CTT - Correios De Portugal, S.A. (CTT) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to CTT 9 Months 2021 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speakers today, João Bento and Guy Pacheco. Please go ahead.

Good morning, everyone. Welcome to the third quarter '21 results webcast. Well, moving to the presentation, and if you follow me with the presentation on the first slide, we declare that it's been an earnings showing resilient growth. It was indeed a good quarter in all business areas but Mail, with the quarterly growth in revenues of 8.1%, based mostly on Express & Parcels and the bank. And this was achieved notwithstanding the deterioration observed in Mail due to lower-than-expected inbound. In fact, inbound revenues were penalized by the end of the de minimis VAT exemption for non-European inflows, as you know, and this had a stronger-than-expected impact. On the other hand, Business Solutions is driving customer loyalty and contributing to further revenue growth and even more so Express & Parcels with an above-market growth in -- for the business area in Spain, translating into positive EBITDA for the cumulative 9 months of this year. This is a significant anticipation of the initial turnaround targets that we have announced back in 2019. We have consolidated our leadership position in the Portuguese CEP market while focusing on complementary commerce value chain solutions, which are driving, as we will see later on, the very growing of the market. And we have a continued growth of consumer and auto credit portfolios underpinning the growth in the bank business. Moving to Slide #2. Well, I will highlight another consecutive quarter with revenues above -- this time, slightly above EUR 200 million with the recurring EBIT of EUR 11 million. That, as you can see in the bottom of the slide, now is based on a much flatter contribution of the several business units to the formation of EBIT. This was mostly based on Mail, not so long ago. And now with significant contributions from Express & Parcels, from the bank and, of course, Financial Services & Retail. Moving to Slide #6, third slide in the deck. And expanding on Express & Parcels, we are calling a healthy growth on the business area, driven by market growth and market share gains in the Spanish operation as the main attribute for the quarter. This growth has been observed both in volumes and in revenues with a significant growth ratios between last year and this year for the quarter, above -- well, roughly 37% in terms of volumes and almost 31% for revenues. And with this, we are moving from considerably negative EBIT that we have in the business area, not so long ago, the third quarter of '19, minus EUR 2 million to almost plus EUR 2 million in this quarter. Moving to Slide #7. We are continuing the rollout of complementary CEP solutions in the commerce value chain that is contributions in which we play an active role to expand the market itself. We have here highlighted some of the most interesting assets for the quarter, starting with cargo. We have now a new operating model of last mile B2B cargo with specialized partners. So this is a much more efficient operating form. It allows us to keep an interesting cargo offer. And in this process, we have also actively managed pricing. And with that, we have removed less interesting sectors, such, for example, tires, which was very negatively contributing to the business. Then we are now moving at a faster pace on e-fulfillment with different forms of delivery, in which same-day delivery, we decide to call the attention. And now we are doing that on a regular basis for large retailers, like, for example, Nos and Worten. And we have started also instant food delivery with Zomato in Lisbon and Oporto to start. We have also been very active on developing the PUDOs network, which has now more than 2,000 points of presence in Portugal, of which 150 are parcel lockers. This is growing on a weekly basis, and we have a very aggressive project to deploy this much larger parcel lockers network, and we are taking advantage of the fact that we have our own technology and production. So a number of initiatives that we'll -- and keep contributing to grow the Portuguese market. Moving to Slide #8. We can see, well, some of these consequences with an interesting and steady growth, notwithstanding the reduced contribution of cargo for revenues, but for healthy reasons, I would say. And with that, we have seen that part of the growth is based on capturing large Chinese e-tailers, some of them injecting directly on the CEP network in Portugal for the first time. And also revenues that -- although the cargo contribution declined due to the churn of those unprofitable clients, still with positive contribution for revenues and interesting growth on -- well, even also for Portugal. Moving to Slide #9. The figures in Spain, very interesting revenue growth. This is driven, as I said before, by solid market share gains. And we've been able to sustain the growth momentum that was generated during the pandemic, which became an important part of the turnaround plan. And therefore, volumes keep growing very consistently, almost 80% quarter to -- well, between the third quarter last year to this year's third quarter. And the same in revenues with a 70% growth, resulting on a very solid year-on-year revenue growth. Moving