DSV A/S
CSE:DSV
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
982.2
1 563.5
|
| Price Target |
|
We'll email you a reminder when the closing price reaches DKK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
DSV A/S
You don't have any saved screeners yet
Ladies and gentlemen, welcome to the DSV Interim Financial Report First Quarter 2020. [Operator Instructions] Today, I'm pleased to present CEO, Jens Bjorn Andersen; and CFO, Jens Lund. Speakers, please begin.
Welcome, everybody, to the Q1 2020 results of DSV Panalpina here from Hedehusene in Denmark, where I'm pleased, once again, to be joined today by Jens Lund, as you just heard.We have been looking forward to getting these numbers out to you guys as we have been through unprecedented times, as you would probably appreciate for the last at least 2 months of -- or the 2 of the 3 months in Q1 and also going into Q2.The format of today's session is as you have been used to. And if you go on to Page #2, we have provided some forward-looking statements that I would kindly ask you to read. And once you have done that, we have prepared also an agenda for this morning, with some highlights, an upgrade on -- integration update on the Panalpina integration. We will then, of course, naturally talk about some COVID-19 initiatives that has been happening in DSV, go through the business segments. And Jens Lund will wrap up with a financial review before we will allow you to come with all your questions.So let's start on Page #4 with the highlights. The quarter has been one of the most special in the history of DSV, like in many other companies. What started as a crisis in China in end of -- very end of January and February, rolled into Europe and North America in the month of March. And we saw that this would be much more severe than something which was just isolated to China.We have been -- we are very pleased to say that we have been open for business as normal. In all countries around the world, we have been considered part of the critical infrastructure. So governments, they have encouraged us to keep on working, of course, something that we have a very clear interest in doing ourselves. To my knowledge, we have moved everything that our customers have asked us to move. We have had more than 30,000 people, in various degrees, working from home. A lot of kudos should be given to IT guys, making this possible and fantastic. We have been open for business. We have been able to access all systems from home, which is phenomenal. We are very pleased about that.We also have the backbone of the company is another close to 30,000 blue-collar workers. For natural reasons, they have not been able to work from home. They have gone to work under the strict instructions of the national health organizations, authorities, but they have been conducting a very, very important work, both the warehouse operators and the truck drivers that we have employed in DSV. Without their support, we could not have been operating.So it has been extremely great to be able to establish that we have been able to conduct the business, maybe not as usual, but we have been able to live up to the expectations in general from our customers in this very, very difficult situation.We are actually very pleased with the result this morning. We have been able to establish a satisfactory development in the gross profit. And the growth, it's grown over 30%, of course, deeply impacted by the acquisition of Panalpina. But we've also managed to grow the earnings by close to 8%, also driven by Panalpina, for natural reasons. You will probably ask a lot of questions today, and I'm just warning you already, how much is from Panalpina, how much comes from DSV. We indicated that last quarter that it will be impossible for us to establish that today. So you have to take a total view of the whole company. Now we cannot split the activity levels anymore, and I will come back to that a little bit later on. We're also fairly happy with the adjusted free cash flow of DKK 915 million. And generally, we -- even though volumes have been impacted, we are very pleased with the result. So little bit on the outlook. As you will remember from last time we spoke or at least we have announced it, that we have withdrawn the outlook for 2020. And as a result of the uncertainty, we have also temporarily suspended the buyback that we have.We do believe that the quarter is negatively impacted with approximately DKK 250 million coming from the COVID-19. This is the estimate that we have. We had set out to achieve an EBITDA result of approximately DKK 1.8 billion, and we managed something which was DKK 250 million lower than that.So on Page #5, you can see that the integration is still on track between Panalpina and DSV. We are super happy about that. The COVID-19 situation has only had a limited impact on the integration plans. By the end of March, more than 30 countries have been onboarded from an IT perspective and also office-wise, and it represents approximately 70% of the Panalpina volumes. As we speak now, end of April, that number is very close to 80%. So apart from a few minor delays in some small countries, we are following the plans despite the challenging environment that we are in. One of the main reasons or one of the main topics, most important things that we're also doing is transferring the customers on to the DSV systems, and that is also progressing well. And we have had no significant service issues in that respect.Cost synergies are still, we reconfirm the DKK 2.3 million (sic) [ DKK 2.3 billion ], and the time line is also maintained, as you can see on the slide. The integration cost is also the same as we have indicated before, DKK 2.3 billion.Then if we go to Page #6. We have today announced COVID-19 cost-cutting program. We acted swiftly already in the month of March, when we came to the realization that this was a very severe, what you say, impact. It could have a severe impact on the volumes that we transport in DSV. This is what you get also from us. We have always done what we could to reduce the cost base, to align it with the activity level. If the activity level goes up significantly, we will add cost and staff. And when it goes down, unfortunately, we have been -- it is necessary to -- also to adjust the cost base. And this is, of course, not something we take very lightly. We have said this morning that in excess of 3,000 good loyal employees will have to leave the company, and this is something we do with a heavy heart. It means that we are now aiming to reduce the cost base with something which is close to -- below GP, as to say, something which is close to 10%, namely DKK 1.4 billion on an annual basis. It will hit the divisions with approximately 50% in Air & Sea, 30% in Road and 20% in Solutions. It is expected to be phased in during the second half of 2020, and it will be impacting all countries and all regions and all divisions, as I said. It's also important to stress this morning that this COVID, so called COVID-19 initiatives will come on top and in addition to the announced Panalpina integration synergies.As we have said earlier, it sometimes costs money to save money. And in conjunction with these savings, we will probably book something in the area of one point -- of DKK 1 billion in 2020. It's also important for us to say that we feel that we have a very, very solid financial position and that we are ready to meet the challenges that may arise from the continued developing COVID-19 situation. So I will wrap up my presentation with an overview of the 3 divisions. Air & Sea. I can only reiterate what we have said many, many times before in these sessions. Once again, everything taken into consideration, a strong performance. We, of course, see the impact of Panalpina when the gross profit is growing 59%. So very, very good, and we will come back to the impact of the COVID-19, but it was primarily impacting the volumes out of China in February. But it turned to be a global impact in March as the more and more of our customers were shutting down and got affected, both in Europe and in North America. It is right now a little bit challenging in air freight due to a drastic decline in capacity, and especially out of China right now, it is very busy due to large volumes