DSV (OTC:DSDVY) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Summary
DSV A/S reported increased EBIT and EBITDA, driven by successful integration efforts, particularly in Air & Sea, where a 42% conversion rate was achieved.
The company's cash flow appeared unusually high due to one-off transactions and high freight rates, but management is comfortable with the full-year guidance.
Sea freight faced a 4% drop in gross profit compared to last year, necessitating initiatives to drive volumes in ocean freight.
Road division delivered EBIT of 999 million, impacted by one-off costs of 250 million, with performance issues in large network integrations, particularly in Germany, France, and the Netherlands.
Contract Logistics (CL) highlighted positive developments with a quarterly contribution of 1.5 billion and a strong return on invested capital.
Revenue increased by 23%, with a group conversion ratio close to 31%, and earnings per share rose from the last quarter.
DSV A/S maintained its strategic roadmap with unchanged financial targets for 2030, increasing bottom guidance from 23 billion to 23.5 billion.
The company expects slight decreases in yield for Air & Sea for the rest of the year due to seasonal and geopolitical factors.
Management highlighted the temporary nature of current challenges and reaffirmed confidence in achieving financial targets, with continued focus on resolving integration issues in Road.
Full Transcript
Jens Lund
During the remaining part of the year as planned. In the business case the impact is basically that we more or less expect the same as we announced on the capital markets day, so not much new to mention there. And then there's a graph on the right side trying to also just visually explain how the impact of the synergies is going to pan out. The financial highlights: the GP up in this market but also of course because of the integration impact, the EBIT also up, and we see that of course we still continue also to invest in integration through the special items cost.
But EBIT definitely up, the EBITDA also up, and I think we've seen now an improvement in IBS for the first time since we acquired Schenker. So that's also very positive. The cash flow, Michael will talk a little bit more about it, but I think there's been a little bit of comments on the cash flow already that it seems unusually high. I think if we do adjust for some of the one-off transactions — and they have gone into the bank account — and also the high freight rates, I think the cash flow is as it should be and what could be expected.
So at least when we look at it from the company side, we are comfortable under full-year guidance. I mentioned that and you can see the graphs below. Switching on to Air & Sea. I think here we also had some debate on the capital markets day and also with investors during the quarter, because we had, as announced, seen the trough in Q1, and now we see a conversion rate of 42%, which was also what was planned for in the business case and definitely also the expectation, I guess, in the market as well.
So really glad to see that we managed to deliver on that. The freight rates have increased a bit; that's of course very good for the yields, because also the volatility in the market means that we can sell additional services, but of course it has adverse impact on the volumes where certain markets are down-trending because of the crisis. So we also mentioned here in the call that we'd seen that the volumes are a little bit lower than what we'd anticipated, but I guess that's also something that is usual in an integration — that you focus more on the integration and perhaps a little bit less on the customer side.
So all in all our EBIT increased and I think the conversion rates are up, so very positive about the development on the Air & Sea side. If we take the GP here, you can also see for air freight that we are almost at 5 billion, so 13% up. And if we look at the yields, 8,700 per tonne is also in the high end. But I guess that's also due to many of these issues that you have with the supply chains being disrupted. Our most important area is of course these days on air freight the technology vertical that continues to drive volumes.
We have sanitized our portfolio in Air & Sea and we have definitely seen that some perishable volumes, but also some of the volumes that we had in relation to Chinese exports, have declined or we've reduced those volumes. So that of course also has an impact on the yield because yield on those volumes was very low. So moving on to the sea freight. Here we see GP 4% down compared to last year. We have a situation where we are hovering around 4,000 per TEU in GP and volumes a little bit up compared to last year.
But this is in particular where we have seen a weaker volume development than we saw planned for. And we are taking initiatives to make sure that we drive volumes then in the right direction going forward on the ocean freight. But all in all on the Air & Sea side I think we are on the right track and the division is going to deliver continued progress also in the coming quarters because we are very advanced on integration also on the Air & Sea side.
Coming then to Road: delivered an EBIT of 999. But we'd also disclosed to the market that 250 million of these are of a one-off nature. So you can say in reality 750 — that's then more than last year but not satisfactory. And what is then the explanation for this? Well, when we've been doing the integration we integrate both large physical networks but also large IT networks. And it's been more cumbersome when there's big networks to integrate. For example, in some of the countries mentioned here could be Germany, France, and the Netherlands. So in the beginning of the year in Germany we had performance issues on the network and had to compensate quite a bit in the first quarter but also into the second quarter. Actually our delivery quality in Germany is now up to what it was before DSV and Schenker were integrated. So we have delivered in full, on time, at the 95% range, which is basically the performance that we've normally seen in a market like this.
