PostNL N.V. (PNL) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, welcome to the PostNL Q3 2022 Analyst Call. [Operator Instructions] Now I would like to hand over the conference call to Mr. Jochem van de Laarschot, Director Communications and Investor Relations, PostNL. Please go ahead, sir.

Thank you, operator. Good morning. Thank you for joining to all. With me here in the room are Herna Verhagen and Pim Berendsen of our Board of Management to go through the presentation, which should be on your screen and you can also find on our website to be followed by Q&A. Pim, over to you.

Thank you, Jochem, and good morning to all of you. Let's start with the first slide with our key takeaways and obviously these key elements were already flat on the 21st of October when we released the trading update but it's clear that macroeconomic conditions have deteriorated further since our Q2 half year results in August and driven basically by 2 main drivers. All-time high inflation levels and at the same time, consumer confidence being very low, has had put pressure on consumer spending and as such, on growth expectations for our e-commerce business. And obviously, the higher inflation rates have pushed up even more than at half year numbers, the organic cost increases that we have to absorb. As a consequence, volumes at Parcels were below expectations. Domestic growth of around 1%. Overall, minus 1.1% driven by a decline in cross-border. Mail volumes were in line with expectations, being 9.3% down on reported levels. And roughly speaking, 7.5%, 7.6% down if you correct for the nonrecurring COVID in Q3 2021. The free cash flow performance obviously reflects a step-down in normalized EBIT as well as negative working capital phasing. In other words, we've had settlements on bilateral terminal dues that were settled in the third quarter, and will not repeat itself in that sense in the fourth quarter. We're continuing making progress with our ESG objectives with a 23% carbon efficiency improvement since full year 2021, and we continue to accelerate our digital transformation program. Negotiations on the collective labor agreements for PostNL and Saturday deliverers is well underway. If we then go to the next slide, and there's obviously a few highlights that you might have seen that indicate that there is less spending on products, and there's also a fair amount of uncertainty on the volume development on the e-commerce front. And it's also clearly the case that our customers find it very difficult at this point in time to predict where volume will go. We do expect that this challenging and uncertain environment is to continue for the next quarters to come. And that's also why it's very difficult at this point in time to give a precise view on volume development for the remainder of the year. Nevertheless, we do expect a significant peak period. Ramp-up is already starting. And more or less, the same volumes as last year is our current expectation. But as said, uncertainty is large. Yes. And then let's move to the other element there. So this previous slide really talked about consumer spending and the drivers behind it. The next slide, which is Slide 4, talks about the unprecedented inflation that cannot be absorbed within the year by regular price increases. It's the bridge that you've seen before, at least until the EUR 100 million assumed total organic cost increases that we reported on the 8th of August. There's 2 components of additional organic cost increases, one that actually impacts the bottom line, which is roughly speaking EUR 10 million additional for the collective labor agreement negotiations. And the other EUR 25 million organic cost increases is for cross-border activities that were in the previous quarters reported in several other buckets, and we basically have taken that out to really show the overall organic cost increases that we have to carry. But the last element does not change -- does not impact the bottom line expectations. If you then look at regular price increases, you end up with a gap of roughly speaking EUR 80 million that we cannot offset in year through price measures. And that's obviously the reason that we've taken several mitigating actions to compensate at least as much as we can, part of this. I'll get back to those in a few slides later on. If we then look at Slide 5, although it's obviously a Q3 report, I thought it was wise to spend a bit