to Slide #10 and looking at the market share gains, this is driven by B2C client acquisition on top of a market that is growing itself considerably. And we've been watching a compound growth between B2B and B2C of 19% from 2017 to 2020, and we are foreseeing a significant growth, especially based -- with almost flat or lower growth on B2B, but there's an impressive growth on B2C, and we see ourselves grabbing part of this growth and again, on top of that market share growth. And if you look at the right-hand side of the slide, moving from 3% to 4% in the last 3 years means that we grew 1/3 of our market share, which is for a very large market, very interesting. Moving to Slide #11. The profitability in Spain stems from a contribution of our combination of various aspects, of course, growth, efficiency and the fact that we are increasing scale. Scale is very important because some of the fixed costs are now leveraged within a larger operation, 18.9% of revenues, that is minus 5% than last year and with very significant unit cost decline for several operational lines, meaning last mile handling and especially so transportation. And with this, we've been able to achieve a positive EBIT in the quarter and -- EBITDA in the quarter and the accumulated EBITDA, which is, as I said, in the opening slide, very interesting in the sense that allow us to achieve the breakeven well ahead of our initial commitment. So a very good outlook in Spain. If we move to Slide #12, we are basically sharing the fact that the ambition is to increase market share to high single digits and grow the EBIT margin to mid- to high single digits. And we are targeting 2 sets of levers. One is to increase market share basically through commercial activities that are described in the slide but also increasing profitability by developing scale, refining price dynamics and also by deploying some Iberian projects in each scale. It's not based on the Spanish market, but on the fact that we have now a full-fledged Iberian operation. If we move to Slide #13, and back to Mail. While the revenue trends were penalized by this inbound decline, driven by the end of the VAT de minimis thing. We have, in fact, an interesting development in several components of Mail with, well, a slight growth in lower value mail with an interesting growth on higher-value mail, but with a significant decline in the part that contains inbound. Of course, we report this with Business Solutions and the fact that we have incorporated NewSpring and going to expand this later on, contributes to -- also to growth in revenues. The most negative impact was, of course, the VAT de minimis, which is going to be detailed as well. And we see digitalization of the customer experience and maybe some improvement in convenience, and therefore, promoting the usage of Mail and contributing to a lower decline on transactional mail. Moving to Slide 14, a bit additional -- an additional insight on the de minimis negative impact. This was higher than we have anticipated. This is a trend that we've observed across all European posts. In fact, the EU tracked inbound mail volumes declined with the impact of 1st of July, roughly 30% in July, August and September. In our case, it produced the decline of EUR 4.3 million or 46%, which is something that compels us to act on a faster way to recover profitability mainly through new actions on costs that we are going to detail later on. If we move to Slide #15, just an additional highlight on how NewSpring is contributing to growth on Business Solutions. It's been, so far, a very successful early period. We are now focusing on cross-selling, but the company itself with the existing portfolio of clients is showing an excellent performance with EBIT and EBITDA above the initial plan, which is very good news. And we are now putting the commercial power of the CTT channel to grab new business for NewSpring by expanding to public sectors, to telcos, to SMEs and to utilities. And just to give you a brief idea, 125 new clients have been already approached since the company was incorporated. So a very good outlook for NewSpring and the future of Business Solutions in our portfolio. Moving to Slide #16, we describe the whole range of business solutions portfolio throughout 6 pillars, each of them with different goals. So the first set is pure BPO, in which we include Mail & Document management and support services. The second set is Commercial, what we call commerce service, advertising and e-commerce services mostly. And then a set of management -- of verticals and transactional, which are typically more opportunistic. And we have different strategies for each of them. So for BPO, in fact, we want to consolidate and grow. For commerce services, we need to continue to explore and grow. And we continue to explore other in an opportunistic way in the sense that it provides interesting share of wallet opportunities with our very large customer base, especially so for SMEs. Moving to Slide #17, a word on costs. So in what regards -- in what regards the impact of inbound and regardless of how fast this inbound will recover, we remain very focused on costs. And so we thought that we should expand a little bit more on this, and I will pass the floor to Guy, to describe our comprehensive approach to cost optimization as a quick answer to the impact of the inbound inflows.