of PPE going out of China. But I think, once again, the Air & Sea organization can be proud of their achievements.On the volumes in Air & Sea, you can also see that it is -- we have seen a very big impact from Panalpina on airfreight. We have had a growth in number of tonnes year-on-year, 112%. And for sea freight, we have grown 60%. The underlying development is a little bit difficult to account for because we have different ways of accounting for the volume. But we know that a lot of you have asked for this, and we are indicating that the underlying development for air freight could be something like minus 14% and in sea freight minus 9%, so slightly worse than the markets, but then we did see a deterioration already in Panalpina before we came in.What we are pleased about, and it is not unexpected in DSV, that is that the yields have gone up in both air freight and sea freight, as you can see. And then especially air freight has been positive, impacted by the mix effect, but also by the utilization of the legacy Panalpina freighter network, which has gone from producing actually a loss in Q4 to making a profit in Q1. It's a combination of better utilization and better, you can say, structure of the network that we were in the process of doing. I'm sure that you would also ask if we expect these yields to remain at this high level going forward. Everything is uncertain right now, so it's difficult to say, but then we don't expect them at least to drop back to the levels we saw in Q4. But as volumes start to hopefully improve again in the coming quarters, we could see a slight deterioration in the yields. Road, also until March, very good development, tracking plans. But we have seen, as Europe also got shut down during the month of March, an impact in the numbers. So despite a relatively satisfactory top line, we have a small, at least in absolute terms, reduction in EBIT. So we did see that certain industries were, of course, deeply impacted by the COVID-19 situation, especially certain parts of the automotive industry and also fashion and retail, whereas others, actually retail stores, grocery stores, pharma health care has been doing really great. So despite that the borders have been closed, we have been able to maneuver, and we are very pleased about the fact that we have been able to live up to the expectations of our customers.And on Page #10, it is a little bit the same story for Solutions as it was with Road. Apart from a slight impact in China at the beginning of the year, we actually had a good start, but of course, a dramatic reduction in activity levels was seen during the month of March. And that then in the probably the least asset-light of the businesses that we have in DSV, unfortunately, impacted the numbers in March. But I would still say the fact that we still make DKK 159 million in a difficult quarter like this should be seen as something which is fairly strong.We have, once again, seen some one-off costs in the quarter related to specific customer contracts and some start-up costs for new distribution centers. And before you ask how much that is, I can clarify that for you already here, saying that it is a number between DKK 20 million and DKK 25 million. But the environment taken into consideration, also a good result from the Solutions division, who have been hit, of course, naturally in certain verticals, but have also been extremely busy in other verticals. No surprise that e-commerce has been doing really well, and also the pharma and the health care operations that we conduct around the globe has been positively impacted.So with these words, I will hand over to you, Jens.
Okay. Thank you very much. I'll try to make it quickly. Of course, the numbers are a little bit, what can I say, difficult to follow because we have seen, of course, the Panalpina integration impacting the numbers, but certainly, also COVID-19 has drawn the numbers in a different direction. But anyway, they, I think, show that our margin and conversion ratio have been diluted. This is mainly due to Panalpina had lower numbers and the integration of Panalpina and the business case, so that will make sure that we recover some of that. And I think we're doing well, as Jens Bjorn said, on that plan. And if we look at the COVID-19, it's, of course, also impacted these numbers. But anyway, we still managed to increase our GP significantly, which you would also expect. So that we grew more than 30% to 6 point -- almost DKK 7 billion in the quarter. And I think the conversion ratio also actually doing well. And all the things taken into consideration, we produced an EBIT that was 7% higher than last year. So not as we expected. We had expected somewhat more, and we clearly see the impact.Some of the things that are a little bit, I guess, out of the ordinary, and this is typically what happens in a crisis, is that certain currencies, they fluctuate depending on the situation in the country. And as you know, when you do integration, IFRS, if you have short-term intercompany financing, you can't book the exchange rate fluctuations on the equity. The so-called translation risk, you have to book it in the P&L, and that's basically what we have seen DKK 400 million of. And it's normal in a situation like this, that if we have a stable reporting currency and some other currencies, they then perform less good, and then it might have some impacts or some of them even better depending on your position.Tax rate, also another point that could call for some attention. It's 27.7%, our overall long-term guidance. Two things impact the tax rate here in Q1 that are not long-term effects or impacts. One of them is the internal transfers that we do, some of them carry withholding tax. It's not big numbers, but it's enough when you have small income at the end of the day to influence the number. And the other one is the special items where not everything is deductible. So if you take and adjust these, our long-term tax guidance is still the same, but there might be a few fluctuations as we go along. A final note on this page was perhaps that we have 32,000 white collar employees. The numbers is not directly visible. So 27,000 blue collars. So I guess it's clear for everybody that we have reduced our capacity quite a bit in this area. If we go to the next slide. I think the first thing that I would like to mention, and it's actually not stated 100% directly in here. But I think the rating that we achieved a couple of years ago, the BBB+ rating, gives us a very solid stance when we have different counterparties we are dealing with in the different areas. And I would also actually like to thank the banks for their cooperation because I think it took us less than 2 weeks to get the documentation in place, so once we reached out to them and said we would like to have extra financial capacity. We don't expect that we need it, but we've learned from previous crisis that it's very good to have sufficient capacity, and I think the banks, they reacted really swiftly. So that's acknowledged from this end here as well.If we look at the cash flow, we generated more than DKK 900 million, which is actually good for the first quarter because here we typically struggle a little bit on the cash flow side because as you know, the cash flow at year-end is typically low, and then when you go into Q1, and also when you have COVID-19, I think the outcome of producing a cash flow of almost DKK 1 billion is something that we are pleased with. Leverage is on plan, and I think for those of you that noticed that we have also got some long-term finance in place just before the door closed, if we can put it like this, so we established the 7-year Eurobond. And we're very pleased with that transaction as well. Net working capital, it is in the high end, but I guess, it's also impacted a little bit by Panalpina and the fact that we have more Air & Sea business that carries a higher net working capital. And yes. I think that's basically what there is to say. Of course, return on invested capital or other numbers are impacted. But I think nothing out of the ordinary.So with this, I think we should go to the questions because there are probably a few.
[Operator Instructions] Our first question comes from the line of Sathish Sivakumar from Citigroup.