of time on the year-to-date Parcels performance, and that's Slide 5. Obviously, you see a big volume impact because of the drivers we just discussed, a positive price/mix but obviously not enough to absorb the organic cost that are EUR 47 million year-to-date within the Parcels segment. Volume-dependent cost is basically countering part of the volume loss. Other cost, EUR 3 million, includes scaling operations, and a big element is the other cost development here as well. And you've seen that back in each of the quarterly reports. But we also see comparison to last year, a big step down in Belgium, big step down in Logistics, and also Spring is still not performing better than last year. That basically leads to the year-to-date performance of Parcels of EUR 32 million. Obviously, please be aware that if you compare it with last year, you need to correct, roughly speaking, EUR 40 million for the nonrecurring effect. Slide 6 then talks about all measures that we're currently taking to secure the financial position of PostNL and to secure the balance sheet as much as we can. So there are operational measures that we are really focused on scaling the operations with the latest views on volumes. We have to do that in a very tight labor market, so that restricts us a little bit. But we, at the same time, need to ensure the flexibility for peak season so that we can safeguard the consumer and customer service levels that we've agreed. We're continuously optimizing our routes, staffing and fleet optimization. And obviously, we continue with the cost saving programs at Mail in the Netherlands that are a bit back-end loaded within the year. If you talk about additional cost measures, they are much more related to kind of the indirect or overhead costs of the group, both at group level as well as at Parcel level. I already briefly talked about the balance sheet. It's not only that we look at mitigating measures on the P&L side, but also really on the balance sheet elements like CapEx, leases but also working capital management. Active yield management continues to be in place. So we're trying to find optimizations within the agreements that we have. But more importantly, this will be a key element for contract negotiations that are currently ongoing for 2023. Then on Slide 7, you'll find the quarters. For Q4, we expect a significant step up in performance in comparison to Q3. Obviously, we do expect, as I said, roughly speaking, the same amount of volume in Parcels as last year. We are very much prepared for the peak days with, roughly speaking, 2x the normal volume for Parcels. Well, inflationary cost elements will continue to impact the fourth quarter. And as said, cost savings in Mail in the Netherlands are back-end loaded. And we do not see, currently, nor do we expect a significant improvement in the cross-border space. Slide 8 talks about the strategy. We've not -- while considering all the mitigating actions and measures we just talked about, we've not changed our strategy nor do we plan to do so. Obviously, we think about, well, where do we smartly phase certain investments that are related to the strategy, but we'll continue with our sustainability program, we'll continue with the recruitment of extra parcel deliverers and we'll also certainly continue with our Digital Next program. But we might phase some of the investments slightly later in time just to help us improving the strength of the balance sheet. Then Slide 9 and further really talk about the third quarter. Well, you've seen the figures before. Revenue came in at EUR 709 million, which is 3% below last year, and the EBIT came in at minus EUR 20 million. The year-to-date EBIT is EUR 23 million positive. As said, Q3 performance was driven by a softer-than-expected volume development at Parcels. And while we continue to scale our operations to volume, we've reached the limits of what we can do as we cannot fully scale down, while preparing for our peak season. The costs are, therefore, increasingly high also relatively to volumes. The free cash flow came in at minus EUR 49 million, reflecting the step down in normalized EBIT But, as said, also more settlements on terminal dues. So, this quarter's result is not necessarily the proxy for the end of the year. If we then go to the Parcels segment, we see revenues of EUR 506 million, almost the same as last year. So, volumes -- revenues, I should say are more or less