Oesterreichische Post AG

VSE:POST

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the results for Q1 2022. [Operator Instructions]

I would now like to turn the conference over to Harald Hagenauer, Head of Investor Relations. Please go ahead.

[Harald Hagenauer, executive]

Good afternoon, ladies and gentlemen, to this conference call of Austrian Post. Our CFO, Walter Oblin, will give some details on the first quarter 2022 and some details on the outlook.

So I would like to hand over to Walter directly.

[Walter Oblin, executive]

Good afternoon, ladies and gentlemen. Thanks for the opportunity to present to you our results for Q1.

Let me start right away on Page 3, which provides the well-known overview of the key financials of the company and the 3 business segments in which we operate and report our mail business, predominantly in Austria; our Parcel & Logistics business, a portfolio of parcel networks in 9 geographies with Austria and Turkey being the largest geographies; and the third segment, Retail & Bank, comprising our branch network and our recently started bank99. Q1 revenue was EUR 601.4 million.

And moving to Page 4, which gives you a little bit market context. I think the summary is we have been operating since the start of the year in a very challenging market environment with several headwinds. Number one, a consolidation of parcel volumes, in particular in Austria but also in some other geographies after a record year 2021, where, in particular, in Q1, we had positive effects from a longer lockdown in Austria and also in other markets. Number two, an adverse public sentiment having negative impact on public consumption and e-commerce volumes. Number three, given our exposure to the Turkish lira with our subsidiary, Aras Kargo, the strong decline of the Turkish lira, in particular in Q4 last year. And number four, a strong inflation energy costs, staff costs and basically across all categories.

On top of that, we had still a quarter where, operationally, we were challenged by the Omicron wave with 1,000 people at the peak of the wave not being present in the company, causing additional costs. So overall, a quite adverse environment, and this environment is reflected in the financials.

Moving to Page 5 of Q1. Revenue for the whole group was down 7.1%. The biggest impact was the decline of the Turkish lira. Without Turkey, the revenue decline would have been 2.4%. I'll come to the detailed breakdown of revenues later on.

On the EBIT side, the combination of declining revenues and increasing inflation had an impact, of course, also with EBIT down roughly 1/3 with an EBIT margin of 6.6% in Q1. Of course, we reacted with a comprehensive set of countermeasures as soon as those adverse trends became clear over the last months, and I'll later comment on some of those countermeasures. It's a combination of countermeasures on the revenue side where, of course, we try to forward costs to our cost increases to our customers by inflation adjustments. We have reviewed our project and investment portfolio. And of course, we have undertaken several measures on the operational and cost side to adjust for lower volumes and also to squeeze out further cost reductions.

As a result, we have given an outlook 2 weeks ago where, on the revenue side, we see a target of stable revenues as a realistic scenario and where we guided for an EBIT for the full year in the bandwidth of the EBIT of last year and the year before. So numbers in EBIT between EUR 160 million and EUR 205 million.

Let me proceed with an overview of revenue development in Q1. As I said, group revenue down 7.1%, 2.4% in the portfolio. Excluding Turkey, this was the result of 0.1 of a relatively stable Mail business. Of course, we continue to see a structural decline. However, it was minus 4%. I think it's still a moderate and stable decline. Most of the revenue decline came from the Parcel & Logistics segment. And here again, most of it came from the depreciation of the Turkish lira. So 12.5% for the whole business segment and 3.4%, excluding our Turkish subsidiary.

And the Retail & Bank segment showed a growth of almost 50% due to the first-time full consolidation of the acquired retail business of ING Austria in our bank [indiscernible].

Moving to Page 7, which shows you the EBIT development compared to the previous year. Last year, almost EUR 60 million. The 2 core divisions both suffered from the adverse trends. Mail, relatively stable with minus EUR 4.4 million. Parcel & Logistics after a very strong Q1 EBIT last year, down EUR 18.4 million. Again, here, the majority of this EUR 18.4 million coming from the Turkish lira depreciation. Retail & Bank, up 7.7%. And corporate down minus EUR 5.1 million in both segments. We had one-offs last year. So I would say, operationally, we were pretty much stable in both segments.

