PSTNY - PostNL N.V. (TNTFF) Q3 2022 - Earnings Call Transcript
PostNL N.V. (TNTFF)
Q3 2022 Earnings Conference Call
November 07, 2022, 05:00 AM ET
Company Participants
Jochem van de Laarschot - Director Communications & Investor Relations
Herna Verhagen - Chairman & Chief Executive Officer
Pim Berendsen - Chief Financial Officer
Conference Call Participants
Frank Claassen - Degroof Petercam
Marc Zwartsenburg - ING
Marco Limite - Barclays
Henk Slotboom - IDEA
Stefano Toffano - ABN AMRO ODDO
Presentation
Operator
Good morning, ladies and gentlemen. Welcome to the PostNL Q3 2022 Analyst Call [Operator Instructions]
Now, I would like to hand the conference over to Mr. Jochem van de Laarschot, Director, Communications and Investor Relations, PostNL. Please, go ahead, sir.
Jochem van de Laarschot
Thank you, operator. Good morning, thank you for joining to all. With me here in the room are Herna Verhagen, and Pim Berendsen, and all 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.
Pim Berendsen
Thank you, Jochem. Good morning to all of you. Let’s start with the first slide with our key takeaways. And obviously, these key elements were already flagged 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 two main drivers all time high inflation levels and at the same time, consumer confidence being very low, has put pressure on our own consumer spending and as such on growth expectation for our e-commerce business. And obviously, the higher inflation rate have pushed up even more than at half year, and 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 decline in cross border. Mail volumes were in line with expectations being 9.3% down on reported levels. And roughly speaking 7.5% to 7.6% down if you correct for the non-recurring COVID in Q3 2021.
The free cash flow performance obviously reflects a step down in normalised EBIT as well as negative working capital phasing. In other words, we've had settlements on bilateral, terminal 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 past, PostNL and Saturday deliverers is well underway. If we don't go to the next slide on there's obviously a few highlights that you might have seen that indicate that there's 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, 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, is our current expectation. But as uncertainly is large. Yes. And then let's move to the other element. So this, this previous slide really talked about consumer spending, and the drivers behind it. The next slide, which is slide four, 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 100 million assumed total organic cost increases that were reported on the eighth of August. There's two components of additional organic cost increases, one that actually impacts the bottom line, which is roughly speaking 10 million additional for the collective labor agreement negotiations. And the other 25 million organic cost increases 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 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 borrow part of this. I'll get back to those in a few slides later on.
If we then look at slide five, although it's obviously a Q3 report, I thought it was wise to spend a bit of time on the year-to-date Parcel’s performance on that slide five. 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 of €47 million year-to-date. What in the Parcel segment for independent cost, this is basically countering part of the volume loss over cost 3 million includes scaling operations. And the 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 €32 million. Obviously, please be aware that if you compare it with last year, you need to correct roughly speaking €40 million for the non-recurring COVID effect.
Slide 6 then talks about all measures that we're currently taking to secure the financial position of personnel and to secure the balance sheet as much as we can. So there are operational measures that are really focused on scaling the operations with the latest fuse 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. Already briefly talked about the balance sheets, 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 on-going 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're very much prepared for the peak days with roughly speaking two times the normal volume per Parcels. Inflationary cost elements will continue to impact the fourth quarter and 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 cross border space.
Slide 8 talks about the strategy not while considering all the mitigating actions and measures we've just talked about. We've not changed our strategy nor do we plan to do so. Obviously we think about where do we smartly face certain investments that are related to the strategy but will continue with our sustainability program, will continue with the recruitment of extra Parcel deliverers and will also certainly continue with our digital mix program, but we might face some of the investments slightly later environment just to help us improving the strength of the balance sheets.
Then slide 9 and further really talk about the third quarter or you have seen the figures before revenue came in at €7.09 million which is 3% below last year and the EBIT came in at minus €20 million. And we estimate EBIT is €23 million positive.