flat, driven by an overall volume decline of 1.1%. It is minus because of cross border; without it, it would be slightly positive. Price/mix was positive. Revenues at Spring and Logistics are year-on-year flat but at the same time results deteriorated because of margin pressure driven by more organic cost increases and freight shortages. Normalized EBIT came in at minus EUR 1 million, compared to EUR 27 million last year. Then the Q3 normalized EBIT bridge, well, the key components just discussed, EUR 27 million compared to minus EUR 1 million. The other result here is a big minus EUR 16 million, driven by Belgium, Logistics and Spring and the other elements we just discussed. Then we step over to Mail in the Netherlands on Slide 12. There, we see revenue numbers of EUR 328 million in comparison to EUR 345 million last year. Normalized EBIT came in at minus EUR 1 million compared to plus EUR 12 million last year. EUR 13 million down. If you correct it for nonrecurring COVID, it's EUR 10 million down. It is, in our view, a solid quarter. The volume decline of 9.3% was also what we expected. If we correct for non-recurring COVID, it is actually 7.5% down and we continue with our moderate price policy and the mix was positive. Obviously, also Mail suffers from higher organic costs, and as we already shared and shown before. The Q3 bridge on slide 13. Revenue volume effect, driven by 9.3% volume decline, a positive price/mix of EUR 10 million, higher organic cost of EUR 8 million, and positive other costs that are driven by cost savings of EUR 7 million in the quarter, offset by various other cost items including bilateral results. And in Other results you see higher costs for International Mail and also including the negative FX effects relating to the higher SDR rates than originally budgeted for, which brings the normalized EBIT at minus EUR 1 million for the quarter. Then on Slide 14, we'll look at the cash flow. Obviously, the bridge starts with the minus EUR 20 million normalized EBIT bridge, EUR 37 million of D&A, EUR 36 million of CapEx in the quarter. We've reduced the CapEx levels for the entire year to bring it more in line with volume development. You see a significantly higher than last year change in working capital which is in part related to the terminal dues settlements in this year. and the other elements are more or less in line with last year. There is a tax refund in 2022 that makes it a positive plus EUR 5 million in the quarter, and bringing it in total to minus EUR 40 million. On Slide 15, you'll see the balance sheet -- and our cash position decreased in the quarter, which is obviously related to in part the business performance, but also in relation to the payout of the interim dividends of roughly EUR 50 million that was paid in August. All in all, that impacts our adjusted net debt position quite significantly. If you compare the adjusted net debt of the end of 2021 towards the position for October 1, we see a deterioration of close to EUR 400 million, which is obviously very, very significant, in part in relation to the share buyback program to the dividends paid, but also the lower cash as a consequence of lower results in this unprecedented time. We're doing everything we can to keep this balance sheet strong and to make sure that we try to not exit the 2x adjusted EBITDA as our leverage ratio. And that's also why we take mitigating actions in the level of CapEx and the level of these additions that we add as well as our working capital position. Then we go to Slide 16. Well, as discussed in this challenging environment with record high levels of inflation and lower consumer confidence, weak global trade and no signs of an improvement, it's really difficult to be precise in what to expect. And because of that, we just take all necessary measures to mitigate these consequences as much as we can to keep focus on our competitive position and executing our strategy, but at the same time, making sure that our balance sheet stays strong. That is what we aim for. We're heading now towards a very busy peak season and even very busy. We're well prepared for that to deliver twice as many parcels as on a regular day and -- well, to make sure that we're able to fulfill the requirements for our consumers and customers at the same time. That concludes the introduction presentation. So I think we can now move, Jochem, to the Q&A part of this morning's call.