Let me proceed with some highlights in terms of implementing our strategy and giving you an update on our core business lines, which now summarizes our strategy framework. I think you are -- most of you are aware with that 3 business priorities, depending on market leadership and profitability in the core Austrian business. Priority #2, profitable growth in new markets, both geographically new markets as well as markets adjacent in our value chain. And priority 3, to further expand our retail and digital offering for consumers and SME. And there's an overarching priority, the green arrow in the middle, a strong focus on sustainability, diversity and customer orientation.

Moving along those 4 strategic cornerstones, let me start with our core Letter Mail business. The long-term trend over the last years was volume decline of around 5%. The business upheld well during the pandemic. It was only a slight increase in volume decline despite the biggest accelerator in digitization. I'm referring to the pandemic. This, I would say, relatively resilient. And stable structural decline continued into Q1 with minus 4% core volume decline. I think we continue to show a stable and profitable addressed Letter Mail business where we, all the time, also find opportunities in terms of last year distribution of mails. Currently, we distribute vouchers for the government to compensate for energy cost increases, and opportunities continue to come up.

Of course, given the inflationary drivers across our costs, we are -- we have a responsibility also to work on prices as we haven't had a major tariff change since April 1, 2020. We have decided to raise postal rates for 2 product categories, the economy letter and the economic business letter. We're talking about roughly 1/3 of Letter Mail revenues here, a little bit less than 1/3. You see the changes in tariffs. We think, given the inflation and cost increases around us, this is still a moderate price increase. However, it will make a contribution to stabilizing margins in our Mail business. And with those tariff increases, it will remain one of the cheapest mail markets. And we believe this combination of high-quality and moderate prices has also been a contributor to an only moderate decline of mail volumes in Austria.

Moving to Page 12. Our Direct Mail and Media Post business. Here, a positive development in Q1. We have seen a recovery from depressed volumes in Q1. Last year, plus 10% volume, this is mostly unaddressed Direct Mail. Addressed Direct Mail, still a little bit under pressure. Of course, this business also continues to be structurally declining. And currently, we are a little bit concerned about paper prices and availability of paper for our customers. So far, this hasn't had a strong negative impact. But this would probably be the case in case of a further escalation on the question of gas availability or on the question of availability, in particular, of Russian gas for Austria.

Moving to Page 13, our Parcel business. You see here the strong growth over the last decade. In particular, you see we had a strong growth over the last 2 years against this strong expansion in the last 2 years. And in particular, in the first quarter of the last 2 years, we saw a decline of 9%. This is the result of the absence of lockdowns, which contributed to the strong volumes last year, an expansion of own delivery volumes of our largest customer in Austria and also a subdued e-commerce and retail markets in general. Over the last months, however, we have seen volumes approaching already last year's level. So we are confident that this trend will reverse over the course of the year.

As we believe in a further mid- to long-term growing parcel business, we continue to invest in capacity expansion and sustainability transformation across our network. And as a result, we expect to spend roughly EUR 180 million on CapEx this year.

Where does this CapEx primarily go? Page 15, it goes into the final phase of the expansion and modernization of our core logistics infrastructure for the parcel volumes -- for the parcel business in Austria. You see that over the last roughly 4 to 5 years, we have touched pretty much every sorting center and, until today, pretty much tripled our sorting capacity. There are currently 2 bigger projects still underway. One is the expansion of our logistics center in Upper Austria, providing substantial more capacity for the most important injection point from Germany and the refurbishment and expansion of our oldest and still most important logistics center in the Eastern region in the urban area of Vienna. The logistics center of Vienna, we started this expansion phase earlier this year. And this will be, I think, for the near future, the -- probably the last major project. Of course, there will be smaller projects depending on volume trends going forward.

Moving to Page 16. Our staff transformation continues to advance. You see the -- in particular, the transformation from expensive civil servant contracts under an old collective wage labor -- collective labor agreement to employees under new collective wage agreement with substantially lower cost per product continues absolute headcount pretty much stable given the volume development. And this -- I think this picture will probably continue for the remainder of the year.

