PostNL N.V. (TNTFF) Q1 2023 Earnings Call Transcript

PostNL N.V. (OTCPK:TNTFF) Q1 2023 Results Conference Call May 8, 2023 5:00 AM ET

Company Participants

Jochem van de Laarschot - Director, Communications and Investor Relations

Herna Verhagen - Chief Executive Officer

Pim Berendsen - Chief Financial Officer

Conference Call Participants

Michiel Declercq - KBC

Frank Claassen - Degroof Petercam

Marc Zwartsenburg - ING

Nikolas Mauder - Kepler Cheuvreux

Henk Slotboom - The IDEA

Marco Limite - Barclays

Stefano Toffano - ABN AMRO ODDO

Operator

Good morning, ladies and gentlemen. Welcome to the PostNL Q1 2023 Analyst Call. [Operator Instructions]

Now, I would like to hand over the conference call to Mr. Jochem van de Laarschot, Director, Communications and Investor Relations, PostNL. Please go ahead, sir.

Jochem van de Laarschot

Thank you, operator. Good morning, everyone. I'm here in the room with Herna Verhagen, our CEO; and Pim Berendsen, our CFO.

We will first start with a presentation, the slides of which you can find on our website and also, of course, on the webcast. And we will follow up by Q&A after that.

Pim, floor is yours.

Pim Berendsen

Yes. Thank you, Jochem, and good morning to all of you.

Let's start with having a look at the key takeaways for the first quarter of this year. Q1 results came in slightly better than expected, so a good start of the year. This is driven primarily by parcel volumes that developed more favorable compared to our expectations. That is the case, both domestically and internationally, and also especially visible in March.

The positive trend in our international activities that we already saw in Q4 continued. Next to the volume component, the better performance is also driven by good operational performance and more efficiency in the operations, driven by the adaptive measures that we initiated last year to adjust the cost price per parcel levels to the lower volumes. So, efficiency is up and volume slightly better than originally expected.

Mail in the Netherlands performed more or less in line with expectations. And all in all, it is a satisfying start of the year for us. Nevertheless, these Q1 numbers are obviously below those of last year. Last year, we still had some weeks of lockdowns. And apart from this, January and February were relatively normal months which, obviously, the war in Ukraine, starting on the 24th of February, and as of that point in time, having significant impact on our performance.

Volume at Parcels in Q1 was down 6.5%. If you look at domestic only and adjusted for non-recurring COVID volumes, we see a decline of 5%. Mail volumes developed in line with expectations, being down 10.8% reported and roughly 8% underlying adjusted for COVID. Also in the quarter, we're making progress as scheduled in our preparations for additional plans to save EUR25 million as of 2024 up to a run rate of EUR30 million in 2025 by a reduction of 200 to 300 full-time equivalents in overhead and indirect support roles predominantly at Parcels.

Looking at the full year, we are on track and we have confirmed our outlook. This is based on the Q1 results that came in above expectations, but still, let's say, in an economic environment that continues to be volatile and uncertain, even though some macroeconomic indicators seem to indicate first signs of improvements.

If we then move over to the next slide on Q1 performance, a bit more numbers there. You see the revenue of this quarter coming in at EUR783 million, a 3% decrease compared to last year. Normalized EBIT at EUR7 million, obviously, a significant increase compared with the EUR33 million we reported Q1 last year, which is obviously largely explained by higher organic cost increases, with also specifically in this quarter a one-time payment of 1.5% of annual salaries for people in the PostNL collective labor agreements, which accounts for EUR10 million. And the total organic cost increases in the quarter amount to EUR54 million, including the EUR10 million with a full-year assumption of EUR185 million.

Our free cash flow was negative and the results with, amongst others, the tax payment related to the year 2022, but also the final settlement payment for the transitional pension plans of EUR16 million. All those payments have now been done and have been settled. Normalized comprehensive income was positive and came in at EUR4 million.

On Slide 4, we repeat the key components of our strategy. We're continuing to execute on that strategy, which is, obviously, to be the leading logistics and postal service provider in, to and from the Benelux with the 3 pillars that we talked about before on Parcels, Mail and Digital Next. And if you look at the first quarter, we've made further progress on some of our non-financial KPIs.