Thank you, Pim. With a brief -- sorry, a brief problem with audio we had during Slide 8 via the webcast. We will make sure that you can hear that back in the replay and also read it back in the transcript. So apologies for that. Operator, please start the Q&A.

[Operator Instructions] And your first question comes from the line of Frank Claassen.

Yes. Two questions, please. First of all, last year in the summer, you have highlighted new targets, 2024 targets, some leeway targets and also some additional growth CapEx of EUR 450 million. How should we now look at these 2024 targets given the new environment? And then secondly, you assume flat volumes for Parcels in Q4? What do you base that assumption on? Can you elaborate on that? And what have you seen so far in the quarter? And what if -- yes, there will be a decline. Can you adjust your cost base still or -- yes, could you elaborate on that, please?

Thank you, Frank, for your questions. Well, last year summer, we introduced a perspective on 2024 on the back of a step-up in investments. And we wanted to indicate obviously what the benefit was going to be on that step-up in investments, and those did relate to our Digital Next program as well as on more investments in Parcels given the volume expectations at that point in time. Well, clearly, we've now seen very, very different market circumstances within 2022. And I also tried to say that it's not easy to predict volumes from today onwards to the end of the year, let alone that I now can already say something about '23 and '24. But what is obviously clear is that kind of the baseline has moved significantly away from us. So the expected outcome in volumes for 2022 will be significantly different than we did expect at the time that we introduced that perspective on '24, and growth rates might also have slowed down given the specific markets and circumstances that we talked about. More precise, I cannot be at this point in time, given the high level of uncertainty and the big spread in potential volume scenarios that we're looking at. That comes back to your second question. Flat volumes for Parcels, where do you base that on? And what is kind of the progress so far within the quarter? Yes. As said, there is a level of uncertainty around those volume expectations. It's a function of what our customers tell us. It's a function of our own data analytics on the trend lines that we do see, and that is basically indicating roughly speaking, more or less the same volumes as fourth quarter last year. That then requires a pretty significant step-up from September volumes towards October. And I think in the dailies, in the weeklies, we do see that step up in absolute volume. So that is at least a sign that is positive in relation to that flatline volume expectation. Now the third -- the kind of the second part of the second question was, and what if this is not reality and you come up short in terms of volume, can you then still do something in terms of cost? And I think there, the fair answer is not really that much anymore. We are in this tight labor markets. We've, in preparation of the peak period, done whatever we can to optimize the cost base given this volume expectation. We've locked in transport routes. We optimize the routing matrix between the depots and we've taken on board the people that we think we need to make sure that we deliver the service our customers want. So if it becomes significantly off, then it will have positive or negative financial consequences. The cost base will not move much in the fourth quarter anymore.

We will take our next question from the line of Marc Zwartsenburg from ING.

Yes. A couple of questions from my side. First, Pim, to clarify, you mentioned an additional organic cost increase of the EUR 10 million related to the CLA increase. Is that -- are you referring to the current CLA negotiations that are running, and that when you reach an agreement will be backward-looking? Can you explain maybe where that EUR 10 million refers to and how this exactly works, as from which date this then would come in? That's my first question. Then on the cost savings because we called at Q2 that these cost savings, particularly Mail in NL were back-end loaded. Can you give us a bit of a feel for what kind of cost saves we should expect in the Mail in NL division for Q4? And then a question on Spring and Logistics. You mentioned cross-border not seeing much of a recovery. If I take your flow chart and look at what you've been performing last year, most of them loss-making in Q3. But yes, that's only slightly profitable in the first half. So would it also still be loss-making Spring and Logistics in -- for the full year of '22, since there is no recovery there? Can you share a bit what the performance is of that business? And also how can you -- because it's a broker model, how do you see that developing forward? If things stay stable, would you then be easily be able to shed some costs and be able to report positive numbers there? And then on the -- yes, on your balance sheet, obviously, we don't know exactly where we will come out for the full year, otherwise we will have an outlook. But what if you would come in, do you still expect the leverage ratio, so the net debt-to-EBITDA to remain below the 2x? And if not, would that have any impact on your definite or on your share buyback program? Those were my questions.

All right. Thank you, Marc. First question related to the EUR 10 million in the organic cost bridge that is basically the step-up in costs that we do expect in the current collective labor agreement negotiations. And they're obviously driven by higher inflation rates, have required us to step up the increased percentages that we currently assume. And that has had within the year this effect. That is indeed assuming a retroactive effect until April 1 of this year, which was the kind of the termination date of the previous collective labor agreement. So that is point 1. On the Spring and Logistics part, I think we need to detail that out a bit further. So it's not only Spring and Logistics, it's the other results also includes Belgium, for instance. So Spring is not loss-making. Spring will not be loss-making full year either. But there is definitely significant downside in the transportation components of other businesses. So our transport business suffers from higher organic cost increases and lower volumes as well. Our Logistics business basically missed a home and garden season. We talked about that before, and also saw deterioration margin developments. And Belgium is loss-making at this point in time as a consequence of lower volume expectations, higher organic costs as well. So it's a combination of those elements that make this such a big step down year-to-date of minus EUR 62 million. And Logistics is a combination of different businesses, some are doing okay. But as I said, the parts of the business that are related to transportation are suffering from the same market dynamics as our domestic Parcels business is. If we talk about the balance sheet, then...

Pim, can I go back to this one? If you take it altogether, because I know it's a lot of moving parts. Would you -- if you take Spring and Logistics plus other all together, would it still be profitable for the full year? Got to feel for it.