As said Q3 performance was driven by a softer than expected volume development at Partials and while we continue to scale our operations to volume, we’ve reached elements of what we can do as we cannot fully scale down while preparing for our big season. The costs are therefore increasingly high, also relatively to volumes.
The free cash flow came in at minus €49 million, reflecting the step down in almost EBIT but that’s also more settlement on terminal dues, so this quarter’s result is not necessarily the approximate 40 at the end of the year.
If we then go to the Parcel segment, we’ll see revenues of €506 million almost the same as last year, so volumes of revenues I should say more or less flat driven by an overall volume decline of 1.1%, it’s minus because of cross border, without it, it would be slightly positive. Price mix was positive. Revenue at spring logistic a 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 one compared to €27 million last year.
Then the Q3 normalized EBIT bridge while the key components just discussed €27 million compared to minus one. The other results here is a big minus 16 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 €328 million in comparison to €345 million last year. Normalized EBIT came in at minus one compared to plus 12 last year, €30 million down if you correct it for non-recurring COVID it’s €10 million down. It has been a solid quarter, 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 a moderate price policy and the mix was positive.
Obviously also Mail suffered from higher organic cost and that we already shared and shown before. The Q3 bridge on slide 13 revenue volume effect driven by a 9.3% volume decline at positive price mix of 10, higher organic cost of 8 and positive overhead costs that are driven by cost savings of €7 million in the quarter offset by various other cost items including bilateral results and in other results you see higher cost for international Mail and also including their negative effects relating to the higher SDR [Ph] rates than originally budgeted for, which brings the normalized EBIT at minus 1 for the quarter.
Then on slide 14, we'll look at the cashflow. Obviously, the bridge starts with the minus 20 normalized EBIT bridge €37 million of D&A and €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 your elements are more or less in line with last year. There's a tax refund in 2022 that makes it a positive plus five in the quarter and bringing it in total to minus €49 million.
On slide 15, you'll see the balance sheets. And cash position and decrease in the quarter was obviously related to import the business performance, but also in relation to the payout of the interim dividends of roughly €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, at the end of 2021, towards the position for October 1st, you see a deterioration of close to €400 million, which is obviously very, very significant, important relation to the share buyback program to the dividends pay, but also the lower cash as a consequence of lower results in this unprecedented time. We're doing everything we can to get this balance sheet strong. And to make sure that we try to not exceed the two times adjusted EBITDA as our leverage ratio. And that's also why we take mitigating actions in the level of CapEx and the level of 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, and what to expect. And because of that, we just take all necessary measures to mitigate these consequences as much as we can to keep a 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 out towards a very busy peak season in any event, very busy, we're well prepared for that, to deliver twice as many passes as on a regular day. And 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 move on. You'll come to the Q&A part of this morning’s call.
Jochem van de Laarschot
Thank you, Pim. With a brief introduction or sorry, a break problem with audio we have during slide 8. We have the webcast, we will make sure that you can hear that back in replay and also read it back in the transcript. So apologies for that. Operator, please start the Q&A.
Question-and-Answer Session
Operator
Thank you.[Operator Instructions] And your first question comes from the line of Frank Claassen. Please ask your question.
Frank Claassen
Yes. Good morning, Frank Claassen of Degroof Petercam. Two questions, please. First of all last year, in the summer, you have highlighted new targets 2024 targets, some really targets and also some additional growth CapEx of €450 million. How should we now look at these 2024 targets given the new environment?
And then secondly, you assume flat volume for Parcels in Q4. Yes, 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, there will be a decline? Can you adjust your cost base till or? Could you elaborate on that please? Thank you.
Pim Berendsen
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 partials given the volume expectations at that point in time. 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 till the end of the year, let alone that I now can already say something about 2023 and 2024. But what is obviously clear is that kind of the baseline has moved significantly away from us. So the expected outcome and volumes for 2022 will be significantly different than we did expect at the time that we introduced that perspective in 2024. And growth rates might also have slowed down, given the specific markets and circumstances that we talked about.