So good morning. Thank you, João. So starting on the same page, 17 that João was mentioning, where we covered our cost efficiency after a difficult quarter on Mail. The decline in inbound Mail revenues obliges us to go faster in this front, in the cost front to sustain Mail profitability, although we continue to believe that structural improvement on the profitability of Mail need to come from a more balanced and sustainable concession contract, and João will give you an update on that later on. The company will continue to invest in the transformation development of its growth levers, namely the financial arm and Express & Parcels. But we need to reinforce and continue to aim to gain operational efficiency. And in the next slide, we can go a little bit deeper on that. So we believe that last mile optimization and interoperability of Express and Mail networks offer room to improve. In March this year, we shared with the market, the new distribution model that we call shamrock model. That will enable basically a mailman to do 3 different routes in consecutive days, consequentially covering more ground and thus being more productive. We have already optimized 40% of the routes, and we'll revise all the routes during 2022 before year-end. And we're already seeing productivity gains on revised routes as we show in the right part of the chart. These optimized routes and other investments in technology also enable us to continue to move more parcels through the Mail network. Year-to-date, that number is already increasing 13% and we are also implementing a new contract structure for our last-mile service providers that will bring savings of about 5%. We are also doubling down the efforts to restructure corporate functions, where we are in negotiation currently in the exit between 175 and 200 people on those functions. Moving to the next slide. We also believe that we can seize more cross-border synergies with a renewed and increased in scale Spanish operations. In operations, we are changing the linehaul network designed to be more efficient in the Iberian approach. For that, we are opening 3 concentration hubs near the Spanish border that will enable us to be more efficient here on linehauls between Spain and Portugal. And we are also deploying the new tools that we developed and tested in Spain in the Portuguese operations, namely on-field force and linehaul management. We built also a joint procurement to benefit from this improved scale and negotiations, and we are also unifying big management contracts between the 2 geographies to try to capture more savings. In Slide 20, moving to financial services. We continue to see an increase when we reinforce commercial productivity. Our financial services had a very good performance in terms of product debt placement, that grew 28.4%. That almost compensated the lower revenues in orders and payments and add the pricing impact of the new public debt contract conditions. On retail services also showing good progress on revenues and growing 37.8% on the back of new products offering and the renewed commercial focus. On Banco CTT, Page 21. Consumer auto lending and savings continued to drive growth. We saw auto loans grew production 9% in the third quarter, benefiting from the doping of the economy, the credit cards through the new Sonae partnership, also more than doubling until September, and we are approaching very fast to the EUR 300 million mark that we commit to develop in 12 months. Although we are ahead of that plan. And off-balance-sheet savings continue to perform very well. The bank already has EUR 617 million of the savings. And the customer fund is also developing as the Portuguese economy continues to have high levels of savings -- mortgages with a slower pace, but this is resulting from the increased focus on the consumer credit size and more reactive approach for -- in mortgages. Moratoria is also ending in the end of September, reducing the amount to EUR 3.4 million and no big signs of concern on this. So we think this is mainly resolved. Moving to the financial section and on Page 23, starting with our key financial indicators, where we can see that this was a good quarter in terms of revenues on the back of parcels growth. And that will be translated into profitability as Spanish operation continues to gain scale and translating that to profitability in the near future. In the second quarter, we saw our revenues grow 8.1%, with growth in most of our business areas with the exception of Mail. As was already mentioned, Mail revenue suffered by a higher-than-expected impact following the end of the de minimis VAT exemption for the non-EU inflows, mainly from China. In the 9 months, our revenue stood at EUR 612.9 million. That represents a very healthy 14.7% growth. Our EBIT in the third quarter reached EUR 11 million with a strong decline due to the Mail division. And despite all other business areas have been growing, the de minimis impact hurt us on this regard. In the 9 months, we had EUR 39.7 million of EBIT. Specific items this quarter with a positive contribution, reflecting mainly the lot sale of sovereign debt securities to optimize the Banco balance sheet to fund the growth we are experiencing. And in terms of net profit, EUR 9.1 million in the quarter and EUR 26.3 million in the 9 months. Cash flow is also growing well, EUR 8.1 million in the quarter to, in the 9 months, EUR 39.4 million accumulated. And then next page, we can see the detail of our revenue evolution, a strong quarter, as already mentioned, 8.1% growth despite the decline on Mail. Express & Parcels and Banco CTT clearly driving most of the growth. In Parcels, we continue to have a very strong momentum both in Spain and in Portugal, where the business unit grew 30.4% in revenues. In Portugal, volumes grew 15% in the third quarter, driven by e-commerce, leading to 8.7% revenue growth or 18.1% if we exclude the cargo effect, and that is transitioning to the new model with impact that João mentioned. In Spain, in the quarter, volumes grew almost 80%, supported by the same e-commerce trends, but also with a big effort to capture market share with the e-tailers. Customer acquisition definitely led to the growth of the top line in almost 6 -- above 69%. Mail revenues declining 4.9% in the quarter and mainly driven by the EUR 4.3 million in bound revenues, in part due to the de minimis event, where we saw a higher-than-expected demand elasticity and also volumes lost to other routes throughout Europe and that Chinese e-tailers proactively promoted. National mail showing a resilient performance, declining 1% and Business Solutions growing 36.3% following the consolidation of NewSpring. Banco CTT with a strong quarter in terms of revenue growth, 23.8% on the back of what I already mentioned, credit cards and auto loans and also commissions growth as we continue to monetize the growing customer base that we are building over that. Financial services, we had strong quarter, 10.1% growth with strong public debt placement about EUR 1.2 billion and a strong growth in revenues of retail that almost reached 38%. Page 26 -- 25, sorry. We have our OpEx that grew 10.3%. Express & Parcels driving most of the growth with EUR 12 million or 25.6%, but resulting from volume growth that was almost 37% in the business unit, but drove that growth. In Spain, we continue to see decrease in unit costs due to the increased scale and consequential operational leverage and investment made in automation and technology. Mail growing EUR 400,000 or 0.4% due to the higher costs associated with the new customs procedures, in line with de minimis and the difficult to timely adopt the mail distribution network to this new volume reality, specifically driven by the inbound. Banco CTT growing EUR 4.4 million, mainly due to the higher cost of risk that the new credit card activity brings and also to IT investments and increased marketing activity. Financial services and retail were EUR 0.9 million related with the increase of the retail sales. Our EBIT on Page 26, declining to EUR 11 million due to the Mail division performance, to the already mentioned de minimis impact despite Express & Parcels and Banco CTT with a significant growth. In the quarter, Express & Parcels growing EUR 2.1 million, reflecting mainly the Spanish operational improvement on the back of that strong growth of almost 17%, Mail suffering by the loss of the revenues inbound and the inability to react timely on costs. Banco CTT growing 0.7%, driven by the credit card and auto loan commerce and commissions and financial services also benefiting from the revenue growth that we saw previously. In Page 24 (sic) [ 27 ], we have our cash flow evolution in the 9 months, with operating cash flow stood at EUR 51.4 million after the second quarter in terms of cash generation, benefiting also for the specific items, positive contribution of EUR 5.8 million. Free cash flow of -- standing at EUR 39.4 million. And our net debt is now consolidated net debt of EUR 59 million. I'll now hand you over to João for his final remarks.