If you take it all together, probably not. But as said, Spring will be. On the balance sheet, we're obviously aiming to stay below the 2. That is what we're aiming for. We think we can get there, assuming the parcel volumes come in, as we just said, roughly speaking, at the level of last year. And then obviously, it also assumes that kind of the Mail performance. If you talk about Christmas cards comes also in accordance with expectations. So as said, if I had a number, I would have been as transparent as I've been in the past to put it on sheet. But we're aiming to get to an adjusted net debt over EBITDA not exceeding the 2. And that's also why the mitigation -- mitigating actions are not only focused on the P&L but as much on the balance sheet. And then I skipped one of your questions that was related to the cost savings being back-end loaded in Mail. So roughly speaking, I would say that in the fourth quarter, an additional, let's say, EUR 8 million to EUR 10 million of cost savings need to be realized. And that's a function of very many different projects and not 1 single thing. So we're quite comfortable that we'll get there.

And most of the -- or some of the initiatives, Marc, which we introduced in 2022 are back-end loaded. So they will get in more cost savings in the latter part of the year.

We will take our next question. The question comes from the line of Marco Limite from Barclays.

My first question is about one of your slides where you mentioned that you are aiming to move on your own panel about 50% of the workforce. I think in the past, you have mentioned at the moment, about 70% of the parcel deliveries are outsourced. So it seems like there is a small change in the strategy there. Can you just clarify why are you changing that? And what has changed compared to the past that is making you slightly adjusting your strategy there? And my second question is, again, on the balance sheet and your target of 2x net debt to EBITDA. So I was just wondering what in your view -- to what extent in your view you can trim CapEx? For example, if I look at the CapEx numbers in 2017, '18, '19, the run rate was about EUR 60 million, EUR 70 million of CapEx, you're clearly -- in the past, you put of a target of a much higher CapEx, but I'm just wondering how much of the future CapEx is already committed? And if you think in a, let's say, low single-digit volume growth scenario, you can trim CapEx as much as to -- going back to the sort of maintenance CapEx therefore EUR 70 million to EUR 80 million. And still on this angle, I would say, clearly, your -- in the past, when you have paid out your dividend about -- historically, about 40% of the dividend was a share dividend and therefore, wasn't a cash outflow. But when we think about -- if you want to keep your current dividend policy as sustainable, I guess, you need to achieve a full free cash flow coverage of your dividend? So I'm just wondering, when you do your budgeting plan and your free cash flow forecast, are you assuming the dividend to be paid out fully cash or you assume still that the 40%-60% historical proportion hold up. Yes, just to understand about what you think about the free cash flow coverage -- of the dividend coverage of the future growth reflected.

I'll take your first question on the workforce within our Parcel or e-commerce segment. We did indeed change our policy. But what we also did say is that this policy change will take quite some years to move the percentage of own parcel drivers up to around 40% to 50%. The reason why we want to change is to create, over time, a more sustainable workforce and then [sustainable-ment] in a few ways, sustainable in the sense that we do want to have grip on a certain part of our network. Secondly, when it comes to sustainability, CO2 emission, it helps us in the speed of CO2 emission reduction to have our own people with own fleet. And we do think that moving forward, with change is that we also want to start working with bigger delivery partners. We do think that it will help us creating a more sustainable workforce and a more sustainable network going forward. But as said, it will take time. And it is not done overnight, and that's what we also said when we communicated beginning -- or end of August. I think the second question on the balance sheet. We move over to Pim.

Yes. Thank you for your questions, Marco. On the balance sheet, well, we can trim down CapEx to some extent, obviously, because that's also what we indicated before. So if we look at lower volume expectations, and we've got a longer planning horizon, we can adjust particularly the network extension CapEx to that volume scenario. And also, we've done that within the year 2022 already. Because in the beginning, we were anticipating CapEx levels of roughly speaking, around about EUR 160 million mark. Whilst today, we do not expect it to be more than EUR 120 million, EUR 130 million by the end of the year. To go back to kind of the -- what you call the normal maintenance levels of EUR 70 million to EUR 80 million. That will probably be too much, also given the fact that, as we said, we'll continue with executing on our strategic plans that requires investments in Digital Next does require investments in sustainability. So going back to that level is not really what we have in mind. But obviously, we'll tune the level of investments for 2023 at the moment that we have the top line forecast at that level of volume growth to make sure -- and that comes back to your third component, that we try to aim for a free cash flow that is enough to at least pay for the cash dividends of it. Prefer be obviously more but at least the cash component of it. Obviously, that has never been based on a 100% cash dividend. I think the -- your 40%-60% has changed over the last couple of periods, also because of the fact that we have a bigger shareholder that takes cash and not shares. So that kind of shifted already to, I think, roughly speaking, 55% cash, 45% shares. And on that relative balance, we seek to get to a free cash flow level that is sufficient to sustain that. As said, it all starts with volume expectations for 2023. And at this point in time, that's just too early. We're working on various scenarios, but it's just too early to say something more about that.