Page 17. Now moving to strategy pillar #2. Number two, profitable growth in new markets. This chart shows our regional portfolio. Our partner networks in Eastern Europe have benefited strongly in the pandemic. It has developed well, some good growth, good margin development, all companies being profitable. And this has continued into Q1.

Page 18, I think the most important development outside of Austria has, of course, been the development in the Turkish market. There, we have continued to grow in local currency. However -- both in terms of volumes as well as in terms -- in particular, in terms of currency, in terms of FX translation, we have seen adverse trends also there. On the volume side, of course, we come from a strong Q1 in 2020 and even more in 2021. And I think as you're aware, the Turkish lira has strongly depreciated given a high inflation in Q4. And as a result, in euro terms, both revenues and EBIT have declined substantially.

Yes. Let me skip Page 19 and move to Page 20. Moving to our third strategy pillar, our retail, our developments in the retail sector and the Retail & Bank segment. We closed, December last year, the transaction to acquire the retail business of ING in Austria. We continue to grow. And I think with this acquisition, we have now a bank -- a small focused retail bank with critical mass, 245,000 customers, a balance sheet of EUR 2.9 billion, EUR 1.4 billion credit volumes. Both mortgage and consumer loans are currently -- and this will keep us busy for 2020. And probably also for the first half year of 2023, we are busy integrating the 2 banks, merging the product portfolios, merging 2 organizations, merging the customer portfolios and the product portfolios. The technical migration is, of course, the most challenging part, but we have completed important milestones already over the last 6 months and have a challenging time ahead of us here.

Moving to Page 21, which shows you our -- the development of our self-service zones. We continue to invest in those solutions as we believe they are the most efficient way to serve customers and also the most convenient -- provide the most convenient service to our customers for sending parcels and for receiving parcels in case our customers are not at home. Of course, the overall volume trends have also had an impact on the volumes handled in our self-service solutions. And on top, of course, is seasonality.

Page 23, a brief update on our efforts in the sustainability area. I think you're aware of the targets we committed to, science-based targets with actually a road map towards net zero by 2040 and an ambitious target to reduce our CO2 footprint by 2030. I think the most important initiative is to become CO2-free in the last mile in Austria by 2030. I think you're aware that since 2011, we offer our customers a CO2-neutral delivery of mail and parcel in Austria and step from CO2-neutral to CO2-free. It means that we will eliminate all combustion engines in the last mile by 2030. We have successfully completed a pilot in the second-largest Austrian city, Graz, where we today already deliver 100% of all mail and parcels without combustion engines. So CO2-free, either by pedestrians, e-bikes or electric vans and transporters.

On top of that, there are a variety of other initiatives. And with that, let me now move to the third part of the presentation and provide some more details about our group results. Page 25 shows you the overview of our key financial indicators, revenue EUR 601 million, down 7%, as already commented. EBITDA margins and EBIT margins, I think, on a -- given the adverse environment, I think, on a decent level, however, substantially below last year. And the cash flow, I think, shows that our business continues to be generating cash as a basis for our dividend value proposition.

Let me maybe also skip Page 26 and move to the business segments right away.

Page 27, starting with our Mail division. Revenue in the Letter Mail and Business Solutions segment, down minus 8%. As I said, the core volume trend was minus 4%. It shows a stable, of course, structurally declining. However, moderately declining core addressed Letter Mail business. Why is revenue decline higher than the 4%? Last year, we distributed masks for the government to more than 1 million senior consumers in the Austrian population. This was one positive one-off, and there were 3 other mailings related to the pandemic, which explain it as part of this difference.

On the Direct Mail and Media side, here you see the revenue equivalent to the volume -- for the positive volume development. I mentioned earlier 5.5% plus. This is a particular recovery from a lockdown-dominated Q1 last year. Based on those revenue trends, relatively stable. However, of course, given the overall environment also and the combination of volume declines and cost increases, I think still quite robust profit in the Mail division was EUR 41 million of the EUR 45.5 million last year and an EBIT margin of 13.7%.

