the normal interest, we are probably a little bit lower than Q4 [indiscernible] but it will probably be somewhere between DKK 750 million and DKK 800 million on the financials.

[Operator]

Our last question is another follow-up from Lars Heindorff with Nordea.

[Lars Heindorff, analyst]

Yes, hi. If I may, I'll try to challenge you a little bit on the logistics part of the business. You reported minus 5% organic growth on the top line here in the fourth quarter, and yet you expect close to around about DKK 100 million EBIT improvements in 2024 compared to '23. And that's on the back of something which I understand will be sort of flattish market. Now, if you adjust, Karina, for those one-offs, does that assume sort of a flattish underlying EBIT into '24, or where are we on that scale?

[Karina Deacon, executive]

We expect that we will improve in '24. The one-offs that we talked about just now were in Q4. We've also had other one-off type cost throughout '23 in logistics. And we do actually expect that we will see increased volumes in '24 in the logistics business.

[Torben Carlsen, executive]

And then we also have the full-year effect of both McBurney and Estron.

[Lars Heindorff, analyst]

And the two [ ladder ] ones, how much would those contributed by roughly?

[Torben Carlsen, executive]

We don't have the specifics Lars, but when you add these 3 elements, I think then we are quite confident with our guidance for logistics. It's the one-off, it's organic growth, and it's the full-year impact of the acquisitions.

[Operator]

Ladies and gentlemen, this was our last question. Mr. Carlsen, back over to you for any closing remarks.

[Torben Carlsen, executive]

Thank you very much to everybody for joining the call and the many good questions. We are excited about our new strategy. We are excited about our financial ambitions. And in '24, we will focus on delivering on those. So we look forward to speaking to you again soon. Thank you very much and have a good day.