[Operator Instructions] Your next question comes from the line of Henk Slotboom from Idea.

And I've got a few left. You want me to do it straight all together, or can I take them one by one?

Henk, whatever you prefer. If you want to do it step-by-step, also fine, if you wish -- want to shoot them first, I'll try to remember them. And otherwise, you just need to remind me.

First of all, this is the time of the year that the tariff negotiations take place in Parcels for the larger clients. What is your first take -- do you feel there is sufficient room to absorb the cost inflation you will undoubtedly experience next year as well. The fuel prices are remaining high. There's an increase in the minimum wage -- in the legal minimum wage as of January. Undoubtedly, other costs will increase as well. What is your first take of what you're seeing at this point in time?

Yes, a good question, but at the same time, a delicate question because obviously, that is the competitive sensitive part of all of this. What, let's say, my take is that -- okay. We talked about different type of contracts. There are contracts with fixed indexation parameters in it. And those will materialize, maybe not for 100% indexation given the height of it, but at least a very, very significant part. Then there's a few contract renegotiations of bigger clients. And there, we obviously need to be aware of the competitive position as well. And there, it's all about moving smartly and carefully to strike the best possible balance in not losing market share in the market with a little bit of overcapacity. And at the same time, cover as much of new organic cost increases that you quite rightly pointed out, just to mitigate the impact on our P&L. So we're doing both. We'll see undoubtedly higher price/mix consequences and price increases than over the last couple of years. How much of the organic cost increase can actually be shelved because of that, that is part of the current negotiations. Clients do understand that costs have moved up, but at the same time, they are in the same marketplace, right? So they also see lower consumer spending hitting their P&L. So that leads to a tension in the value chain. And that's also why you need to be smart on trying to find alternative ways to also find efficiency improvements that can help you bridging the gap together with your clients as well a bit.

Okay. In the press release, Herna already mentioned that the economic headwinds are likely to sustain for some quarters to come. Now the fourth quarter, you already said I've basically locked in the capacity I need. I expect to need and there's very little you can do. Traditionally, the first quarter of the year is a seasonally weak quarter. Can we expect -- given the fact that you're obviously experiencing difficult times or more difficult -- more challenging times ahead that you will bring down the cost further that you can bring down the cost further going into 2023. And will the measures that we can find on the first page of the press release, be sufficient? Or does it -- will it take more than just that?

Well, let's say, talking about the first quarter of 2023, yes, the cost will come down because we've locked in those volumes as part of our peak process for this couple of months. So we've not locked them in for Q1 2023. So that is one. Whether or not the mitigating actions will be enough. That is a function of volume expectations going forward. And if not, we'll take additional measures to compensate as much as we can.

Okay. Then Staying with Parcels. A couple of weeks ago in the press -- in the call concerning the paying updates...

Sorry.

Concerning the trading update.

The trading update. Yes. Well, it's trading update just this morning. It was a bit of both. Let me put it that way. But trading update, let me rephrase it. I believe it was there that it was mentioned that you have currently 400 APMs installed in the Netherlands. Now in the fantastic city of Wijk bij Duurstede, we already have 2 Albert Heijns and 2 Budbee locker boxes. It's not the first place of the world where the Budbees and whatever focus on when putting APMs. How do you see the competitive environment from that side? You already mentioned we see a bit of overcapacity in the market. There are a number of new kids on the block. Budbee will merge with Instabox. DHL has already said that they will come with a new proposition concerning letterbox parcels. Can you give me some more color how you look at it? And what it could mean for you going into 2023?