Today, we have 8 million PostNL consumer accounts, of which roughly 70% are actively used. We're implementing an algorithm that supports the planning of delivery routes fully based on data, which will further improve the efficiency of our network operations. We've now installed 710 automated parcel lockers, which is an increase of roughly 200 compared to the end of last year. We further improved the carbon efficiency of our own fleet by another 6% in the first 3 months of the year. So all in all, good progress also on the strategic side.

The next slide -- next slide talks about the performance of the Parcels segment. There, we achieved revenues of EUR561 million, a slight decrease compared to the same quarter last year. As said, volumes were down 6.5% reported, 5% domestically when stripping out the non-recurring profit elements. Volume decline was offset by price increases and favorable mix. Cross-border continued its positive trend.

Logistics was a couple of million below last year, and the normalized EBIT of the segment came in at EUR5 million compared to EUR18 million the year before. Obviously, reflecting the organic cost pressure, including the one-time allowance of 1.5% we just talked about, which is partly mitigated by very good operational leverage and good efficiency levels also related to the adaptive measures that we've taken last year, including the optimization of routes, staff and our fleet, but also strict cost control on direct.

Slide 6 provides the bridge in the setup that you've seen many times before. So it's a reconciliation of the EUR18 million result of last year's quarter to the EUR5 million. And here you see the key components. Revenue effect, EUR23 million, positive price/mix of EUR16 million, the biggest part related to higher prices that we've introduced towards the market, EUR24 million of organic cost going the other way. Volume-dependent costs, obviously, as a function of lower volumes, a positive. And also there in other costs, you see the operational efficiency improvements on network optimization, et cetera. Other results, slightly better and spring, down in logistics and other businesses also driven by higher organic costs.

Then we step over to the Mail segment. Mail Netherlands revenue came in at EUR349 million, a decline compared to EUR387 million last year, obviously, driven by a volume decline of 10.8% reported, which is 8.1% if you take out the non-recurring COVID of last year. Revenue is obviously impacted by the moderate price policy with a 5.2% increase in stamp prices as of January 1, 2023, and normalized EBIT came in at EUR8 million compared to EUR36 million last year.

Also at Mail, we see significant organic cost increases, which also are a reflection of the wage increases we agreed on the collective labor agreements, obviously, also including the one-off payment in this quarter of 1.5%. At the same time, sick leave rates continued to be high, negatively impacting cost and quality levels, while we are currently making progress in filling Mail vacancies. Cost savings are well on track and leading overall to result in Mail in the Netherlands that is more or less in line with expectations.

Slide 8 provides the bridge for Mail in the Netherlands, EUR36 million compared to EUR8 million, down EUR25 million if you correct for the non-recurring COVID. You see EUR9 million of cost savings realized, offset by slightly lower bilaterals in other costs and in other results. There are some phasing elements in it, but also lower proceeds from real estate sales that account for that. All in all, in line with our expectations.

The next slide provides a breakdown on the cash flow. Cash flow, a negative number, obviously driven by a slightly lower normalized EBIT number than last year and then some changes. Taxes paid predominantly related to 2022 is higher. You see a slight increase in the phasing of the CapEx. Full-year CapEx is unchanged at EUR150 million, a little bit more was done in the first quarter. And you also see the EUR16 million settlement payment transitional plans at the bottom of the graph, which is the final payment that we've now made.

That brings us to some forward-looking words statements on Slide 10. And clearly, it is still early in the year, but the satisfying Q1 results combined with the still uncertain economic environment makes that we're comfortable and confident that we can conform our normalized EBIT guidance for 2023 full year within the ranges of EUR70 million to EUR100 million for normalized EBIT, and free cash flow is expected to come in between EUR10 million and EUR40 million.

Also important is that we are well positioned to deliver the step-up in improvement in performance as of 2024 that we talked about at Q4 numbers. And I repeat what I've said in February. The 200 basis points margin improvement, predominantly from Parcels, assuming an upward trend in e-commerce and further based on economic conditions is still what we expect to realize.

For the shorter term, we do expect for Q2 a result business-wise that is going to be more or less in line with the result last year. It assumes that Parcels volumes will be more or less in line with volumes last year. We expect Mail volume to continue to decline in the range of 8% to 10%. We know, obviously, the impact of collective labor and other organic cost increases. We do expect the price/mix effect being positive to continue. And obviously, also the benefit from the pension arrangement will also continue to contribute quarter-after-quarter.