Thank you, Guy. If we move to Page 28, we decided for obvious reasons to have a more detailed description of what's happening with the concession. So as of this week, a new step towards a more sustainable concession contract was known and made public with more detail. The decision was already known, but now it's fully detailed. I would like to call your attention to the fact that we've been on a convergent route with government since the extension was imposed to panels by the end of last year. So this is a very good demonstration of willingness to proceed. What happened? Well, as said in the right-hand side of the slide, we know that it's going to be a 7-year term contract that the procedure is through a procurement mechanism awarding directly to CTT through negotiation. And for that purpose, and so-called the evaluation committee -- we call it negotiation committee -- will be nominated in the next few days to prepare the tender and to invite us to present the proposal, what has already been disclosed on willingness to do -- willingness and, in fact, decisions to do differently. Well, on density, basically not much changes. The criteria to define the threshold for density remains with ANACOM, and we don't expect any major change. The new aspect is that now one post office per municipality was defined as the minimum threshold. We are already there, as you know. We believe this was extremely important to -- for CTT to regain reputation, and we started that process long ago, actually a few days after I joined the executive team. And by the way, we are opening the last of these stations on the next -- 22nd of November. Then on quality and pricing, we have interesting news. First on quality, the perimeters and the objectives should be aligned with European Union best practices. There's even a mention that it should be in line with the European Union average indicators. And the major aspect, the government will now set the quality parameters and targets. Although they are proposed by ANACOM, they are proposed under the conditions that have been described, and then it's government that takes a decision. An interesting aspect also is that in case of non-compliance with the quality objectives, the mechanism will be mostly through compensation of new investment obligations rather than price penalties. So a very interesting setting for the future in terms of quality requirements. Likewise, for pricing. Now the pricing criteria, as stated in the resolution, should encourage an efficient operation and ensure the economic and financial sustainability of universal service provider with several mentions that things have changed and the pricing mechanism needs to adapt as well. The price formation will be approved by government upon the proposal by the concessionaire after analysis by ANACOM. But before that, the criteria will be settled in a multiyear agreement to be discussed and agreed between the concessionaire, ANACOM and the Director General concerned with the consumer. And so again, good news. In case there is no agreement in that tariffs committee process, it's -- the government will set the pricing based on the principles that have been described. And for 2022, there's also a mention that the prices will be the prices applying to the next contract. So a very important step. That, of course, needs the process to be now, I would say, smooth and fast. And that will have that we have reassured, we have received several signs of the assurance that regardless of the political situation, the government is committed to take this to an end before the year-end. And with this, I would invite you to move to Slide 29, our last slide, in which we state the outlook. We are, in fact, ready to keep growing and to grabbing further growth. We are observing and we are, in fact, deploying the continuing acceleration of our digital initiatives that will further strengthen our competitive position. While the COVID-19 resurgence throughout Europe doesn't allow for removing the uncertainty related to the pandemic, and we have this very important new risk factor, which is the impact of the de minimis on revenues. It was stronger than anticipated. Because of that, and as Guy has described with some detail, we persist on cost optimization to compensate for that, so as a short-term reaction. And we see, I would say, a wide set of initiatives that will enable us to produce interesting results, we trust. But the structural improvement in profitability will only come -- a formal will only come with a more balanced and sustainable concession contract. And again, there, we have good news because of the government resolution that has been described. All in all, and with the challenges and also the good news, well, combined, we believe and remain committed to achieve our final year '21 EBIT above EUR 60 million, as stated in the previous quarter. And with this, we will end our presentation and remain open to questions. Thank you.