I have 3 questions. So firstly, on Panalpina integration. During the full year '19 conference call, you mentioned that it takes a couple of months to start realizing the synergies once the volume is onboarded. So do you see any changes to this time line due to COVID-19? And secondly, what is your exposure to SME customer base? And what is your risk assessment of potential defaults from these customers and the impact on working capital? Finally, have you been making any use of aid -- support programs by different countries and of course, the governments?
I can maybe answer the last question before I forget it. And then, Jens, you can take 2 other ones. We have, to a relatively limited degree, made use of the support programs from governments. It's less than EUR 10 million. So we have been using those to the extent that it has been possible.And then maybe, Jens, on the synergies and SMGs (sic) [ SMEs ].
If we take the credit exposure, I think we -- if we look in DSV, the top 100 customers, I don't think necessarily that you are about -- or just out of top 100, you are an SME. But the top 100, they account for 30% of our volume. So 70% is less than the top 100. Then I think if you split that further up, I would probably say that perhaps 50% of what is left could be considered SME. And then the other one, perhaps Ms or big Ms, midsized companies. Typically, what we do with all customers, we take out credit insurance on them so that we have an external validation. We've used that for years and years. We use Dun & Bradstreet for this. And then we buy credit insurance from insurance companies. This means that you validate the credit risk via an external party, and you can -- it has a quality, this validation so that you can buy insurance based on that. So we try to stay within those parameters of this for all the SME customers so that we don't go out and take risk that we can't understand. And we have to remember that if we then lose money under this credit insurance program, we are covered for 90%. So it will have a small impact on us, but there's a proper process for that.In the last crisis, we saw that the losses, they increased a little bit, but it still was below 1 per mill. So in reality, it's something that we are used to, that we understand. There will be a little bit of losses. But it should not be something that we should be speaking to our investors about because the risk management should be in place in this area.When it comes to the Panalpina integration, it's right. The productivity gains, they are showing as we go along. There are some initial productivity gains when people, they move on to the platform because it's simply more efficient than the one they came from. But the full productivity, they will get when they have worked on the platform for 6 months. Then typically, you won't be able to tell the difference between the productivity of Panalpina -- former Panalpina employee and the former DSV employee, so the new DSV Panalpina employee will basically be the same.
And just a quick follow-up on -- so you said 70% of your customers are above 100. Out of that, 50%, that's potential SME. So is it more like 35% is your SME exposure? Is that the way to think about it?
Yes. That was what I was sort of alluding to. So I think you got that right.
And the next question comes from the line of Daniel Roeska from Bernstein.
Three questions, if I may. Number one, you commented on the volume developments in Air & Sea, which were a little bit ahead of market. Could you comment on kind of what the drivers behind that was? Is there kind of a conscious decision in there to kind of pivot towards more profitable products or kind of churn less profitable products out of the business? Maybe also your thoughts on perishables at this point in time?Secondly, well understood on the additional costs restructuring that will kick in, in H2 and then last into 2021. As this kind of rightsizes the business, how do you think about the way out of the crisis? If we look back to the '08, '09 crisis, other forwarders that weren't quite as aggressive on cost during the crisis grew a little bit faster on the way out. So does that impair your ability to grow quickly, capture market share once the crisis is over in 2021 at some point, hopefully? And what are you putting in place? And how are you thinking about kind of that recovery and getting staff or the required staff levels back on board at that time? And last question, could you please comment on your plans on the buyback? And I won't ask you for a time line here. But if you could give us some color under which conditions you would consider resuming the buyback. So what do you have to see in the business for the buybacks to restart?
I'll start off with this. Don't be mistaken. There's nothing we would like more to reinstate the buyback program. We are big fans of buybacks. We have always been that. If you analyze the last, I don't know, 15 annual reports of DSV, in most of those, you would find large buybacks. It is a very, very important part of our capital allocation policy, and nothing at all has changed in that respect. Having said that, we think it will be irresponsible and a little bit strange resuming buybacks now or not having suspended buybacks. Saying that we have no financial guidance but we could continue with buyback is counterintuitive, if you ask me. So we need more solid ground under our feet, but -- before we can say anything about resuming buybacks. But trust me, it's something that we follow closely. And once we believe it's appropriate and responsible, we will reinstate buybacks, but it is simply too early to say that.In terms of volumes, what you will also have seen many, many years in DSV is that we don't have kind of this volume obsession. We are more obsessed with profitability. So it has always been profit over volumes in DSV. And if we do not kind of see that a certain business lies right in DSV, we don't want to do the business if it doesn't make sense.We had seen a certain volume being taken out of the system in Panalpina before we came in, and we see a full year effect on that. That will disappear in -- at least in Q3, that effect. We'll probably see a little bit of that also in Q2. Perishables, of course, has been hardly -- hard hit by the crisis. There's no doubt about that. Especially, flowers have had a very big impact also. When it comes to the cost cutting, I don't necessarily see that we will get slow out of the crisis. What we are aiming to do is to achieve a permanent reduction in our cost base, and we will try everything we can for the beginning, at least, of a normalized situation to keep the cost level as it is and only slowly phase in new costs. We simply have new ways of working. We will take new technology into operations. And I think that we will be in a very, very strong situation if we manage to keep the cost base at this new low level in the market. And that should actually enable us to go out and actually gain market share once this crisis is over.
Great. Any fundamental reservations on the perishables product? I mean you commented on that before that you wanted to try it. How is that working out?
That's still what we are saying. We are -- we have the perishables business as part of DSV right now. On certain trade lanes, it's actually working really well. In others, we have challenges. But it was part of the integration -- or the acquisition of Panalpina. And we have no further comments. The comments we have are basically the same we had last time we spoke.
And the next question comes from the line of Dan Togo from Carnegie.
Yes. First, a question on the new cost synergies, the DKK 1.4 billion. Can you be a bit more specific on how exactly that will impact here in 2020? I guess you're introducing now, and there will be some kind of effects maybe already in the course of Q2. And then, of course, a full year effect, I expect, in 2021. So a bit on the time line here, Jens. And then maybe a bit on the yields, especially in Air. I appreciate your comments earlier that it could come a bit down here in Q2. But what are the dynamics taking yields down in the course of Q2? Is it that perishables come back? Is it less urgency cargo? And then just a third one, if I may. DKK 250 million COVID impact in the first quarter is, where your impact is so to say half through the quarter. Is it fair to assume that this number or this impact will reach DKK 500 million in the second quarter? Or can you already now start to mitigate, so the impact will be less?