I think it's important to understand that, let's say, around EUR20 million one-off costs related to the plans to reduce 200 to 300 FTEs in overheads will occur in quarters to come. So it's not a one-off program, but it's split in very different programs to be discussed within the business units and the works councils of those business units, which means that there will not be one-off restructuring cash-out to be recognized, but it will be phased gradually over Q2, Q3, Q4. And if we know a bit more of the phasing, we will certainly update you on it. But good progress is made. We're comfortable that we'll reach that number of FTE reductions and as well, then, the savings associated with it.

So maybe to summarize. First quarter results came in above expectations. So that's a satisfying start of the year for us. Parcel volumes have developed a little bit better than expected, and we see the positive impact on efficiency measures, operational leverage of the measures that we've taken to improve the margins on the e-commerce side as well. Mail in the Netherlands, more or less in line with expectations and some early signs of improvements in macroeconomic indicators, but obviously, overall, still in very volatile and uncertain market circumstances. Full-year assumptions, therefore, remain the same, and we're all on track to deliver our full-year outlook.

And on that note, Jochem, I'll hand it back to you.

Jochem van de Laarschot

Thank you, Pim. Operator, could you please open the floor for Q&A?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Michiel Declercq from KBC.

Michiel Declercq

Yes. The first question would be on the nice parcel volumes, so 6.5% decline. I was just wondering if you can give a number on how this compares to the overall market decline that you're seeing because you earlier mentioned that there would be some market share impact as well. So if you could give some number on this. And following up on this, also your outlook for the second quarter, the flat Parcel volumes. Is this a bit in line with the budget that you gave in the fourth quarter? Or is this actually a bit of improvement? Because I saw that consensus was a bit below that. So if you can give some comments on that?

And then maybe for my second question. You mentioned, of course, that the macroeconomic environment is improving a bit and that you see this also in the Parcel volumes. How will this translate in your cost savings? And I mean, with the 200 to 300 in FTE reduction, could it be that we now come in at the lower end of that range a bit? Or how depending is this on how the volumes develop throughout the remainder of the year? Those would be my 2 questions.

Pim Berendsen

Michiel, thank you. I think, let’s say, the volume development in the quarter in relation to market share developments, what we said is that given the overcapacity in the market, driven by the fundamental changes last year, we do expect full year a little bit of market share loss, and then you think about 1 percentage points or 2 percentage points and not significantly more. And that is also the trend on what we saw coming out of 2022, including the first quarter of 2023. So no deviations, no differences in comparison to the earlier statements there.

If you talk about, let’s say, our expectations for Q2, we’re still a bit cautious. But by saying that we do expect volumes of Parcels to come in relatively flat in comparison to last year, that is a bit of a continuation of the slightly better performance that we also saw in Q1 and it’s a little bit of an improvement in comparison to our own expectations as well. At the same time, obviously, we’re still a bit cautious given the fact that we’re still operating in pretty volatile markets. But that is how we look at it.

Then your third question. There is no relation as far as we are concerned of the slightly better volume development and 200 to 300 FTE reductions. We’re still making progress and aim to achieve that plan. That should impact 2024 step-up in performance, predominantly in Parcels with EUR25 million. So, there is no deviation to that plan. We plan to complete the planning phase by the end of the second quarter and also are engaging with the works council to operationalize those very many different plans. So, there’s no correlation with slightly better volume developments and then as such, coming up at the lower end. That’s not the plan. And keep in mind that the 200 to 300 full-time equivalents are indirect. So, they’re not directly related to volume at all.

Operator

We'll now move on to our next question. Our next question comes from the line of Frank Claassen from Degroof Petercam.

Frank Claassen

Yes. 2 questions, please. First of all, on the price mix. Have we seen now most of the positive price mix? Or can we still expect more to come in the coming quarters? Can you still raise prices maybe in the course of the year?

And then secondly, on your digital transformation program, you spent EUR3 million in Q1. What can we expect for the rest of the year? And what are your main projects here?

Pim Berendsen

On the first one, yes, definitely, we -- and you should also expect a continuation of the price mix along the lines that you've seen in the first quarter. That's obviously not because of the fact that we're still introducing new price points. Those have been introduced and have been negotiated as of the beginning of the year. But in comparison to last year, obviously, those individual price points are at a significantly higher price level. So, you should expect those elements of the table to come back also in the next 3 quarters.

Frank Claassen

Okay. But no new price hikes foreseen, I would say?

Pim Berendsen

No additional ones on top of the ones that we have introduced already at the beginning of the year.

Frank Claassen

Okay. And the digital transformation?