So we've also had some of these issues in some of the other markets. Of course we take learning from these integrations that we're doing so that we eliminate some of that risk. So there's no really structural change to the aspirations that we have in Road, because it's something that we have to overcome, and then when we are on the other side of it, we actually have the same performance as we had before. But we've then eliminated one network, both on the IT side but also on the operational side.
And this puts us then in a much stronger position for driving the company forward. So we've then added Brian Ejsing's experience to the Road team. He's been with the company for many years and has significant experience in these type of integrations, and that's really what has helped us to make sure that the delivery performance goes back to normal historically. If we, for example, look at the KPI called delivered in full, on time, for example in the Schenker network, it has hovered between 93 and 95%, very seldom at 95, and currently we are at 89%.
So there's still a little bit of work to be done, but we expect to be within that range in September month. And that means that then the extra cost that we have on the GP level — when you don't deliver in full, on time you have additional cost because you have to get express trucks or do express deliveries or do some things that basically then compensate so that the customer gets a good experience — and you don't need to do that. It actually drives quite a bit of cost also on the terminals.
So that's what you can see in the numbers. And this is then a little bit about the Road. So there's nothing structurally wrong with our plans — this is very important for me to emphasize — but there are some transactional issues in relation to the integration that we are dealing with. Then of course I think the highlight of the quarter is definitely CL. If we sit here and produce 1.5 billion in a quarter, return on invested capital is moving very fast in the right direction.
Last year it was somewhat lower and now we can really see that we are moving basically according to the planning that we have on CL, also growing quite a bit, not least with the tech vertical here, because we have this global footprint that not many of our competitors have, where you can serve a customer on CL either in Australia or in Japan or basically in Mexico or in the US or Europe or wherever it's relevant, the Middle East. So that definitely benefits us quite a lot.
And with the run rate that we are having, we're going to produce an outcome on the EBIT level in the 6 billion range for the year. And if you had asked me a year ago about whether we would be able to do that, I would probably not have been able to confirm that, but really glad to see how it's developed on the CL side. And as I said, we expect actually continued progress also in the coming quarters when it comes to CL. So very positive indeed. And on that note I will actually hand over to Michael, who will then take you through the more detailed numbers, cash flow, etc. So please go ahead, Michael.
Michael
Thank you, Jens. Yes, and jump to page number 11, some highlights from the P&L here in the first six months of 2026. First, of course, Lijian's already explained that our EBIT has increased quite a bit to 6.3 billion, which of course we're very happy with. Revenue increased 23%, so it's quite a dramatic increase in revenue, which I'll come back to the impact on our net working capital in a second. In this quarter the conversion ratio for the group increased to close to 31%.
This actually improving in all divisions. And Jens also highlighted especially RMC has seen quite an improvement from last quarter as well. So we are definitely on the right track here as well. Net interest cost is a little bit higher obviously if you compare to last year. Now we have the Schenker business in all three months in this quarter and then we've increased also some of our leases, which is impacting the net interest cost in that line. Finally, I think you also elaborate a little bit on that, Jens.
Our earnings per share, we can see that it has increased yet again from last quarter as well. So this is some of the highlights here on the P&L side. Then we have over the years spoken a lot about the cash flow and, as you also started out by saying, we will come back to this here. It's clear that our cash flow is impacted by higher activity in the second quarter here compared to last quarter. But especially the increase in the rates has impacted our net working capital.
So it's relatively high these days. On top of that we have some property divestment, also coming back to the 250 million you just mentioned before, Jens, where we have not received the money yet. The transaction was before month-end of June and now we still need to get the money here within the next month or two when we will receive the last approvals and stuff like that. So we will get those money back. So it's a high net working capital but it's very explainable to the rates and properties as well as activity.
So all this is temporary and we should see, you can say, the cash flow coming in here in this quarter in Q3. So that's actually... we're not... we look forward to that, obviously, and so it is under control, so to speak. Then we talk about our gearing ratio. It's a little bit down compared to last quarter. We are ending at 2.7 which was 2.8 the last time. So we have actually paid back debt and reduced net interest debt with 7 billion compared to when we started.
So I think that's a lot about the cash flow. So that's great. And we actually still have the target to come back to a normalized between 2 and 3% on an annualized basis. But of course the rates is impacting us right now. Then on page number 13, this is the financial targets for 2030. I know we spent a lot of time going through those at the capital markets day a couple of months ago. So it's just some housekeeping to have them in here. They of course remain unchanged also on the roadside.