If we take the numbers first, and when do we expect it to factor in? Of course, we have started to execute. So if you take the DKK 1.4 billion, I guess, you will come to DKK 350 million per quarter sort of -- if it averages out. Of this, you'll probably see, let's say, 25% impact here in Q2. You will see 50% impact in Q3, and you will see 75% impact in Q4, and you'll see full year impact in Q1 next year. So we are going through the program now in the different countries, in the different areas, in the different jurisdictions. And of course, following regulation in these areas. Then you spoke about yield on Air and dynamics when it comes to that. I mean it's very dynamic. I think I can confirm that. So there's, of course, a situation where you have many different impacts. I think there's bottlenecks. There's perishables, as you say. There's -- how can we make the consolidations. We don't have the cargo planes, stuff like this. So simply, it's hard for us to tell then what is the mega trend in this because I think it changes basically, I'm not saying on a daily basis, but at least on a weekly basis.So what is important for us is also that we hold on to our GP and that we keep our market share so that we basically protect our income, and that's what we are focusing on in this area. So I can't really give you any sort of external indicator you can look at and then say then I can figure out what goes on in DSV, because sometimes, we can't even figure it out ourselves. So it is hard. It's very dynamic. Then the last one. You said the COVID-19 impact. And what was it you asked on this one, Dan?
Whether the run rate, so to say, will continue with more or less impact…
Yes. Yes. Okay. That was the reason why -- I think I will try to explain it in another way. I think the way we look at it is, we look at it as a square root symbol. And I think the bottom will either be here in April or in May. So it's sharp down, but then also, perhaps it comes up again. And actually, I think April will probably, given the information that we have right now, be the worst month because automotive starts up now. Retailers still closed down in many places, and then many other things like restaurants, things like that. So everything is closed down. We have Easter in April. When we come into May, it's going to come up a little bit. And how this pans out? I think actually that if we could sell it for the double impact in this quarter. I think you have a deal, and we can shake hands on it right now. But I'm not sure that this is going to suffice. Whether it's then DKK 600 million or DKK 700 million or where we end out, it's hard to say. But if we have a deal on DKK 500 million, and you compensate the rest, we make the deal now.
And the next question comes from the line of Lars Heindorff from SEB.
Also a few questions from my side. Firstly, regarding the cost-outs. You mentioned the DKK 1 billion impact this year. I'm curious to find out what kind of special items that will be related following this. Normally, you say, if I recall it correctly, around about, it takes DKK 1 to save DKK 1. That's the first part. And the second is regarding the tax rate. You talked about, Jens, a little bit in your presentation, well, we should believe, this will reverse back to the 23% longer term? And then last but not least, maybe sort of -- I don't know if you actually can answer this, but the group costs appears actually to be positive here in the first quarter. And I'm just curious if this is a sort of impact from the Panalpina integration, that you moved things around, or if something else goes on. If you could give an indication about the group costs for the full year, that will be super helpful.
I can take -- thank you, Lars. Thanks for the questions. I'll just take the first one and then give Jens also some time to think about the rest of the questions. I know he's eager to answer them already, so don't be mistaken. But the DKK 1 billion, you're right. We've -- it's less actually than what we normally do. For instance, on Panalpina, you're right. The synergy number was DKK 2.3 billion and the one-off cost was DKK 2.3 billion as well. Now we say the cost saving will be DKK 1.4 billion. It's actually between DKK 1.4 billion and DKK 1.5 billion. There's been a little bit of confusion about that. But as one point, we say it's DKK 1.4 billion. And the cost of doing that is DKK 1 billion. It is the structure. It is slightly different initiatives that we have in this program, Lars. So that is why the cost is lower. Of course, when we send out a number today, say this is the best estimate we have. We cannot guarantee 9 months from now that the actual cost will be DKK 1.000 billion, but this is the aim we have. And I can also tell you that we have a very strict, you might not be surprised about that, but follow-up on this. And that all, you can say, initiatives out in the countries where you spent, so to say, these costs as we book special items, they need to be approved and authorized here at this office by us at group level. So we have kind of that number under control. And if you endeavor into larger costs, they either have to be approved by us, or you actually have to book them above the line in your own P&L.And then maybe, Jens, on the tax and the group costs.
Yes. I think the tax rate is -- you should think about the 23%, as I said. Now when we do integration, sometimes, you have some withholding tax when you transfer some activities in the structure. It's not always 100% efficient. But governments, they're trying to recover as much tax as they can. This impacts us as one-off things when we do the integration. On top of that, there's been a few special items that were nondeductible as well. So I mean, that the countries, in general, they broaden the tax base and lower the rate. So there are many things you have to pay tax on these days. So go with the 23% long run or long term, and then you're good in your model.The group costs, we have actually now consolidated all the Panalpina into the DSV allocation model. And I think for the first time in a very long time, we have over-allocated into the structure. So we will have to find a way to reverse that a little bit because we have simply built the countries through high fees and -- or you could also argue the other way round, we've been fast at slimming the cost base in group than we initially planned so either income or the cost doesn't really stack up. So we will adjust that a little bit, and you will be very happy about that because then you can try to figure out what the baseline is for your quarter, and Flemming will be happy to speak to you about it. So we will readdress that, but it will cause a little bit of disruption.
And the next question comes from the line of Robert Joynson from Exane.
A few questions from me. First of all, on the restructuring measures that have been announced today. Of the 3,000 redundancies that have been discussed, are all of those white-collar workers, or does that include blue-collar as well? And then second kind of part of that question, on restructuring, what share of the DKK 1.4 billion relates to staff costs specifically? And then a couple of questions on volume, if I may, as well. Could you maybe just kind of comment on what you're seeing in terms of the current volume run rate? Like, for example, what was the volume growth in April or the second half of April, whatever you're comfortable to comment on? And then just in terms of the sea freight volumes. I appreciate that you're now just giving the headline figures in terms of the year-on-year growth rates rather than splitting out DSV and Panalpina separately. But I'm just conscious that in Q4, that the Panalpina-specific volume declined by 30%, which was because of rationalization measures that you guys carried out. Did you do more of that rationalization in Q1? Or did that -- or was that largely finished by the end of Q4 last year?