Moving to our Parcel business on Page 29. Here, minus 12.5%. This is the result of minus 7% volume -- revenue decline in Austria, mostly volume-driven, 39.1% revenue decline in euro terms of our Turkish parcel business. Mostly coming from the currency development and growing revenues, both in the CEE parcel portfolio as well as in our logistics solutions business. In total, as I already said, 4.5% minus. However, without the Turkish development, a revenue decline of 3.4%.

As a result, of course, very high profit in Q1 last year. It could not be reached, EUR 17.4 million this year with a margin of 6.2% was the result for Q1. As I said in the beginning, also Omicron weighed on our results as we had to provide additional staff to cover for at the peak, 1,000 people being quarantined due to COVID-19.

Page 31, our Retail & Bank division showed growth in Q1 of 50%. Of course, on a relatively small absolute level, EUR 26.4 million of the EUR 17.7 million. This is mostly coming from interest income and provision income resulting from the acquisition of ING's Austrian retail business.

Page 32, profit in the Retail & Bank division recovering from EUR 15.4 million last year to roughly EUR 11 million this year. Last year, there was also negative one-offs included. If you take that out, I think we can talk about the stable operative development. The results in Q1 and also over the next quarters will be impacted also by the migration costs of merging 2 banks and [indiscernible] systems.

Page 33 gives you an update on our balance sheet. I think compared to the annual accounts 2021, a little change. We continue to operate a conservative balance sheet with a strong equity ratio, a conservative provisioning, low level of intangibles. The total balance sheet has grown. Total assets have grown, particularly given the development, slight growth in our banking balance sheet.

Page 34 gives you an update on cash flow. In Q1, I would ask you to focus your attention on the column in the middle, what we call operating free cash flow. This is the free cash flow from operations, excluding any impact from the banking operations. And before, growth CapEx was EUR 72.1 million in the first quarter. I think we show here a quite strong cash flow generation almost at the level of last year. Of course, this is always a little bit running behind the operators' EBIT development, even after growth CapEx still EUR 61 million in free cash flow. So I think we are confident that we will generate a robust cash flow also for the full year as a basis for, again, an attractive dividend, of course, dependent on our earnings.

With that said, I'm closing with Page 36 with the outlook we provided 2 weeks ago. We continue -- we will continue to face an adverse and challenging market environment for the full year with inflation on the one hand, request consumer sentiment and e-commerce volumes as a second driver, absence of positive special effects for the Parcel & Logistics business compared to 2021. Despite these adverse conditions, we have a target of revenues that should come close to the EUR 2.5 billion of revenues last year. We do expect Mail to continue its moderate structural decline, partly compensated by the already mentioned price increases.

On the parcel side, we do expect the volumes, in comparison for last year, the volume trends to improve over the course of the year. And for the full year, at least we expect some stable -- I would say, stability in volumes in Austria and CEE. And the Turkey -- the development in Turkey will, of course, depend highly on the macroeconomic development in Turkey, in particular on the exchange rate. I already mentioned that we will have 1 more year of high CapEx volumes with a total CapEx volume of around EUR 180 million, a well-known order of magnitude of around EUR 100 million maintenance CapEx and roughly EUR 80 million in gross CapEx, most of that resulting from 2 large sorting center expansion projects, as mentioned.

And on the earnings side, we guided our EBIT. As already mentioned in the summary upfront, we guided our -- we guide our EBIT to assuming a relatively stable macroeconomic environment without further escalation of the declined prices. We expect our EBIT to end somewhere in the range between 2020 and 2021, which, in absolute numbers, is the bandwidth of EUR 160 million to EUR 205 million. Of course, the ambition of the management is to get as close -- to get close to the level of 2021.

So thank you for your attention, and I'm happy to take questions.

[Operator]

[Operator Instructions] And the first question is from line of Sean Goodier from Bank of America.

[Sean Goodier, analyst]

Just 3 questions from my side. Firstly, on Austrian parcel volumes, roughly how much of the decline in parcel volumes in Q1 with constrained consumer sentiment versus last year's pandemic impact? And you mentioned that you expect stable Austrian volumes for the full year. Does this mean that you expect volumes to be up year-on-year in the second half? And then on the sort of 90% decline in Turkish volumes, how much of this was actually from weaker consumption in Turkey? I can see in the chart that you also expect stable Turkish volumes in 2022. And can you explain why sort of given higher inflation and weaker consumer sentiment?