So from a strategic point of view, the way that we are heading, there's no changes during the quarter. So we still continue on the roadmap that was, you can say, presented at the capital markets day. And of course we are still confident that we will achieve the financial targets and we have plans to do so. So that's just to conclude on that one. Then we have, like Jens mentioned, we have actually narrowed our range of outlook. We have increased the bottom from 23 billion to 23.5 billion.
So of course it's due to the fact that we have already now passed six months. Some could argue that the range is still a little bit high. But I would also say that the uncertainty which we look into is also quite high. So for the remaining part of the year we expect the Middle East situation to be as is and do not... that's how it is. This is information that we have right now. So we need to work with that as an assumption. Then for the Air and Sea market, we expect for the remaining part of the year also to grow low to mid-single digits and also that the yield will slightly decrease on that one.
For the Road, it's also a little bit low single-digit growth in the road market. And then of course, like Jens talked about, Brian works on the recovery plans in the areas just mentioned before. So overall we increased the bottom of our guidance and we continue to be confident that we are on track to deliver on the guidance as promised to you guys. And then back to you for some of the key takeaways. Yep. So I'll just reiterate that the earnings momentum is definitely positive in the company and we look forward to continue that journey also in the coming quarters.
And then I think, you know, the Schenker integration, very soon we will not be talking much about that anymore because it will be something that is history. And then at the end of the day, of course, always pleased to be able to narrow the guidance in the higher end of the range. So with that said, I think we are basically ready for the Q&A session. And I'll just remind you, you can press star and 1, but I'm quite sure the operator will do that as well.
So let's move on.
OPERATOR (Moderator)
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. In the interest of time, please limit yourself to one question.
Anyone who has a question may press star and 1 at this time. And today's first question comes from Alex Irving from Bernstein. Please go ahead.
Alex Irving, Analyst at Bernstein
Good morning. My question is on Road. You explain the issue that you're having is you're having to add cost to get to the right on-time and in-full delivery quality. How much of that cost did you need to add in Q2 and how do you expect that to trend into Q3, Q4 and early next year? In other words, when do you think growth will be back on track? And is there anything else to highlight that's weighing on the division beyond delivery quality cost? Thank you.
Jens Lund
I would say that if you look at the first half year, we've done some calculations about it, it's definitely more than a quarter of a billion that it's cost us, and it's probably even closer to 500 million that we're talking about. But it's estimates that we're talking about, and every percentage that you are below it costs you a significant amount of money, not only on the GP, but actually also on the administrative burden that you carry. And this is the reason why that once we then get back to the normal range, right now we improve, what can I say, we call it default delivery in full on time with approximately 1 percentage point per week.
So getting back then on track and eliminating that cost here during the third quarter, that is the primary focus that we are having. And then basically we should be able to take that, what can I say, burden away from a financial point of view, but definitely also from an operational point of view and a customer service point of view. So I think that's basically what we are looking into.
OPERATOR (Moderator)
And the next question comes from Christian Le Delchu from UBS. Please go ahead.
Christian Le Delchu, Analyst at UBS
Hi. Thank you very much. Could I ask you on the Q3 EBIT, could you talk a bit about the building blocks? Seasonality, halting quarter on quarter, incremental synergies, any other moving parts having consensus is 6.7 billion. Do you feel confident that the building blocks can help you reach that? And if I could just follow very briefly on the prior question, EBIT margin-wise in Roads, how should we think about Q3, Q4? It sounded that there should be already an improvement in the underlying EBIT margin in Q3.
Did I understand that well? And any more color there? Thank you.
Jens Lund
We take Road. I think there's big summer period in Q3 that always, what can I say, has a significant impact if you sit on a lot of infrastructure, and this goes for June, July and August obviously, where you will have that headwind. September will be a good month normally when it comes to that. And right now we are improving, and we expect that it will help throughout the quarter as we are talking about it. But we don't really guide on a quarterly basis.
But you know, when you look at the company in general, we need to see improvements and of course in A&S where we get the impact from the synergies that you also saw now, we make more than 1 billion more in Q2 than we made in Q1. We need to turn the table around in Road. I don't think that we're going to see the full impact of that in Q3 but definitely into Q4. And then on CL, I think we will continue, what can I say, the slow grinding way forward.
I think that's what I can say, because very soon you'll ask for a monthly budget as well and we guide on a yearly basis. So hope this answers your question.
OPERATOR (Moderator)
Thank you. And the next question comes from James Hollands from BNP Paribas. Please go ahead.
James Hollands, Analyst at BNP Paribas
Yeah, thanks very much, Mike. If I can come back on the free cash flow, is there anything underlying that you're concerned about in free cash flow performance? Obviously you've made a very clear statement that this effectively normalizes from Q3 onwards. Is that fair to say? You will see a normalization and very obviously does this impact your view on the potential speed, whether it's share buybacks can come back in? Thank you.