On the volumes, April is actually not over yet. It soon is, but it's -- we don't really have very firm, very hard numbers for April. I'm sure you have the same sources of intelligence that we have. But if we have to say a little bit, we do believe that air freight -- the market for air freight in April could fall as much as 30% and sea freight up to 20% in terms of volume in April. That is not a DSV development, but this is what we believe could be the case for April. You are right. We -- you will -- I think it's hard to find in our industry at least a more transparent company than DSV. We'd like to give you as many numbers as we can. We simply just cannot give you the split between DSV and Panalpina as we integrate. As you heard earlier, we have 80% of the volume in one system. And it's not like you have a star on each customer saying this was a DSV or Panalpina customer. Some customers were even before joint customers as well. So it's simply not possible. We would cause actually more confusion than anything else trying to give these numbers.It is right that Panalpina had a slightly different way of accounting for the volumes in sea freight. That was corrected, but I guess it takes a full year before you get the full effect of that. So there has been some impact also here in the quarter. And then maybe, Jens, on the cost-cutting measures.
Yes. I think basically, it's predominantly white collars that we are talking about. Probably 80%, 80%-plus is white collars. And I think when you talk about the special items, it's more or less the same distribution. That perhaps I would say 80%-plus is related to staff. There are leases. There are consultants. There are many other things that we can try to reduce our consumption of as well, and that we are doing. So this also has an impact. But I think that's what I can say on that.
And the next question comes from the line of Marcus Bellander from Nordea.
Yes. Just a follow-up on the current trading. Jens Lund was quoted by some news agency this morning saying that air freight volumes were down 20% and sea freight volumes were down 15%. And then Jens Bjorn, you just said minus 30% and minus 20%. Does that mean you're taking market share at the moment? Or is there some misunderstanding here somewhere?
That's what I said. It's -- things have changed. You can see how fast things go. They have changed since Jens gave this interview this morning. No, I'm kidding. It is very difficult to say, and it's going to be difficult to say if sea freight is down 15% or 20%, I'm saying these -- the numbers I gave is also to be maybe, I wouldn't say, conservative, but it would be very wrong also to give you guys false impressions or hope and to paint a too rosy picture. But the fact of the matter is that we have no kind of when it comes -- we know our own numbers. We track the numbers more closely than what we have done in the past. But when it comes -- so we know more or less how we look, but we cannot say anything about the market because there's no hard statistics out there from anybody. You know air freight volumes, they come more than 1 month delay. So it is more blurry than it has ever been before.
Understood. But could it be that you're, say, a big freight forwarder or a big actor in the air freight market, could it be that you're taking market share because you can get access to capacity that maybe smaller forwarders cannot?
We -- I would hope that in a situation like this, that it would be possible for DSV to gain share, both by using our own capacity, which we have been, I must say, credit goes to the old Panalpina, the legacy freighter network. We were, I guess, it's no surprise, not too enthusiastic about that during 2019. But to sit on air freight capacity right now is something which is really, really great. It's been super attractive for our customers to use this capacity that we have, both our own plane, but also the charter capacity that we have with the commercial airlines also. So it could be -- but it's -- I'm really cautious, Marcus, to sit here and promise anything in respect of Q2. We have to be patient and we have to be a little bit conservative also.
Yes. No, I can certainly understand that. And the last question regarding the DKK 1.4 billion cost cuts, what measures are you taking exactly? Because I just -- I would imagine that if it's all about layoffs, those cost savings would come through a little bit quicker than what you're indicating.
Yes. But it's -- we're a global company. In certain countries, the plans have already been executed. It's done, it's dusted, it's behind us. In others, you need to have certain negotiations, we, of course, respect that deeply, with trade union representatives, even some countries with government bodies. It's not so easy to have these negotiations right now because these government bodies in certain countries here in Europe, they are shut down, people working from home. So it comes in various degrees. So I think the split you got is, of course, a moving target. I know you all want to do it per quarter. It's fully understood. But for us, the most important is, of course, to do it in the most respectful and the right manner, but also to make sure that it's done before this year is over, so it will have a full year effect next year.
And the next question comes from the line of David Kerstens from Jefferies.
Three questions, please. First of all, you commented on the yield development in air freight. I was wondering in sea freight, the improvement in yield versus Q4, is that normal seasonality? Or were there also special COVID-19 mix effects that impacted that development? And secondly, the DKK 250 million COVID-19 impact, is that still, the split DKK 150 million in February and then DKK 100 million March? Or have you now taken a different view on February? And how should we look at the decline in March versus February? And then finally, on the Panalpina integration. I think you were at 60% of Panalpina countries onboarded at the end of the year, increasing to 70% at the end of March and now 80% in April. What drives that difference in momentum in the first quarter versus the month of April? And when do you expect to be completed with the onboarding of Panalpina countries?
I would quickly say something about yields in sea freight. Then maybe Jens can comment on the rest. It's correct that yields have gone up in sea freight. We are super happy about that. It is actually the ongoing integration of Panalpina that had a positive impact on the yields. We were able to optimize some consolidations and also, of course, use the new combined strength in terms of procurement and obtaining rates by the sea freight operators, the carriers. So this is the main reason.Not so much. COVID-19 has not impacted sea freight to the same degree as it has with air freight, as you could imagine. So it's mainly due to the Panalpina integration.
And then on the split, I think the China lockdown, you have to take into consideration, of course, for Air & Sea. It means a lot, and a lot of cargo was not moving there in February. And actually, that had a substantial impact on us. That opened up in March, and we were still able to receive in many areas, so -- and actually, in China, imports also then started up again. So I guess that explains some of it. Then there was also a rush up till the shutdown and before Easter. So actually, that helped us in certain areas in March. But of course, that's not necessarily a benefit when we come into April, because then you get Easter and then you get the lockdowns and then you get more COVID-19 all over Europe basically and the U.S. So I think that explains it a little bit. It's a little bit bumpy. I think that's what you're alluding to. And you would like a V, that is very straight line. But this is not how it works. It is a little bit bumpy as we go along. And then I think on integration, I think you are almost now going into the engine room of some of the stuff that we do. But what has happened actually in the last month is that we -- when you do integration, you make sure that the new colleagues can work on your production platform. And then sometimes, you have some customers that have, what can I say, a higher level of complexity. And these customers, we've been working very hard to find good solutions so that we can move them over. And actually, we had a lot of customers moving over in April.On top of this, due to COVID-19, we had actually countries ready to be rolled on -- out on the 1st of April. We couldn't do this because when people, they start on the system, they have to be in the office. So there has to be a colleague next to them. So we decided to postpone a few countries, and they actually go live today. So that's basically the little swing that we have.And when are we ready? We will have -- the thing is now that when you do the big countries first, you get a lot of progression. But now we do a certain number of countries every month, and we will have done most of them in July, I would say. Then there are still a few countries outstanding where you have some compliance work that needs to be done and to be clear on the systems. And that's the only thing that will be outstanding. So we will have done more than 90% in July, hopefully, towards 95%. And then the remaining part will be done during Q2. And then we will be -- or not during H2, so -- but that's not something we will spend time talking to you guys about. We will consider it done at that time and dismantle the project because it's a normal rollout for us at that time. So that's basically the plan, and it's going really well. Also during COVID-19, everybody is really stepping up and delivering what they have to deliver.