[Operator Instructions] The first question comes from the line of Filipe Leite from CaixaBank.

I have 3 questions, if I may. The first one on EBIT target. First, just to reconfirm that the target is for recurrent EBIT and not for reported EBIT. And also, how comfortable are you that it will be possible to reach the target, considering that it will require a significant improvement in the EBIT of fourth quarter when compared with this quarter, with third quarter? But at the same time, you are also saying that the end of VAT exemption in small parcels should continue to be a risk factor. So should we expect a significant OpEx improvement already in fourth quarter? Or should we see it coming from probably top line improvement in order to reach the target. Second question on E&P. And if you continue so positive in the e-commerce evolution in the last quarter of this year because Amazon said recently that the increase caused global logistic chain problems and the return of consumers to the physical store should have a significant impact in the e-commerce already in fourth quarter of this year. So are you also expecting some slowdown of e-commerce in fourth quarter? Or should we continue to anticipate a strong quarter? And last one on cash flow, and this is actually a clarification, because you mentioned in the presentation free cash flow in the third quarter of roughly EUR 8 million. But despite that, your net cash position, excluding lease liabilities stood almost unchanged when compared with the one reported in the first half. So can you help me to understand why net cash still flat despite this positive free cash flow generation in the quarter?

So first question, of course, we are aiming at recurrent EBIT, and that should be clear. Regarding confidence, it's, in fact, a combination of both your suggestions. It has to be OpEx improvement and top line improvement as well. We have, of course, an uncertainty related with how the de minimis impact will somehow turn. But what we believe is that regardless of that, we have room for OpEx improvement and again, top line improvement. And with that, I will move to the second question about how confident we remain on Express & Parcels. And you are right in those times, namely that Amazon has revealed. But we have now, I would say, rather sophisticated forecasting routines and signs that we are receiving from our customers will allow us to have a positive outlook for the peak season, and therefore for the quarter. So we remain confident that E&P will keep growing. And I will pass the floor to Guy for the cash flow question.

So the reason the cash flow generation of the quarter didn't translate to equivalent net debt evolution is basically the payments associated with the closing of the transaction of NewSpring.

[Operator Instructions] Next question comes from the line of Antonio Seladas, A|S Independent.

Two for you now related with the bank. So the first one is related with your cost of credit risk is now slightly above 1%, 1.1%. So if you can provide us some guidance on this evolution -- the evolution of cost of credit risk? And the second question is also related to the first one. Your credit use -- the use that you mentioned on the presentation at about 6.3%, and for auto loans about 6.1%. However, the cost of credit risk has been increasing. So my question is, I hope that credit card loans will earn higher yield because the cost of credit risk will be higher. So can you share with us, if I'm thinking right or not? Or, well, if you can explain this issue, please?

So let me try to clarify, so cost of risk is increasing not because an underlying increase of the cost of risk, but because of the mix of the credit book that we have, okay? We have around 1% cost of risk for auto loans, the credit cards, as we stated, when we announced the [ Sonae ] partnership is around 3%. And mortgage is much below all of these values. As the credit card share of the credit book goes up, it's basically mathematics in its function, the credit risk is improving. Regarding your comments on the profitability, let's say, we -- on the credit card, net contribution for our margin, it's below the auto loan contribution as we announced and as we expected.