Michael
Yeah, I of course expect that the cash flow will come because it is temporary and there's no underlying challenges in there. So we of course expect that that will come back. And then in terms of potential share buybacks, like I have said also previous quarter, we do estimate, you can say every quarter, how is the cash flow looking for this quarter that just passed, how will it look next quarter, and then how is the gearing ratio looking? And then based on that, we assess whether we will be able to start a share buyback and that methodology will of course continue.
But as you can see for this quarter, where we have an interim, you can say, tie-up capital in our net working capital, we actually want to get that in the bank here in the next quarter and then we will assess whether we are in a position to consider it again. But just want to reiterate that there's nothing changed in our policy.
James Hollands, Analyst at BNP Paribas
Would that therefore indicate likely share buybacks announced at Q3?
Michael
No, I would not say that that is likely to Q3. We assess it every quarter and as Jens rightfully mentioned, we have our capital allocation policy which we stick true to. We also have our rating agencies. So it's a mixed, you can say, development that we need to see before we start the share buyback.
OPERATOR (Moderator)
Thank you. The next question comes from Patrick Kreuzer from Goldman Sachs. Please go ahead.
Patrick Kreuzer, Analyst at Goldman Sachs
Michael, good to see the key improvements you're making there in A&S and CL. But I think you have two, as you say, temporary issues in terms of working capital and then the Road EBIT in Q2. And I think it'd be helpful if, similar to Q1 where you spoke about Air and Sea Q2 performance, about 40% conversion, you've delivered 42, if you could be perhaps a little bit clearer on the Q3, Q4 path on those two items to confirm they're temporary. So Road underlying EBIT performance 750 in Q2, sounds like Q3 would be in a similar range.
And then you're suggesting 250, 500 million sort of one-off costs flowing back up in Q4. Is that kind of the right way to look at Road? And then working capital, you know, 2 billion negative flow in H1 overall, and we understand the building blocks, but do you expect to recoup most in H2, how much in Q3? Any sort of rough directional guidance would be helpful.
Jens Lund
Yeah, you can take it.
Michael
Thank you for the question. The net working capital, we do expect that that will—you can say the cash flow will come in here. As said, it is temporary. And remember also, like we also have written, 1.8 billion is due to some of the property divestment of the legacy Schenker properties. And of course the transactions are closed and we will have the money here within this month or next month. So I'm quite certain that this is a temporary issue in terms of the projection of net working capital.
Of course it depends on the rate development and also if we kind of start getting more volume and activity in. But overall, of course we do expect that if it continues as is, of course we should have NWC brought down to in the range of between 2 and 3% over the next couple of quarters.
Jens Lund
I think the seasonality on working capital is unfortunately so that it's always the best position at year-end. So there will always be a headwind when it comes to the year. But as Michael says, I think the property money, they have more or less gone into the bank account. There might be one outstanding. So we are 100% certain on that.
Michael
We actually did receive some money last week.
Jens Lund
So. And in the other one, as we said, nothing structural when it comes to Road, I think it's probably a fair way that you look at it that, you know, the next quarter is going to be, also because of the seasonality, weaker. And in the fourth quarter we're going to get back on track. As I said, when we've done the integrations in the markets, then we come back to the normal quality levels that we have seen. We can also see that we then can, what can I say, achieve the productivity that we require in order to deliver the outcomes that we have planned for.
So sometimes when you do an integration, you know, things, you know, require that we take some extra steps. This is not unusual, but as long as it's of a transactional nature and not of a structural nature, then I think we're going to solve it.
OPERATOR (Moderator)
And the next question comes from Jacob Lacks from Wolfe Research. Please go ahead.
Jacob Lacks, Analyst at Wolfe Research
Hey, thanks for your time. So your guidance incorporates lower air and sea yields in the back half relative to the second quarter. Why is that? Just given everything going on in the ocean market right now. And do you think that's true for both 3Q and 4Q? And then do you think you can get the positive air and sea volume growth in the second half as you lap the Schenker acquisition? Thanks.
Michael
Yeah, no rolling forecast. This is what we're planning for, that we get growth back in the latter part of the year. And then of course, if you look at the yields, there's normal seasonality where they do taper off at the end of the year. Then depending on the geopolitical environment, this can of course fluctuate a little bit. And I think we have as little insight into this as you may have or not. I'm not sure, you know, but I at least expected that there would be a resolution in the Middle East and now it seems as if it's going a little bit in the wrong direction if you're looking for a resolution.
So let's see what happens. I think that's the best thing we can say right now. But of course we react to it depending on what happens in the market.