Secondly, on Mail, how much do you expect the July Mail price increase to offset your sort of base case for volume declines this year? I understand this only account about 1/3 of Mail products.

And then my final question, actually, is on your dividend policy. Are you still committed to a 75% payout ratio? And is the ratio likely to be lower than last year's given higher CapEx and potentially lower earnings?

[Walter Oblin, executive]

Thank you for your questions. Let me answer the questions in the opposite direction as asked. And so as to the last question on the dividend policy, I think the answer is it's too early for any dividend guidance, but our dividend policy is unchanged. We continued the dividend policy where we commit to pay out at least 75% of net earnings. And I think we also made transparent -- we highlighted the dividend payout ratio in percent of net earnings. When we communicated our dividend, we had a set ratio of around 85% to 90%. And I would say, there is currently no plan to deviate substantially from this level of payout. But again, I think it's too early, but be assured, being a reliable dividend stock is at the core of our value proposition to investors.

Then I think there was a set of questions on Mail volume. I think if I understood the question right, it was kind of to what extent will this offset volume decline. I think the revenue that is underlying is roughly a little bit below EUR 250 million. We talk about a tariff change in the high single-digit figure. So for the half year, these tariffs will be fluid in our P&L. I think you can expect a positive support of around EUR 10 million.

If the question was around, do we expect further -- trigger of further volume decline, I'm not sure if that was the question. But if it was the question, I think, of course, any price increase is a trigger for reviewing mail volumes on the side of our customers, but we do not expect a substantial acceleration of mail volume decline through this price increase. We believe that most of our customers are doing -- are working anyway on digitization efforts that this tariff change will not materially change their digitization efforts. And many volumes are also tied to regulatory requirements, and we don't see any change there.

I think then there was a question on our Turkish business. I'm not aware of a guidance of stable volumes for Turkey. I think we have a profit to make one thing clear. We continue to have a profitable Turkish business, which is -- continues to be profitable above industry averages, however, less profitable than in a record last year. Also in Turkey, we had positive impact from COVID. I think the core question going forward for the full year is the development inflation and government measures on minimum wages and resulting consumer sentiment and purchasing power of Turkish consumers. But I think we have to be aware that the conditions in Turkey will be more -- substantially more challenging than last year.

And on parcel volumes, I think it's very difficult, to be honest, to single out the corona extra volumes. I would say, there is, of course -- out of the 8%, 9% volume decline that we've seen in Austria, probably a substantial part of the loss is due to COVID one-off volumes. And I'm not sure if there was another question on that. If I forgot it, I would ask you to...

[Sean Goodier, analyst]

Yes. So just on the Austrian volumes, you sort of mentioned that you're expecting to be broadly stable for the full year. And does this mean that you expect volumes to be up year-on-year in the second half in Austria?

[Walter Oblin, executive]

Yes. Mathematically, this is the right [indiscernible].

[Sean Goodier, analyst]

Yes. Just on the...

[Walter Oblin, executive]

I wanted to add, we have already seen over, month-by-month, an improvement of volumes compared to last year. This positive one-off of lockdown volumes pretty much was a January, February effect last year. There were no further stores closed in Austria for the rest of the year. Actually, no, there were 3 weeks in December. So there, we might see some impact, but that was 3 weeks. So overall, we are confident that we -- compared to last year, there will be an improvement over the last weeks and months -- over the coming weeks and months, yes.

[Sean Goodier, analyst]

That's helpful. Yes, I just wanted to point out on the Turkish volume I just saw on your chart on Slide 18 that you have a sort of outline for an estimate in '22. This roughly looks the same as '21. So that's what I interpreted as the volume guidance.

[Harald Hagenauer, executive]

No, that's not really a guidance. It's -- the case true for Austria, but I think we have a bit more question marks in Turkey, of course, on the volume side. And we see some help on the price side coming in front of us, but we don't want to give a guidance right now on the volume side in Turkey.

[Operator]

The next question is an Ivar Billfalk-Kelly from UBS.