The more precise I can be at this point in time, given the high level of uncertainty and the big spreads and potential volume scenarios that we are 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, there's 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 day using 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.
The third, kind of the second part of that 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.
Frank Claassen
Okay, that's helpful. Thank you very much.
Pim Berendsen
You're welcome.
Operator
Thank you. We will take our next question. It is from the line of Marc Zwartsenburg from ING. Please ask your question.
Marc Zwartsenburg
Yes. Thank you, operator for passing me on. A couple of questions from my side. First, being to clarify, you mentioned additional organic cost increase of the €10 million related to the CLA increase is. 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 the €10 million refers to? And how this exactly works? As from which date it is this then would come in? That's my first question.
Then on the cost savings costs, I recall at Q2, that these possibilities, particularly Mail in NL were back end loaded. Can you give us a bit of a feel for what kind of cost side we should expect in the Mail in NL division for Q4? And then a question on the spring and logistics, demands and cross border not seeing much of a recovery? If I take a flowchart and look at it, what you've been performing last year, it must have been -- in Q3. But yes, there's only slightly profitable in the first half. So would it also still be loss making shipping and logistics in for the full year of 2022 since there is no recovery there? Can you share a bit what the performance is of the business? And also how you how can you because it's a broken 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 on your balance sheet? Obviously, we don't know exactly where we will come out for the full year. Otherwise, we would have an outlook. But what if you would come in? Do you still expect the leverage ratio or the net-debt-to EBITDA to remain below the two times? And if not, would that have any impact on your definite or on your share buyback program? Those are my questions.
Pim Berendsen
All right. Thank you Mark. First question related to the €10 million in the organic costs, the bridge that is basically the step up in cost that we do expect in the current collective labor agreement negotiations they are 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, this, in fact, 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. That is, that is point one.
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 other income, other results also includes Belgium, for instance. So spring is not loss making, spring will not be loss making full year either. But there's definitely significant downsides in the transportation components of other businesses. So transport business suffers from higher organic cost increases and lower volumes as well. Our logistic 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 for higher organic costs, as well. So it's the combination of those elements that make this look this such a big step down year-to-date of minus 62 million. And logistics is a combination of minus 62 million. And Logistics is a combination of different businesses. Some are doing okay. But the parts of the business that are related to transportation are suffering from the same market dynamics as other domestic Parcels businesses.
If we talk about the balance sheet, then…
Marc Zwartsenburg
Pim, can I go back to this one. If you take it all together, because I know it's a lot of moving parts, would you if it takes being a logistics plus other altogether, would it? Would it still be profitable for the full year, get a feel for…
Pim Berendsen
If you take it all together, probably not.
Marc Zwartsenburg
And the springs…
Pim Berendsen
On the balance sheet, we're obviously aiming to stay below the two. That is 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 the kind of the Mail performance, if you talk about Christmas cards, comes also in accordance with expectation. So that's that 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 two.
And that's also why the mitigation mitigating actions are not only focused on the P&L, but as much on the balance sheets. 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 €8 million to €10 million of cost savings needs to be realized. And that's a function of very many different projects. And not one single thing, so quite comfortable that we'll get there.
Herna Verhagen
And most of the – or some of the initiatives Marc which we introduced in 2022 are backend loaded so they both get in more cost savings in the later part of the year. We lost connection.
Jochem van de Laarschot
Operator, next question, please.
Operator
Of course. Thank you. We will take our next question. The question comes from the line of Marco Limite from Barclays. Please ask your question.