OPERATOR (Moderator)
Thank you. And the next question comes from Muniba Kayani from Bank of America. Please go ahead.
Muniba Kayani, Analyst at Bank of America
Good morning. Thank you for taking my questions. I just wanted to go back to understand Road a little bit better. So did you have any one-offs in Road in the first quarter? Just want to understand why kind of these operational issues came up in the second quarter and there was nothing in the first quarter. So that's one thing. And then secondly, just related on Road, should we expect, do you expect any more one-offs related to property transactions in the second half?
Because my understanding is that you still have those ongoing in terms of the property divestments. Thank you.
Jens Lund
I think if you look at Q1, we started many of the integrations in Q1, so they didn't really necessarily have that much of an impact. It really filtered through into Q2. And then of course when you produce your work in progress, sometimes you do it a little bit based on estimates as well. And then when you see the real outcome, then—so there might have been some accruals, you know, were they 100% accurate at the quarter-end? Probably not. But this is not unusual that, you know, can be 50 or 100 million from one quarter to another.
If we then sit and look at it, as I said, it's probably driven a cost between 250 and 500 million during the first half-year. So it is something, it's meaningful. When it comes to the divestment of facilities, we continue to follow our asset-light policy that we've had for many years. And when we then divest facilities, we will then also, if there has been financial impact, disclose it. But we don't, what can I say, plan for this in our guidance because this is very transactional, of a very transactional nature, and therefore we don't know—we have no certainty on the outcomes before, what can I say, that you've had kind of like an auction on the different facilities and what are people willing to pay? Yep.
OPERATOR (Moderator)
And the next question comes from Alexia Dugani from JP Morgan. Please go ahead.
Alexia Dugani, Analyst at JP Morgan
Yeah, good morning. Just a very quick follow-up on the 250 to 500 million impact to H1 performance in Road based on these issues. Is this all cost or is there some lost revenue in there? If you can just clarify that. And then my real question is, obviously we saw you not that long ago. I would imagine these issues must have been brewing in the background that you were trying to fix. Clearly it's not possible to fix them very quickly. It's a big integration, it's quite complicated, I guess.
What else—what is on your radar at the moment? When you look at performance week on week on this integration, are there any other areas that you are actively problem solving that we should be aware of? Because, you know, ultimately I think everyone understands it is a complex integration. The largest you've done. There's a lot of systems, there's a lot of network. But being a little bit more, say, understanding of the issues that you're facing on the ground, I think would help us all when we look at, you know, kind of our models and our expectations to be able to basically measure you with realistic kind of progress.
Jens Lund
If we look at, what can I say, the costs, less revenue, we could potentially probably have had more growth. Normally we do see a lot of revenue attrition when you do M&A, so that's really hard to judge. But the cost side, of course we can see that the GP when we produce is lower. So I think that's probably where the main part of the number stems from. When we then take issues in certain areas, I think we are quite transparent about, what can I say, what goes on in the company.
I would like to think so. I would say that the integration when it comes to the A&S side is, you know, progressing as it should. I don't really see any, you know, big areas there. Of course we need to deliver volume. This is the main task when it comes to A&S. I think this is clear for everybody. I think on the CL side, I think the numbers, at least when we look at them, they speak for themselves. So also, you know, it's basically to be able to scale and drive the company forward.
And then we have these integrations on the— It is in relation to the DSV volumes that are moved into the Schenker systems in Europe. This is what we're talking about on the Road side, and that was really kicked off in the beginning of the year. And I believe that we saw each other in the beginning of May where we had the first indications of that. Now two months or more have lapsed, or actually two months and a little bit more. So, yes, there's been some new information.
I don't think it changes the case structurally. This is very important for me to emphasize. We've also seen that some of the areas where we did have issues, they are back on track. So all in all, we don't really necessarily— Sometimes you will have a reaction, what can I say, to negative information like this. But it seems rather, what can I say, significant, the reaction. But I mean, the market does what the market does and we will then, of course, make sure that we solve these problems and deliver the results that we have set out to do.
Michael
I think it's also fair to say now we see things, then we address them. And as we also write in the announcement, it's a couple of large countries. So I think we have been more or less through all the different scenarios. It can, of course, be that there are some few remaining parts left, but overall, I think the combination of systems and countries and stuff like that, we have been through a lot of the scenarios and taken some lessons learned there.
Alexia Dugani, Analyst at JP Morgan
Thank you.
OPERATOR (Moderator)
Then the next question comes from Chida Ekblom from Morgan Stanley. Please go ahead.