[Ivar Billfalk-Kelly, analyst]

If I start with your CapEx outlook, you haven't made any changes to this year or next by the looks of things and even in years beyond. But some of your peers are talking about reducing their CapEx spend in line with reducing parcel volumes. Is there a scenario where you might actually be able to reduce the spend on your CapEx if volumes were to decline?

And secondly, your balance sheet remains very, very strong, despite the ongoing concerns. In the context of effectively falling share prices and falling values across the board, is there any scope for you to produce M&A to increase your footprint within the faster-growing segments within Central and Southern Europe?

And lastly, in the context of your parcel volumes, are you seeing any incremental losses to Amazon? Or has that stabilized at this point? And to the best of your knowledge, are there any plans for Amazon to expand their footprint further within Austria?

[Walter Oblin, executive]

So on parcel volumes, Amazon continues to build out its network, its own delivery network across Austria. And we -- and there are plans also communicated by Amazon to add further urban regions over the next years. This is included in our plans and is also part of the volume reduction that we've seen in Q1.

On M&A, I think we continue to look out for bolt-on acquisitions that add value to our portfolio. However, we continue to be very disciplined. The premiums that were paid in recent years led us, in most cases, to the conclusion that we are not willing to pay those premiums if valuations come down. And maybe some opportunities come up, but we will be -- we will continue to be disciplined.

And on CapEx, I think most of the CapEx for this year was already predetermined by projects that we decided on and contracted last year. We believe these are the right investments for securing and defending our market leadership position in the Austrian parcel market going forward. We have seen very volatile development of volumes over the last, I would say, 10, 12 quarters. And if we change our investment strategy every quarter, I think we would not do the right thing. But of course, we will be more careful in deciding on future projects as long as we don't have a clear view on how volumes will develop going forward.

[Operator]

The next question is Bernd Maur from Raiffeisen Bank International.

[Bernd Maurer, analyst]

Not much left. A couple of things I wanted to ask have already been commented on in the conference call. Only one thing to Letter Mail pricing. It now has announced the increase of equal tariffs as of July. Mr. Oblin, you stated around about EUR 20 million annual revenue effect. Can you comment on current box about priority tariffs, universal service obligation, what to expect here? And that's all.

[Walter Oblin, executive]

Thank you, Bernd, for your question. I think the answer -- the specific answer is no, we cannot comment. I think the general answer is we're looking at ways to forward cost increases to our customers in every business, in every product line, be it in the parcel business where we have direct contracts with large and smaller customers. We have, in particular, on the parcel side, the so-called diesel floater clause in most of our contracts, where we are pretty much hedged on the diesel side. So I think that's probably also helpful to know if you look at our parcel business. .

And on the Mail side, of course, with the cost development that we have and with the inflation that we have, there is, on the one side, the needs to -- the need for further price increases along the way. But -- and with increasing inflation, also increasing degrees of freedom, I think most of you are aware that our regulatory regime basically has the consumer price inflation as a ceiling across product groups in the regulated portfolio, the ceiling for price increases. And with higher inflation, we have more degrees of freedom with every month and every quarter that passes.

And so there are no specific things we can talk about. It's always -- we had first to go to the regulator. And I mean we just got the approval from a regulator on a price increase. But I think in general, we are reviewing all products and will make steps when they are possible when we think we can implement them in the market and we communicate once we have made decisions and get regulatory approval.

[Operator]

The next question is from the line of Andre Mulder from Kepler Cheuvreux.

[Andre Mulder, analyst]

Yes. A question on your outlook, especially on the sales side. If I look at the sheet showing the actual trends, I see some negative numbers for the consumer part. Wouldn't you expect that to have an effect on your sales level in parcels? Shouldn't you be a bit more, let's say, negative looking at these numbers?

[Walter Oblin, executive]

You mean the consumer sentiment on Page 4 or so?

[Andre Mulder, analyst]

That's right.

[Walter Oblin, executive]

Yes. I mean, we -- of course, we are in an uncertain and challenging market environment. Given what we have in our sales pipeline, given the focus we get from our customers, the guidance that we have given is the one that we currently see as a realistic one. However, the uncertainty is higher than usual and the visibility is lower. But with that said, that's what we currently believe in.