Marco Limite
Good Morning, thanks for taking my question. My first question is about one of your slides where you mentioned that you are aiming to move on your own pedal about 50% of the workforce. I think in the past, you've mentioned at the moment about 70% of the possibilities are outsourced. So since 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 two times net debt to EBITDA. So, just wondering what your view is, to what extent in your view, you can train topics. For example, if I look at, the CapEx numbers in 2017, 18, 19, there are it was about €60 million, €70 million of CapEx. You're clearly, in the past you who our 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, 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 for 70 million and still on this angle. I will say clearly you're in the past when you when you have paid out your dividend about or theoretically 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, free cash flow coverage of your dividend. So I'm just wondering what when you do your budgeting, planning your free cash flow forecasts, are you assuming the dividend to be paid out fully cash or your own, or your co sale, that the 40%, 60% is very good proportion, or just yes, just understand about what you think about the free cash flow coverage of [Indiscernible].Thank you.
Herna Verhagen
I’ll take the first question on the workforce within our Parcel or e-commerce segment. We didn't 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 overtime, a more sustainable workforce and then sustainable meant 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 our own people with own fleet. And we do think that moving forward with the changes 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 such it will take time, and it is not done overnight. And that's what we also said when we communicate the beginning or end of August. I think the second question on the balance sheet, we move over to Pim.
Pim Berendsen
Thank you for your question Marco. On the balance sheet, 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 goes into beginning anticipating CapEx levels of roughly speaking around about €160 million mark. Whilst today, we do not expect it to be more than €120 million €130 million by the end of the year.
To go back to kind of the what you call the normal maintenance levels of €70 million to €80 million, there 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, that 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. On 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, preferably obviously more, but at least the cash component of it.
Obviously, that has never been based on 100% cash dividends. 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 for the 5% 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
[Operator Instructions] Your next question comes from the line of Henk Slotboom from IDEA. Please ask your question.
Henk Slotboom
Good morning. Thanks for the presentation Pim and Herna. And thanks for taking my questions. I've got a few left. You want me to do it straight all together? Or can I take them one by one.
Pim Berendsen
Henk, whatever, whatever you prefer. If you want to do it step by step also fine. If you want to shoot them first. I'll try to remember them. And otherwise, you just need to remind me.
Henk Slotboom
First of all, this just the time of 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, that fuel prices are remaining high. There's an increase in the minimum wage and the legal minimum wage as of January. And as the other costs will increase as well. What is your first take off of what you're seeing at this point in time?
Pim Berendsen
Yes, 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 we talked about different types of contracts, there are contracts with fixed indexation parameters in it. Those will, those will materialize; it may be 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, go over as much of the 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, then, over the last couple of years. Now how much of the organic cost increase can actually be sheltered because of that, that is that is part of the current negotiations. Clients do understand that costs have move up, but at the same time, they're in this, they're 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.
Henk Slotboom
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 patiently 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 will, obviously experiencing difficult times or more difficult, more challenging times ahead, that you will bring down the course 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 that just that?
Pim Berendsen
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 2033. 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.
Henk Slotboom
Okay. Then same with Parcels, couple of weeks ago in the press in the call concerning the paying off…
Herna Verhagen
During the trading updates.
Henk Slotboom
The trading update, yes, well, trading updates. Good morning. It was a bit of both, let me put it that way. The trading update, let me rephrase it. I believe it was there that it was mentioned that you have currently 400 APMs installs in the Netherlands. Now in the fantastic city of Valdosta [Ph] that we already have two overtimes and two, but the locker boxes. It's not the first place of the world where the burbees and whatever focus on when putting ATMs How do you see the competitive environment from that site? You already mentioned we see a bit of overcapacity in the market or a number of New Kids on the Block. Bubby [ph] will merge with instant books. DHL has already said that they will come with a new proposition concerning letterbox, Parcels. Can you can you give me some more color, how you look at it. And what it could mean for you going into 2023?
Herna Verhagen
I think the market off of the APLs is, 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 add 1500 in 2024. And these are not the big amounts when it comes to CapEx has to be very clear. On the other side, when you think about 1500, APL or Parcel lockers, that probably if you if you feel 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 amounts. That's not what it is. We do think that those parcel lockers are important for a few reasons.
The first one is that you have to be at strategic places. So what we tried to do, at least in this year, where we, of course, place the first 600 is to take those, what we call strategic positions, I think that 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 a retail stores to those APLs. And we do think that when it comes to convenience for customers, at least some of our customers that APL or parcel locker is important.