And the next question comes from the line of Andy Chu from Deutsche Bank.
Two questions from me, please. Jens Bjorn, I think you were quoted this morning by the wires, on the wires as saying you don't expect a V-shaped recovery. In terms of industry recovery, how long do you think it will take the industry to get back to sort of 2019 levels? And on the cost reduction program, sort of 10% of SG&A. I guess it's not possible for you to sort of give us an indication of what you're expecting for volumes as that would constitute some sort of full year guidance on volume and activity. But just could you give us a flavor in terms of -- is that -- do you think that's enough in terms of the DKK 1.4 billion? Or could there be scope for that number to actually increase?
First of all, I'm a freight forwarder by education and not a macro economist. So please take that into consideration when I give views on what kind of recovery we are looking into. It's -- we have, of course, taken some learnings into what we have seen at prior crisis, not least the financial crisis 2008, '09. Jens talked about it earlier today also that a V-shape recovery where we get back to and even surpass 2019 levels in a situation where the whole world goes into, I wouldn't say, default, but into a tremendous financial, what you say, a difficult situation, it's just not what we look into. I think from a personal point of view, my personal view is that consumers will be reluctant to go out and spend a lot of money, and I think that will have some sort of effect on world trade. Having said that, we could see a volatile also environment where, in certain industries, we will see a lot of restocking going on because some inventories in certain industries are low and people will probably maybe also going forward like to keep slightly more inventory in stock than before, so they don't expect -- or expose their supply chains to the disruptions that they saw in the past. So some sort of, as Jens said -- alluded to a square root, we go down. We went down quickly. We will come up again, but probably at a slightly lower level than what we were at before. Then we hope that we can gain share and that we can still demonstrate solid growth in earnings in DSV.When it comes to the DKK 1.4 billion, I think it is actually quite ambitious to go out and try to have the courage, so to say, to go out and slim your cost base with 10% on top of what has already been done or is in the process of being done with Panalpina. Should things further deteriorate, I think, again, the only responsible thing for us to do is to align, so to say, the cost base with the volume development. But for the time being, with the scenarios that we look into, the DKK 1.5 billion will -- or DKK 1.4 billion will suffice at -- for the time being.
And the next question comes from the line of Muneeba Kayani from Bank of America.
A couple of questions from me. You mentioned that unit GP in the Air business benefited from the Panalpina legacy freighters. Can you please quantify that in terms of -- either in unit GP terms or just overall GP terms? Secondly, on freighters, with kind of -- if the market is down 30%, and -- then do you get a more balanced market, especially with passenger? Are you now seeing more passenger planes being used as freighters? And is there less need for charter freighters now? So if you could just comment on how that has changed. And then the DKK 250 million impact from COVID-19 in the first quarter. Can you give some sense of how that's split out across the divisions, please?
So I'll take the first question. It's very, very difficult for us to exactly be able to quantify how much of the yield improvement comes from the freighter network. It's -- I would say it's less than half. You shouldn't put too much. It doesn't play a very significant role, but it is the mix effect which has also helped us. We have been forced, so to say, to also utilize the capacity to a better way now as the capacity has been extremely, extremely tight. We see small tests from commercial airlines to use passenger planes to move cargo. I've even heard of cases where seats have been stripped out of airplanes, but it is old passenger planes with a few exceptions. They are grounded right now. Capacity is really tight in air freight, and we expect that to be the case in the near-term future. So we anticipate -- we're in very, very close dialogue with our customers right now, because as they ramp up, they are, of course, slightly concerned that they will not get capacity because it's very likely that volumes will come back into the system before capacity in terms of air freight. So we, of course, try to ensure our customers, they're working with a large freight forwarder as DSV, we will be able to secure the capacity that they need.And maybe Jens, on the DKK 250 million?
Yes, on the DKK 250 million, I would say that, of course, it's hard to say 100%. But given that the February impact was mainly related to air and ocean, that's DKK 150 million. Then I think you could split it normally according to the activity level. So perhaps the remaining part, you could say, in the Q1 is DKK 200 million for Air & Sea. And then it's perhaps 2/3 of the remaining part for Road and 1/3 for Solutions. But going into the next quarter, that's going to change dramatically, because now you see we go to Europe where we have -- and also the U.S. where we have a much larger presence, not least of Road, but certainly also of Solutions. So that's really how it looks. Air & Sea is also impacted here, but to a lesser degree.
And the next question comes from the line of Mark McVicar from Barclays.
Just one question really, one question that spreads across 2 divisions. Could you just talk us through the sort of the operating leverage and the dynamics in the Road and the Solutions businesses? So if you get a 10% or a 15% or a 20% drop in activity, how quickly do your costs between GP and EBIT fall away? And how much stickier or otherwise are they compared to the Air & Sea division?
Should I say something about that?
Yes.
If we look at Road, Mark, you would typically -- the fixed capacity you would have is cross-dock facilities. So let's say that one vertical goes down, but you have perhaps more from another vertical that sort of, what can I say, balances out. And if you have too much capacity in a cross-dock facility, you would typically fill it up with some temporary storage. So I don't think the risk on the Road side is too big, taking care of that. And of course, with the subcontractors, you can reduce them basically on a day-to-day basis. And then you have the equipment, the trailers. But we have a certain way that we contract trailers so that we don't get called out on that. We can adjust the capacity basically on a daily basis with between 15% and 20%. So it's short-term leases that we take out, and then we have a pool of longer-term leases. So I would say, on the Road business, it's actually geared. But of course, if there's less GP, in general, because the volumes generally are 5% down, we need this in order to cover our fixed cost. So of course, they are a little bit suffering. We can then, because we expect lower activity levels, take a little bit of fixed costs out because we have fewer employees.If you come to Solutions, it's very vertical driven. So if you work for customers that are in areas where there's high activity, you have no problem at all. On the contrary, sometimes, you even need resources these days. And then, of course, if you are a supplier to automotive and the factory is shut down, then you have no work. Then in a country like Germany, you can send your staff home, and -- but you still perhaps have to pay rent depending on whether it's your building or whether it's the customer's building that you're in. So that would then be a situation where you would then have a lease, and you will have to deal with that. Then sometimes, if it's your lease, then you can go to the landlord and say, "Can you help a little bit as well?" And sometimes, they will. And in most cases, they won't. So of course, that will lead to some impact in this month. That's the reason why I'm saying that Road, somewhat more impact, but certainly also, Solutions will face quite a tough quarter. So I hope that gives you a bit of color.