Chida Ekblom, Analyst at Morgan Stanley
Thanks very much. Hi, guys. I've got a question on your staff cost numbers in terms of number of employees. So I can't really square what's going on at the divisional level with what's going on at a group level. So we've got staff costs down across the board, which is good since the Schenker integration. But the reduction at the group level is far more modest than if we look at the divisions. And so the question is, why are the heads at the head office level not actually moving in the same way as the divisions? And actually on a sequential basis, I think you actually might have added a few heads at the head office. So a little bit of colour, please, on sort of the difference between the operators at the local business levels relative to maybe your more central functions. That would be helpful, thanks.
Jens Lund
Thank you. It's a good question, and you're absolutely right. In line with the integration, we are also consolidating more and more tasks and workflow in some of the group entities. So it's very well spotted. That is why it develops as it does for the group part. And I do believe that.
Chida Ekblom, Analyst at Morgan Stanley
Do you have colour on how that normalizes? Because it would be quite disappointing to see all these heads come out at the regional and business levels and then just see, like, the total number shifting around to head office functions. So a bit of colour on the catch-up or the alignment there, that would be helpful.
Jens Lund
It will be done in line with the country rollout. So you can say it's around 2000 FTEs that we have added. I think it's fair to say what we've done is just so that you don't think it's administrative people we've created, what can I say, consolidation of certain activities. So let's say customs clearance could be, for example, some of the Parcel Express activities and some other activities under a label that we call Global Products. We don't disclose that to you with the P&L right now. We may do that at a later stage. But it's operational activities where, let's say, you do customs formalities.
Then instead of having it both in Road and in Air & Sea and in Contract Logistics in the same country, we're actually carving that out and leaving that into the fourth division. It's also in line with the strategy that we explained to you on the capital markets day. By consolidating this we'll be able to use the same tools and also outsource some of this work to low-cost areas and drive, for example, the synergy case that we need to do when we deliver on the basically improved financials on the customs clearance side.
And this is actually the same we do for Parcels and some of the other services that we are producing. So this is the reason why you actually get a significantly higher headcount in the headquarter. I'm quite sure if you speak to the IR team they will be able to tell you what is the development in the classic administrative part and what is the development in the fourth-division part. And I think that should give you, what can I say, the integration information that you need for your basically forecasting in your spreadsheet and also show to you that we aren't creating administrative jobs in the headquarter big time.
Because that's not the case. It is centralization of business tasks. I would say that they sit in our normal IT budget and they are not singled out. We have a team, what can I say, that runs AI and many of these technologies that we need to do. It's actually more on the change management side that you need the resource and we will then, country by country, roll it out. So there will probably be more people moving out of the divisions as we progress on this journey. I think we have still some ground to cover when it comes to that, but I think you know that you will be able to get the details basically from.
But they will then be minus in the division and then plus in this Global Products category, what we are talking about. And then of course we drive the productivity. We already see that this of course happens and we have, what can I say, some aspirations on that journey. We have to deliver 6 billion to you and the consolidation of, for example, the customs area will probably deliver 12–14% of that number. So it is something of productivity that we have to increase in this area.
OPERATOR (Moderator)
And the next question comes from Jas Heindorff from Nordea. Please go ahead.
Jas Heindorff, Analyst at Nordea
Yeah, thank you for taking my question. It's a follow-up on some of your earlier comments. Jens, you said that you have taken initiatives to increase the volumes in Sea Freight in the coming quarters. And can you just elaborate on what specific initiatives have you taken? And then as part of that question, Q3 will be the first quarter when we actually can start to look year-on-year volumes instead of talking quarter-on-quarter. So do you expect, when we get to Q3, that you will be able to show positive year-on-year growth rates and volumes in Air & Sea (A&S)?
Thank you.
Jens Lund
Yes. I also said, you know, the rolling forecast shows that during Q2 we're going to get out of the second half of the year. We're going to get out of the trough so that we then come back to taking or growing the business again. The initiatives that we're taking is, I mean, what we're doing is every country or every area has a book of business. It's assigned to people and we have target setting on it and then we drive, what can I say, sales according to this target setting in relation to the customers.
So I think that's basically what we try to do. If we take it overall, then of course certain customers you need to drive, what can I say, with vertical expertise on top of that and other customers, what can I say, is more like general cargo and the customer segmentation. Then you sell to the customers, let's say you have very small customers, perhaps more digital interface, where the larger the company gets, you know, that you interact with, the more specific it is and the more planning and work it requires.
So I would say that that is all ongoing and we have to prove now that we can capitalize on the capacity that we have and deliver growth.
OPERATOR (Moderator)
Then the next question comes from Harishankar Ramamorti from Deutsche Bank. Please go ahead.