Yes. I think the market of the APLs is an important market. And we -- indeed, we will come to around 600 probably by the end of the year on APLs, and our aim is to have 1,500 in 2024. And these are not the big amounts when it comes to CapEx. It has to be very clear. On the other side, when you think about 1,500 APL or parcel lockers, that probably, if you fill them very efficient, that is probably 3% to 4% or 4% to 5% of your total parcel volume. So it's absolutely not the case that via those lockers. You can help the market to big amount. That's not what it is. We do think that those parcel lockers are important for a few regions. The first one is that you have to be at strategic places. So what we try to do at least this year, where we, of course, place the first 600 is to take those -- what we call strategic positions. I think that's one. Secondly, those APLs are placed also in the neighborhood of retail locations which are in many of the peak season moments during the year do not have enough storage capacity. So for us, it also helps in periods where it is very busy to have a certain overflow from retail stores to those APLs. And we do think that when it comes to convenience for customers, at least some of our customers, the APL or parcel locker is important. On the other hand -- and parcel lockers will have, of course, a totally different position in our future delivery network than it has, for example, in Poland, where InPost is huge, and that has to do with the size of the country, the density of the country, but also the fact that we already have delivery networks, which are efficient and which, of course, are very dense. So in that sense, it will have a different position than in other countries. But in our view, it is strategically important. And as I said, it's not the big amount when it comes to investments.

And if I may add on this, Henk, let's say, I think it is also clear that also these competitors are in a different market dynamic than they envisaged. In other words, they did have business models that were really focused on growth and growth only at the expense of cash flow, so to speak, and also they need to manage their cash runway and their balance sheet better in this market environment. So it's not to say that they will continue with the pace of rolling them out as quickly as they've done so prior to these changes in market circumstances.

Does that also apply for the Amazons and bol.coms of this world because Amazon has a hub in Amsterdam. They have a hub in Rotterdam. They have a hub recently opened in Antwerp. I mean if you can take parcels from Waalwijk into Belgium, then you can surely take parcels from Antwerp into the south of the Netherlands as well. I know I'm aware that Amazon is not your biggest client. It's something that will more affect your German colleagues. But bol is a large client, and bol has also a deal via its parent company, Albert Heijn with Budbee/Instabox because the 2 will merge. And it's not only parcel lockers, but Budbee has a bicycle network. Cyclone has a bicycle network. They cover over 80 cities already. How do you see that in-sourcing trend? Is that something that will play a role going into 2023? Or is that something that may play on a somewhat longer period because the sluggish growth is pushing everybody to postpone a little bit of its plans?

I would not compare Amazon to bol, to be honest. So Amazon has worldwide, a clear strategy when it comes to delivery, and that is that in dense areas, they do the delivery themselves. That's what you have seen them doing, of course, in the Netherlands, also in the period when they still had very small amounts of volume. So -- and I assume that they will continue that to expand and to fill their network. When it comes to bicycle delivery, it is, of course, as it was when we had, of course, Instabox, but also Coolblue have their own delivery. In our view, it is part of the delivery market going forward that there are certain parts or certain elements in that market that are done or by companies themselves or by different companies who offer different solutions. So in our assumptions, we take into account the fact that when we think about this market, it will not all be market, which is next day or where you need to have a dense network in all parts of the Netherlands. That's one. Secondly, if you think about the big amount of volume that needs to be distributed and delivered, therefore, you need also different tools than only bicycles. Let's be clear about that as well. So it is, of course, an element in the market, but it will not be the biggest element in the market, that's second. And thirdly, we do think that these companies are hit by the fact that -- of course, they see their growth disappearing at this moment in time. And therefore, I think they have different worries when it comes to investments, CapEx, et cetera, et cetera, than investing in expanding their cycle networks.

Then I've got 2 very small questions left on Mail. First of all, how many Christmas cards did PostNL deliver last year? Do you have a ballpark figure? Is it something like 120 million or so?

By far not, but we stopped giving numbers already quite some years ago, Henk. But by far not.

