Earnings Report: CTT Reports Robust Growth in Q3, Anticipates Strong Performance in Q4

image

Earnings Report: CTT Reports Robust Growth in Q3, Anticipates Strong Performance in Q4

Portugal's national postal service CTT (CTT.LS) reported strong performance with significant revenue growth in the third quarter of 2024 and a positive outlook for the fourth quarter. CEO Joao Bento highlighted the transition period in the third quarter, characterized by a 17.3% increase in revenue and a 28.6% increase in EBITDA, excluding Financial Services.

The company’s Express & Parcels segment contributed to this robust performance by reaching record volumes, while Mail revenues grew despite a decline in addressed mail traffic. The banking segment also saw significant growth with a noteworthy increase in customers and deposits. Looking ahead, CTT anticipates a strong fourth quarter, forecasting logistics revenues between 70 million and 90 million euros.

Key Highlights:

  • CTT reported a 17.3% revenue growth and a 28.6% EBITDA increase in the third quarter, excluding Financial Services.
  • Express & Parcels volumes reached record levels with a 46% year-on-year growth and an EBITDA margin of 8.7%.
  • Mail revenues rose by 8.9% to 82.4 million euros, despite a 7.5% decline in addressed mail traffic.
  • The banking segment added 29,000 new customers and saw a 46% increase in deposits, leading to a record 12.4% return on tangible equity.
  • Operating cash flow was 29.1 million euros, free cash flow was 8.5 million euros, and net debt stood at 2.7 million euros, with a cash position of 154.8 million euros excluding lease obligations.
  • CTT expects a strong fourth quarter, projecting revenues between 80 million and 90 million euros, with Mail revenues showing improvement in October.
  • A proposed 6.9% increase in Mail prices awaits regulatory approval for next year.
  • The company aims to maintain a stable or slightly growing dividend payout ratio of between 30% and 50%.

Company Outlook: CTT anticipates a strong fourth quarter, expecting logistics revenues to reach at least 70 million euros. Mail revenues are improving, with signs of recovery seen in October. Significant increases in public debt placements are expected, especially in Financial Services, with a normalizing cash flow anticipated to return revenue to historical levels.

Negative Highlights:

  • A flat consolidated EBITDA performance was reported for the quarter.
  • The Mail segment experienced a decline of 3.5 million euros due to volume and operational expenses.
  • Financial Services saw a decrease of 1.3 million euros.

Positive Highlights:

  • The Express & Parcels segment reported a growth of 4.2 million euros with margin expansion.
  • The banking segment grew by 7.2%, driven by strong funding dynamics.
  • Management expects normalization in Mail and continuous improvement in Financial Services.

Shortcomings:

  • Operating cash flow was negatively impacted primarily due to working capital delays related to receivables from a major customer.
  • The increase in lease obligations was a result of fleet renewals and capacity expansions in Spain.

Q&A Highlights:

  • The current pricing structure is expected to remain unchanged for the upcoming regulatory period.
  • A 6.9% price increase has been proposed for next year, pending regulatory approval.
  • The impact of VAT on intra-European transactions will continue to affect working capital.
  • The bank’s strategy will focus on leveraging new shareholder support to enhance resources and savings.

CTT's strong performance in the third quarter and optimistic projections for the fourth quarter demonstrate the company's resilience and strategic focus on growth areas. Despite facing some operational challenges, the company's commitment to maintaining a stable dividend and improving service offerings places it in a favorable position for the future. Investors will closely monitor the proposed Mail price increase and the ongoing improvements in Financial Services.