Harishankar Ramamorti, Analyst at Deutsche Bank
Yeah, hi, good morning. Thanks for taking my question. Maybe I can revisit one of the earlier ones on Road, when you spoke about some potential impacts to revenues. Would it be possible for you to give us a sense of underlying like-for-like growth or, say, the churn in percentage terms? And then maybe one quick one on the minority interest. I find that that's gone up quite a bit. Any color on what's driving that up in Q2?
Jens Lund
I think if we look at Road, I'm not 100% certain and, you know, it's always difficult to say exactly what is the market and what are we, but we are probably a little bit behind the market and once the quality issues have been resolved, the network should be stronger than before and we should then be able, what can I say, to come back to normal growth rates. So if I was sitting with your spreadsheet, I would probably take a couple of percentage points off.
We've anyway said that on the integration that we are going to lose a bit of GP. So we are definitely within those parameters. When it comes to the minority interest, I think Michael can say a little bit about that, but there's a good explanation.
Michael
I think it's right that it's quite high for the quarter. As always, when we go into these integrations—well, not as always, but in many cases—the acquired business has a lot of JV interest stakes in different parts of the world. And when we go in we want to clean that up so we get in control in full, enhancing our network, and then cleaning that up means sometimes that we have to pay out the minority share to the different JV holders, and we have been working in exotic countries to clean that up.
So that should be, you can say, predominantly a one-off this quarter. We have had in Turkey, Japan and Bahrain, so we have a lot of JVs that we clean up, but the biggest part has been cleaned up so one of payment of dividends as part of acquiring the minority entity and then basically buying the remaining of the shares in the unit. So it can be several years of profit that has been accumulated down there. So there's no correlation with the line minority interest actually going forward.
Jens Lund
Hopefully we own now a bigger part of the company, as Michael says. But then of course the part where we still have minority, of course it's a few Contract Logistics operations in Turkey and Japan, I believe it is. The rest we are in 100% control of now. But well spotted. I would say this is how we have to treat it from an accounting point of view. It is part of the, you can say, profit distribution.
Harishankar Ramamorti, Analyst at Deutsche Bank
Okay, so sorry, just a follow-up. Should we expect any material cash outflows towards the acquisition of these minority interests going forward?
Michael
No, no, it's not significant. It's always, you can say, many smaller ones typically. So it's not a big outflow.
OPERATOR (Moderator)
Thanks. And the next question comes from Marco Limiter from Barclays. Please go ahead.
Marco Limiter, Analyst at Barclays
Hi, good morning. Thanks for taking my question. I've got a question on the 250 million capital gain in Q2. Why are we seeing a capital gain in Q2 and why we didn't see any capital gain in Q4 and Q1? And I guess related to that, where are we in percentage terms versus the 2 billion euro asset disposal that you have guidance for? Are we just at the start, midway—how many transactions should we expect going forward? I'm aware that you said that we should not expect any, or the guidance does not reflect any, capital gain.
But, you know, beyond the guidance—yeah—are there more capital gains that we should expect going forward? Thank you.
Jens Lund
I think we've already explained on the capital gains that we are not expecting or planning for gains. There's an opening balance adjustment. So let's say if you'd had some gains in the early part of the year, you would have had to adjust that in the opening balance if they related to a Schenker facility. So that's really how the accounting rules work. Now we've then divested some here in the second quarter and I think Michael can tell a little bit more about the volume and where we are at on that.
So perhaps you can say something on that.
Michael
Yes, you can see that in the cash flow statement. You can see that we have sale of property, plant and equipment, roughly 4.5 billion DKK for the first six months. So we are grinding our way through it.
Jens Lund
So. So if 2 billion is 15 billion, then we have done one third and we will continue to divest those facilities.
Marco Limiter, Analyst at Barclays
Thank you. And just to be clear, so is the accounting treatment different now in Q2 versus what it was in Q1, for instance?
Jens Lund
You can say after 12 months you don't adjust, what can I say, the gains in the opening balance anymore. When you do the purchase accounting you have 12 months where you go in, make an estimate, estimate what's the value of the asset. If then there is a transaction and the value crystallizes and it's different, then you have to adjust that in the opening balance. Once you then pass, what can I say, that point, there can be many things that lead to an adjustment on a facility because you would use certain assumptions when you make the valuation for the facility, and if some of these assumptions change, or the market, for example for investment in property, changes afterwards, then of course the outcome is probably going to be different from your initial assessment.
Marco Limiter, Analyst at Barclays
Okay, thank you. And just to cross off the topic, did you have any capital gains related or sale-and-leaseback gains in Contract Logistics in Q2 or in the first half? Thank you.
OPERATOR (Moderator)
Then the next question comes from Ulrich Bak from Danske Bank. Please go ahead.