[Andre Mulder, analyst]

Okay. In Q1, your volumes declined 9% in Austria. Can you single out the Amazon effect?

[Walter Oblin, executive]

Well, I earlier got the question to think about the COVID-19 effect, and I said it's hard to quantify that. I think that the 9% is a combination of Amazon, COVID and lockdown. And it's very hard to single out the precise impact of those 3 elements.

[Andre Mulder, analyst]

Great. And last question, you mentioned the volumes for -- the parcel volumes for Austria and also for Turkey. I'm looking for the volumes for Eastern Europe as well. Do you have them?

[Walter Oblin, executive]

Just give me 1 second. I know we have given an indication here on the relevant page.

[Harald Hagenauer, executive]

You mean volumes for Eastern Europe in the last quarter, yes?

[Andre Mulder, analyst]

Yes. That's right.

[Harald Hagenauer, executive]

It was slightly up of about 3%.

[Andre Mulder, analyst]

Yes, I've seen the delta, but I'm lacking the numbers. So...

[Walter Oblin, executive]

Yes, around 3% is the number, parcel volumes, CEE. It's mentioned [indiscernible], 3% plus.

[Andre Mulder, analyst]

Yes, I was looking for the absolute number though, but...

[Walter Oblin, executive]

Absolute number.

[Harald Hagenauer, executive]

I can send you an e-mail later on.

[Andre Mulder, analyst]

Yes, that's fine.

[Operator]

Our next question is from the line of Marco Limite from Barclays.

[Marco Limite, analyst]

So my first question is on your guidance. You're clearly kind of giving us a pretty wide range for EBIT. So I just wanted to understand if -- at this point in time, which are your best case assumptions for the Turkish business? So am I correct in saying that the upper end of the guidance reflects an improvement in the FX for Turkey while the lower end of the guidance reflects the Q1 run rate or the current condition from a macro perspective and FX perspective also into the rest of the year? So just trying to understand what's your kind of base case for the FX for the Turkish lira.

And the second question is on your cost base. I think you are currently under discussion with unions. There will be wage increase on the 1st of July, if I'm not wrong. So if you can give us an update on that? And still on the cost base, some of your -- the other post operators have flagged some one-off payments or one-off compensation to the logistics partners to compensate them for the extra fuel costs. Can you tell us if you've seen anything on that, if you had to pay one-off payment to your logistics partners?

[Walter Oblin, executive]

Yes, let me start with the last question. Yes, of course, our trucking partners -- particularly our trucking partners are regularly coming to our procurement department and asking for price increases. I think there, we typically also have some kind of diesel floater regime where we basically compensate them for increasing or can also benefit from decreasing diesel prices. We have not -- I cannot say whether we have had any demand, but I think I can say with certainty that we have not chosen onetime payments for our trucking partners to compensate them. So I think that was one question.

I think the second question was the assumption on the Turkish lira for the business. I think what we are assuming here is a further, however moderate, decline of around 20% to 25% of the Turkish lira until year-end. Of course, nobody knows whether that is a realistic assumption. We will know later on during the year. The other assumption is that our Turkish business continues to be profitable. And as I said, it has been decently profitable in Q1, and also the latest figures we've seen from them are encouraging in that direction.

And there was a third question, which was on staff costs. You're right, we concluded our yearly wage negotiations with the Post union end of April. It was an increase of 4% effective July 1. And basically, you can apply that on roughly a staff cost base of about EUR 1 billion. So for the full year, this means roughly EUR 20 million additional staff costs. Of course, then we have some compensating counter effect from the transformation of civil servants and employees under the old collective wage agreement to new collective wage agreement. But that's the order of magnitude if that was your question.

[Operator]

So there are no further questions at this time, and I hand back to Harald Hagenauer for closing comments.

[Harald Hagenauer, executive]

Once again, thanks for participating in this conference call. Ladies and gentlemen, if there are further questions, don't hesitate to call us the next days. We are, of course, available and hope to see you in person in a couple of weeks, a month. Bye-bye.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.