Yes. And just a very quick follow-up. In the Solutions division, do many of your contracts have a sort of a minimum payment built into them? Or are they much more sort of closed book, and you're essentially paid by the volume going through the facility under the longer-term contract?
You always pay for the thing that you store basically in a contract. So there is some kind of a fixed, and that typically relates to the rent level. And the speculation in Solutions is if you have high activity, then sometimes you can subsidize the rent a little bit. But in general, you have to price the different services so that they are at market. So of course, the customers have to pay as well. No doubt about it.
And the next question comes from the line of Casper Blom from ABG.
We've talked a lot about how all of this is affecting your business negatively, the COVID-19. But to what degree does it give you opportunities? Thinking perhaps that the other freight forwarders might not have the balance sheet that you have, could there be possibilities to do M&A in the current situation? Or would that be deemed as basically too early after the large acquisition of the Panalpina last year? That's the first question. Secondly, with the DKK 1.4 billion of cost reductions that you're now doing, are you in any way sort of, I would say, tapping into a potential that you also saw in connection with the Panalpina acquisition, but that you, for maybe negotiation or more sensitive reasons, didn't go ahead with back then but now sort of have the opportunity to do? Those are my 2 questions, please.
It's actually a fair point you're raising here at the end, there are certain areas that we might had hoped could continue from Panalpina, where we went in with the best interests, but where we've now seen it is necessary to align most structures to the way that we operate and that we are organized in DSV. It's a little bit of the DKK 1.4 billion, but nothing dramatic, I would say.When it comes to M&A, we have done a very, very large transaction. We have -- we are only 8 months into the integration. So I think it would be irresponsible to go out and do something big right now. But of course, if we do see small tuck-in opportunities in certain verticals where we could gain some competencies, where we could kind of use this environment and strike a good deal, of course, we would be very open to that. But to do something major, I think, we probably need to get into 2021. But we will be open for kind of all opportunities, but the organization also needs to be ready for it.
Maybe just as a follow-up on that. What is your sense on the -- because I suppose the freight forwarding market is very, very fragmented and there are relatively small players out there, what is your impression of how those guys are handling the situation right now? I mean are you already -- are there already someone coming to you and asking if you could be interested?
I mean we -- I cannot say too much about that. It's not like -- what has prevented some consolidation in our industry over many years has been the fact that not only DSV, but also some of the smaller guys have been able to convert almost all their earnings to cash even in a situation like this. So it's not like we're the asset owners that this massively drives maybe the need for consolidation. But of course, we are probably one of the companies who have been the most open about our ambition to take part in the consolidation. So people kind of they have our phone numbers, if I can put it that way. And there has been a few discussions here and there, but nothing major, as I said. So it's not like the whole industry, apart from the big guys, are bleeding. I wouldn't say that. And just for the sake of good order, we wish all our colleagues, small and large, all the best and success. Of course, they are competitors. And -- but it's not like we hope that they will all go belly up in this situation.
And the next question comes from the line of Sam Bland from JPMorgan.
Two questions, please, from me. The first one is: Where the volumes in Air & Sea have declined slightly faster than the market, are we right to think it's mainly from the sort of new Panalpina volumes churning off rather than a kind of underperformance of the older DSV volumes? And the second question is just sort of thinking a bit more longer term about how COVID might impact global trade. Do you see any sort of long-run impact where you -- potentially you could have slightly reversing globalization as people look to shorten transport distances, maybe make supply chains more robust? Anything around long-term globalization impacts from COVID?
There's no doubt about the fact that a lot of discussions are taking place and will take place amongst our customers when it comes to managing their supply chains, both short term and long term. I don't necessarily believe that everything will be -- to change 100% and that all production will be conducted just around the corner from where the cargo is needed. The salary arbitrage from the current suppliers are simply too large. And we always use this example. If, for instance, U.S. customers are dragging production home or close to, let's say, to Mexico, we can, say, make the same profit driving a truck from Mexico into the U.S. as we make taking a container from China to the U.S. So for us, it doesn't necessarily represent a big challenge the way we see it in terms of globalization. But of course, this kind of single-source strategy could be under review from a lot of our customers. But I don't think that -- I think actually that it will be more diversified and I actually think that supply chains will become more complex when it comes to this. And it's -- we've been on for more than an hour. So I'm sorry, I forgot the other question.
The other one was on the -- where volumes have declined slightly faster than the market. Is that mostly from Panalpina channel?
It is so tempting to say it's all to do with Panalpina and all that, but you could also have seen a little negative impact in DSV. We did talk last year about one particular industrial customer in DSV in air freight, where we ceased the opportunity to work with the particular customer because we simply could not get it to work. He could not figure out how to pay our bills on time, and there was a big commotion. So even though it was a lot of volumes, we did cease that operation. So that has probably also impacted. But to be fair, I would say, the majority of the impact probably comes from customers who had already been given notice or had given notice to Panalpina when we came in.
And the next question comes from the line of Cristian Nedelcu from UBS.
Only one last question from my side, please. You alluded to the GP per unit coming a bit down potentially going forward. Could you give us some color what assumption in freight rates do you have going forward? And maybe secondly, related to this. We've been reading about freight forwarders in general applying force majeure clauses over these last couple of months and implicitly charging spot freight rates to their customers. Did this help your GP per unit in any way? And if the lockdowns are lifted, do you revert back to contractual agreements with your clients and no more force majeure? Any color there, please.