Ulrich Bak, Analyst at Danske Bank
Yes, hello Jens and Michael, thank you for taking my question. Just on the cost synergies, you write that the impact increased by 300 million in Q2, but looking at group fixed costs they only declined around 56 million quarter-on-quarter. And I acknowledge that in Air & Sea fixed costs decreased around 300 million, but at the same time the group costs increased by more than 200 million, which is probably what you alluded to earlier on this Q&A. But where do we really see those 300 million in cost synergies?
Also considering that Q1 cost level was elevated. Thank you.
Jens Lund
I think if you look at it—and thank you for the question—if you look at our Contract Logistics division, you'll actually see that there is an increase quarter on quarter in the cost there. And if you track that to the development of the business, I think it's fair that it has been worthwhile investing in some white-collar workers. If you look at the conversion ratio and the EBIT margin that they have. So this is the main reason, obviously I think this is what you need in your explanation and it will all stack up.
OPERATOR (Moderator)
And the next question comes from Arthur Trusloff from Citi. Please go ahead.
Arthur Trusloff, Analyst at Citi
Thank you very much for taking my question. The area I wanted to focus on was just the sea side. So you know, clearly volume progression, q/q was a little bit soft in Q2, I guess. What's the sort of opportunity to grow volumes going forward and what are you expecting in sort of Q3? Are you expecting more normal seasonality? Are you expecting some catch up and when should we sort of start to see you grow back in line with the market again? And then I guess and actually just finally on that, when would we expect to see you go above the level seen in the previous year?
And then also on yield as well, you know the CCFI index is up very significantly in terms of what you're going to be recognizing in Q3 versus Q2. So I just wondered why the gross profit per unit in sea should not be up meaningfully. Thank you.
Jens Lund
I think that was quite a few questions but let's try to see if we can answer them all. I think if we look at the Ocean Freight, we already explained what we're doing on the customer facing side. I also think now given, what can I say, the network capacity we have on LCL and many of the products that we have on Ocean Freight, they're definitely market leading and very strong. So that should help us to continue that development on Ocean Freight. I think if we look at the Ocean Freight, we have also invested quite a bit in the sales force, not least in Asia.
So that should hopefully also drive some outcome in the coming quarters. I think when it comes to the yield side, I think we are now at 4,000 so it is somewhat higher than we would normally plan for. And I think you're right, there is a chance that we may even get a little bit more expansion on the yield into the next quarter. We will have to wait and see then when it comes to, what can I say, we have now to have reached the trough and we have then to see that basically we catch up with the market and start to deliver, what can I say, performance that is satisfactory and this has to happen here during the second half of the year.
But hopefully we can also start to see some of this also when we announce, what can I say, the next quarter. This is at least what we have in our rolling forecast.
OPERATOR (Moderator)
And the next question comes from Christian Godigsen from SEB. Please go ahead.
Christian Godigsen, Analyst at SEB
Hello gentlemen. Just a quick question on the Road from my side, I was just wondering what are the plans with Brian Ejsing in relation to their roles of both having a role as COO and also CEO of Road. Thank you.
Jens Lund
I think the plans are now that Brian stabilizes the situation and once that is done we will then start to discuss how, what can I say, to drive the succession in Road as we normally do. So we will take our time. Brian is doing a good job. And since, you know, CL also reports to him at the end of the day, but that's doing fairly well, he can spend his resources on the Road side, which is actually also doing and doing a great job there.
Christian Godigsen, Analyst at SEB
So just to be clear, so the intention is once you progress more on Road, then Brian will step back to focus solely on being a COO, and then you will have a succession in a new CEO role. So you have two separate.
Jens Lund
We will probably get there. But let's see how it all pans out now and also how the workloads, what can I say, they spread out. But as I said right now, Brian, he can double-head and do both jobs. He does a very excellent job on that. But the idea is, of course, that the structure that we have, that we get, you know, a solution in a little bit longer term.
Christian Godigsen, Analyst at SEB
Yep. Okay, very clear. Thanks a lot.
OPERATOR (Moderator)
Ladies and gentlemen, this was the last question for today. I would now like to turn the conference back over to Jens Lund for any closing remarks.
Jens Lund
Well, thank you very much for your interest and your time today. I think we've had a lot of good questions, not least when it comes to Road, but certainly also to the cash flow situation. I hope that at least you feel that we have confidence in our ability also to deliver the outcomes that we need, both for the year, but also in the coming quarter. So we look forward to the conversations that we're going to have with you bilaterally now in some of our investor meetings.
And then we look forward to speaking to you again at the end of next quarter. Thank you very much for your interest and have a continued good summer. Thank you.
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