The next question comes from the line of Marco Limite from Barclays.

I've got just one question left. So just going back to the VAT exemption for non-EU inbound volumes. So can you just confirm that most of those volumes are mainly small parcel coming from China, but classified as letters, I don't know, such as like iPhone cases or things like that? And therefore, in Q4, generally, given that our e-commerce related volumes, those volumes have got -- yes, you've got higher absolute numbers of those volumes just because of the seasonality. And therefore, in Q4, we could expect an even stronger impact to EBIT just from those volumes? And yes, just -- and actually, the second question is, can you just clarify if we should expect this also for the first half of next year just because of the comp base?

So what we witnessed with the disruption of these flows, is it was basically twofold. First, it's an elasticity on demand because the overall pricing of these parcels coming from China, that you are right, are mainly booked on Mail increasing. And that we have new routes to Europe because the Chinese e-tailers found other routes to other countries in Europe. What we expect is, first, of course, seasonality plays a role here and this elasticity effect to go down as people realize that the Chinese e-tailers are still very competitive in terms of pricing despite this price increase. And we think we can capture more share of the volumes that have been rerouted to other countries. Nevertheless, we aim to go faster on the cost optimization front to sustain the Mail profitability, namely to what I already mentioned on last-mile productivity gains, exploring synergies with Spain and to optimize corporate functions, be it on the headcount front, be it on the facilities, the other levers we can touch in the first place.

Maybe, Marco, let me just add what aspects, which -- regarding elasticity. It's not only the increased cost because of taxing, it's also very significantly the attrition related with the customs processing of all this. And in fact, in that sense, things will improve [ years or year ]. First, because most Chinese e-sellers are now charging VAT and in the early days after the 1st of July, some of them were not. So people will have to pay VAT on a very cumbersome process. And that's almost disappearing. So that is a very positive aspect in terms of elasticity. And then because after a first impact, but because these remain very competitive marketplaces, people will return. We have a sign from a very large Chinese e-tailer saying that they have faced a 40% decline, sudden drop to European destinations. And they expect that at least half of that will be back by the beginning of next year. So there's that effect of attrition also. And in fact, the signs are that for that purpose, for that single reason, it should improve.

The next question comes from the line of Artur Amaro from CaixaBank.

Picking up the question from Marco. We've read in the newspapers that the de minimis had an issue also related with the fact that there's been several delays in the -- of the parcels and some bureaucratic questions regarding the decline to pick up the parcels. But my question is, we're going -- entering the fourth quarter, we expect some pickup in this kind of inbound mail. What has been done so far from CTT in order to make this process more quick and more faster or more efficient? That's my question.

Let's see, we continue to improve -- to work with the Portuguese authorities that are the ones that define parcel procedures to improve the process, and we are seeing the efficiency flows improving throughout this quarter. Then there is this other impact that João mentioned, that is as parcels come with VAT paid in the origin, the customs procedures suddenly becomes much more efficient because there is no local additional work to make them go out of customs. So both by the process be more efficient or by elasticity things should improve. But nevertheless, we are committed to focus on costs to prevent sustainability of Mail or to preserve [ the system of Mail ].

Maybe I could add just one additional aspect, is that because of this, well, disturbance related with the VAT de minimis thing, a lot -- and Guy already referred to this, a lot of Chinese e-tailers tried to find other routes. This is a trend that started with the pandemic. Because when flights became unavailable, they tried to find other ways to reach Europe. And we know now that there are a number of e-tailers that are using other routes. Therefore, one other aspect that we are now reinforcing considerably is the commercial effort to try to understand where these e-tailers are, which channels are they using. And with that, we also think that we can improve the capturing or recapturing of parcels flows that were previously in the Mail network and now are using different methods.

Very clear.

But again, this is very important. The most important aspect is that we are not relying only on recovering of those inflows. We are taking very seriously the cost efficiency lever, because that is something that we can control.

Artur, have your questions have been answered?

Yes.

Thank you very much. Dear participants, there are no further questions. I would like to hand the conference over to our speakers for closing remarks.

Thank you, Nadia. Well, it's been a pleasure. Thank you for coming. We remain, as always, available through our IR team and, of course, Guy, myself, and the whole Executive team as well. So thank you again, and we hope to see you soon.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day. Dear speakers, please stand by.