Jens can talk a little bit about force majeure. But before that, it's obvious, if you sit on a trade lane where freight rates on sea -- air freight has gone up tenfold, you cannot adhere to agreements that you did at the end of 2019. Our customers are fully aware of that. Of course, they try to negotiate, but we have found solutions together with our customers that we have moved into basically weekly kind of rate agreements. We are seeing now, if we can slowly extend them to have a slightly longer duration, but we are not in a position where we are at least not out of Asia right now where we can offer kind of fixed rates as we were used to. And maybe, Jens, it's the force majeure. It's a delicate topic. Maybe you can shed some light on that.
Well, I think the force majeure clause is something that -- I mean it's a card we don't really like to pull vis-Ã -vis the customers. We would like to go and speak to the customers about the general problem that we have. We might have said it a couple of times. But we would much rather speak what is the service requirement of the customer and how do we deal with it, and then we go back to the normal contract as fast as we can. And we have one very large customer where we have, let's say, a couple of thousand shipments per week. And I think during 1 month, there was approximately 100 shipments where there was some speciality due to this situation. And then we speak to the customer and say, listen, what -- how do we handle this one? And then the customer, of course, they have the same issue with their customers. They are not idiots. They understand this. And then we have to figure out how to find a good solution together with them. And I think that's how we've worked our way through it. I know that some have been out with the general force majeure. I'm not sure that this will work in court if you ever got into that. And it's certainly something that when you play this card, it's quite important that it can handle some transparency, because otherwise, if you play this card and you make the most of the customer, then I'm not sure that you have a long-term business relation with the customer, if you know what I mean. Then they might find another forwarder.
And the next question comes from the line of Frans Hoyer from Handelsbanken.
So the DKK 1.4 billion cost adaptation corresponds to a drop-off at the top line or in volume that you see. And I was wondering, which verticals are they sort of focused on? Any particular verticals? And what makes you convinced that this is the right approach? How certain can you be that these volumes will indeed stay low or recover only very slowly?
It's -- you're right, Frans. We don't know for sure. We just think that the only responsible thing is not to sit tight and do nothing. This is not in the culture. This is not the DNA of DSV. We always act swiftly. The word that you need to remember is that we try to make these permanent savings. We think that with the digitalization, the new technology that we use in DSV, we will be able to achieve operational leverage opportunities also. So the whole idea is that when -- or if volumes start to recover, that we will absorb those new volumes in the new and low-cost environment. We have done that on multiple locations in DSV lately in 2009 and also after we bought UTi also, where the productivity of the company increased, mainly due to the fact that we take this new technology into use.
And any particular verticals that this relates to?
The savings? Or…
No. The drop-off in top line, in the income, in volume.
The verticals, I guess, that you know, for example, are under pressure, you will see that in the media as well, but if you work in either automotive or oil and gas or some of these areas, then, of course…
Fashion.
Fashion, yes. Then, I guess -- that's, of course, area where we have too much capacity at this moment in time because the activity levels are down. And I think it would be great if then automotive came back big time. I'm not so sure that this is going to happen in the foreseeable future. And I guess if you have other areas like we do have some exposure to, for example, the cruise, it's not big. But I guess, in this area, perhaps we've also slimmed down our organization a little bit, because I don't know too many people right now that are booking cruises these days. And I know that the ones that are on cruise, they've got a little bit of a longer journey than they expected. So I guess that's a little bit sort of -- it is what you see out the window yourself. This is also how it's adjusted in our organization basically.
I mean I can -- you're right. I can see that. But in terms of fashion, I would have thought that, that is probably here to stay even -- so I would have thought, it sounds more to me like it's to do with the automotive sector.
We can break it down for you.
[ Also the oil and gas ] related.
We can break it down for you. We have some different areas where we have it. But what we've been focused on is to get the productivity up in certain areas and get permanent savings. And I think that's what we can basically promise to the investor was some credibility, I guess, we have done it before.
And the next question comes from the line of Neil Glynn from Credit Suisse.
You're muted, or we cannot hear you.
Neil, can you hear us? The next question, from the line of Will Waters from Lloyd's.
Yes. Can you hear me?
Yes, loud and clear.
Okay. Great. Just wanted to talk a little bit more about the extent to which the air freight market has become an ad hoc market. You mentioned -- touched on it just now in some situations where rates have gone up tenfold. But to what extent is that the case globally now that the whole of the air freight market has effectively become an ad hoc market? Or are there still some markets in which sort of longer term, the older contractual long-term contracts and arrangements are still in place?
Yes. Without going into too much detail. It's also a commercial issue. It's -- that we don't want to disclose totally. But as you could probably imagine, with the large, large volumes of PPE going out of China right now, it is a little bit a Wild West market right now where there's a big fight for capacity where there's a tremendous congestion also in airports like Shanghai that really puts a lot of constraints on the whole situation. It is a spot market right now. Other lanes are still contract rates. So I guess this is what I can say.
I can say one thing more on the exposure, it's Jens here, the other Jens. Normally, if we have a rate agreement with the customer, we would have a BSA that sort of secures that so that if we have promised somebody something, we will have secured some capacities there. We don't -- we are not a carrier. This is not our policy. So just so that we are clear on that as well.
Yes. But with so much capacity from passenger belly holds, having no longer existing now, presumably, those agreements on other markets, for example, in the transatlantic, you can't -- it must be difficult to stick to previous long-term agreements on markets where the capacity is no longer being flown.
But if -- you have the assumption that there's the same volume. There's also -- there's less volume. So then you find solutions for these areas. And of course, this is probably an area where you can then use the force majeure clause as well or at least have a debate about it. Listen, you're flying out of Copenhagen. I heard the other day that there's 500 people going through Copenhagen Airport on a daily basis. It used to be almost 100,000, and it's for domestic flights. Then I'd say you've based your rate to the customer, then it's a real force majeure, if you understand what I'm saying. Then you find another way, another routing, and then you find another price with the customer, and that's then how it works.
As there are no further questions, I'll hand it back to the speakers.
Okay. If that is the case, thank you very, very much. Neil, I don't know if you are still on the call, but we couldn't hear you, we couldn't hear your questions. So please feel free to reach out to Flemming, Jens or myself after the call. I don't know if you had any technical issues dialing in. But we really appreciate the interest, all your questions. They were all very, very good as normal. We thank you for listening in. We thank all our staff for a tremendous job done in unprecedented times. You rock, you're great, we thank you very much for all the efforts that you have done. We go back now to executing on the plans we have talked about, and then we will get back to you guys at the latest at the Q2 announcement, where we hope the world has been recovering compared to what we see today. Thank you from Hedehusene, and goodbye.