On the other hand, and parcel loggers will have of course, a totally different position in our view in our future delivery network than it has, for example, in Poland, where in Post is, 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 it's not the big amount when it comes to investments.
Pim Berendsen
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.
Henk Slotboom
Does that does that also apply for the Amazons and bol.com 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 -- into Belgium, then you can surely take Parcels from Anderlecht to 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. The Bull is a large client and Bull has also a deal via its parent company Albertan [Ph] with Dudley/instabooks so because the two will merge, and it's not only partial, or per se, but B has a bicycle network Syclone is a bicycle network they cover over ABCD 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 might make play on a somewhat longer period, because the sluggish growth is pushing everybody to postpone a little bit of his plans.
Herna Verhagen
I would not compare Amazon to Bull 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 the network.
When it comes to, to bicycle delivery, it is of course, as it was when we had of course, instant books, 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 a market which is next day or which where you need to have a dense network in all parts of the Netherlands. That's one.
Secondly, if you think about the big amounts 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's it is of course, an element in the market, but it will not be the biggest element in the market. That's that 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 etcetera, etcetera, than investing in expanding the cycle networks.
Henk Slotboom
Then I’ve got two very small questions left on Mail, first of all, how many Christmas cards do you – last year. Do you have a ballpark figure? Is it something like 120 million or so?
Herna Verhagen
By far not, but we stopped giving numbers already quite some years ago, Henk, but by far not.
Henk Slotboom
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, I mean the first couple of quarters what caused the improvement of a mix in Mail?
Herna Verhagen
Partly the fact that that of course there was a little bit less of direct Mail etcetera. These are the low price goods. Partly it's the development of letterbox parcels. So there are a few elements which helped of course the development of that of that price together with where possible. We added of course fuel surcharges, etcetera, etcetera.
Henk Slotboom
Okay, well thanks for all the answers and thanks for allowing me all those questions.
Herna Verhagen
Super. Thank you.
Operator
We will take our next question, the question comes from the line of Stefano Toffano from ABN AMRO ODDO. Please ask your question.
Stefano Toffano
Yes, good morning, everybody. Thank you for the answers so far. 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 shoot in the next quarter to be the same as last year, we will have personnel very close to the 2.0 on that EBITDA. And I mean, and that will then be your starting point for, excuse me 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 will obviously don't want to have a discussion every quarter; you will want to have some flexibility.
So, at some point, when does lower costs 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 the competitor has been aggressively continuing to, 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, I guess, specific on the Parcel machines, because we have seen at some place that higher costs have to door have driven increased adoption of ATMs [ph]? And I don't know if in that sense, it's something that might hurt you going forward. Thank you.
Pim Berendsen
Okay. Well, I think your first point, let's say, your calculation shows that we're going to be close to the two and more not say, close 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 that's what we aim to keep it below the two, it will not be significantly below the two 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, EBIT down 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 those very different volumes scenarios that we'll look at. And by the time that it is fourth quarter, we have these analysis behind us. And I certainly can say a bit more on it than I can do today. And given the fair amount of uncertainty and volume developments going forward.
Obviously, we'll try to make sure that we improve on the two times adjusted EBITDA and 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 what we plan 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 will not go back to the roughly speaking 70 to 80 million maintenance CapEx only because at the end of the day, although hit by very, very complex market circumstances, we do expect e-commerce to continue to grow on the back of online penetration growing market share from offline. 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 quarters of this more we need to expect.
On the APL, I think Herna tried to explain it is strategically very -- but it's really a small part of overall volumes that we 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.
Herna Verhagen
And I think what plays a role as well in the Netherlands is that also door to show 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.
Pim Berendsen
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 transcripts of this call will be available soon on our website. Thanks. And see you next time. Thank you.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.
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PostNL N.V. (TNTFF) Q3 2022 - Earnings Call Transcript