Okay. And then the last question is in the presentation, we can see that the mix in Mail improved. What caused that? Because last year was still positively impacted by the COVID mail, albeit less, of course, than in the first couple of quarters. What was the improvement of the mix in Mail?

Partly, the fact that, of course, there was a little bit less of direct mail, et cetera. These are the low-priced goods. Partly, it's the development of letterbox parcels. So there are a few elements which helped, of course, the development of that price together with, where possible, we added, of course, fuel surcharges, et cetera, et cetera.

The question comes from the line of Stefano Toffano from ABN AMRO ODDO.

So very quickly, again, a question on the balance sheet because clearly, the fourth quarter is important. And -- but if we take a back of the envelope calculation that we assume in the next quarter to be the same as last year, we will have PostNL very close to the 2.0 on net debt to EBITDA. And I mean -- and that will then be the starting point for next year. So again, not so much flexibility. And maybe a question regarding this at some point -- obviously, there is a trade-off between CapEx and higher investment, or in this case lower investment and the dividend payout. And I mean, you obviously don't want to have a discussion every quarter, you will want to have some flexibility. So at some point, when does lower cost and lower CapEx start to hurt future growth? And this is the first question. And the second question is also maybe in terms exactly this, what you see in terms of competition? Because some of your competitors have been aggressively continue to invest and you don't want your competitive position seem to erode. So I don't know if you can maybe comment a little bit on that as well. And maybe a third question is, again, specific on the parcel machines because we have seen at some players that higher costs of to-door have driven increased adoption of APMs. And I don't know if in that sense, it's something that might hurt you going forward.

Okay. Well, I think your first point, let's say, your calculation shows that we're going to be close to the 2. And well, let's say close is, in a way, let's say, the right way to look at it. So it's going to be close towards that number based on the expectations that we have. But as said, we aim to keep it below the 2. It will not be significantly below the 2 on the back of your assumptions. That is absolutely right. How that will then subsequently evolve during 2023, is obviously a function of the volume and EBIT expectations and then the relevant components that bring EBIT, EBITDA to cash flow, right? So at this point in time, yes, we just don't know what the top line is going to be. And we'll base the levels of investment and working capital requirements on these very different volume scenarios that we look at. And by the time that it is fourth quarter, we have these analysis behind us. And then I certainly can say a bit more on it than I can do today given, as I said, the fair amount of uncertainty on volume developments going forward. Obviously, we'll try to make sure that we further improve on the 2x adjusted EBITDA leverage ratio. And that's what we're aiming for. The function -- basically, the answer on the question, but if you have too little flexibility, will you then basically surrender your longer-term e-commerce growth expectations by taking out too much of investments that could deteriorate your competitive position? Obviously, that is not what we planned for. We want to keep the competitive position as competitive as we currently are, and that's also why on one of the earlier questions of Marco, I said, we'll not go back to the roughly speaking, EUR 70 million to EUR 80 million maintenance CapEx only. Because at the end of the day, although hit by a very, very complex market circumstances, we do expect e-commerce to continue to grow on the back of online penetration, growing market share from off-line. And over time, with lower inflation rates, consumer spending will, at some point in time, come back and reinforce the growth through online penetration as well. So indeed, we need to strike a careful balance between short-term performance, short-term balance sheet requirements as well as long-term growth expectations that we continue to expect will be there. But to what extent you need to be a bit patient, I'm afraid because there, we need the volume scenarios and the indication of how much quarter's of this more we need to expect. On the APL, I think Herna tried to explain. It is strategically relevant, but it's really a small part of overall volumes that we carry. So I don't think it will move the needle in terms of efficiency, volume being delivered through an APL or investment levels in comparison to the other drivers of the business.

And I think what plays a role as well in the Netherlands is that also door to -- so price differences between APL delivery, door-to-door delivery are almost nil, and that is because of the density of the amount of parcels we deliver.

All right. okay. I think that sums up our call for analysts around the Q3 results. Thank you for joining us. If you have any further questions, you know where to find the IR team. And as I said already, the replay and transcript of this call will be available soon on our website. Thanks, and see you next time. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.