Pim Berendsen

Yes. Well, this is, roughly speaking, also the run rate that we’re currently working on. And so that will continue also for the next quarters. Big projects are – and it was already mentioned in the introduction of an algorithm also for the e-commerce route optimization part. There are changes being made to our digital channels to enable SME clients to access our service offerings better. So that’s just a few examples of the projects that we’re currently working on. The vast majority of thos’ are focused on improving the customer journeys of our key customers, on our key journeys, and at the same time, improving the efficiencies even more in our e-commerce part of the business.

Operator

We'll now move on to our next question. Our next question comes from the line of Marc Zwartsenburg from ING.

Marc Zwartsenburg

Yes. Congrats on the quarter. A couple of questions from my side. First of all, on the Parcel volumes. Maybe can you share maybe a bit more or provide a bit more color on how your larger segments were performing? Was there a difference between certain categories, clients? Can you provide a bit more color there, what you saw through the quarter? That is one.

And the other one is on the cost base. So you have EUR54 million of cost saves, including the EUR10 million one-off, so EUR44 million run rate, a guidance of EUR185 million. If I simply multiply the first quarter by 4, I get to slightly below the EUR185 million. But is that EUR185 million sufficient in terms of organic increase isn't there through the year, also some additional inflation still feeding into maybe in Belgium into your wage indexation, et cetera? Maybe you can provide a bit more color around the EUR185 million. How confident you are to reach that number?

And then maybe -- and a small one here on the free cash flow, Pim. The tax settlement you had mainly related to 2022. I've seen the cash flow. It is minus EUR34 million of cash outflow, but it's a bit a bucket of where more items are included. Well, first of all, it was included, I guess, your free cash flow guidance. Can you also share the number with us?

And then lastly, also a bit of -- for the modeling PostNL Other. I see in your outlook statement, you provide EUR20 million better than 2022 due to pensions. Should I then assume that the PostNL Other EBIT is around EUR20 million better than lower negative than last year? Or should we include more inflationary items to get to a number for PostNL Other? Those were my questions for now. I have actually a few more, but I might come in later.

Pim Berendsen

All right. I would say there wasn't a big deviation between the different segments, larger or smaller customers, if you talk about the profile of the volume development. What you did see, though, is a slightly better performance from the international part than the domestic part, which was also what we alluded towards saying that already the improvement as of fourth quarter continue down that road. So, no specifics between customer segments, but international slightly ahead of the curve if you compare it to domestic.

On the EUR54 million organic costs, obviously, I do recognize the way you do the math, Marc. So indeed, EUR44 is the kind of the structural component. Do that times 4, add back the EUR10 million, and you are already almost there. And yes, there's a few cost components that are maturing a little bit throughout the year, but we have clear visibility on those. So at this point, I don't have any indication or argument why it should be a material number different from the EUR185 million that we indicated before.

On the free cash flow component, yes, the free cash flow performance of this quarter and the moving parts that you can see in this bridge were all part of our forecast of cash flow for the entire year. I don't, by heart, now have the number of the tax paid in '23 that do relate to a corporate income tax assessment over 2022. So, I don't know the right number for that right now.

And on PostNL Other, the biggest component, but not the only one, is indeed, obviously, the delta pensions that you can find there. And what is left is, let's say, obviously, also impacted by organic cost increases for other people that are -- the costs related to the people that are reported there. So, that is what I can say about that.

Marc Zwartsenburg

Okay. Very clear. Maybe I can squeeze in another one on your outlook and you had these bar charts per quarter. Well, this quarter obviously was a bit better. Q2, I recall, was also a bit similar to the chart for Q1. Would we now have to assume that, that one also is a bit better because you're trending a bit better also in Parcel volumes? Is that the right way to look at it?

Pim Berendsen

Yes. Well, there's -- let's say, if you go back to the graph of Q4, they were kind of in Q2, 2 different kind of elements. The other one was the kind of the business performance and the other one was obviously with orange lines indicating at that point in time, the expectation that the one-off costs, restructuring cash-out in relation to the cost savings were to be accounted for in Q2. There we say that will be faced differently. It's not one program but different components and as such, will be accounted for in different quarters. And the real business performance is expected to come in more or less in line with last year. And yes, there is always going to be a little bit of phasing elements coming out of a quarter into the next. But that is what we currently see. So a business result excluding one-offs, that is in line with last year.

Marc Zwartsenburg

But the phasing of the one-offs related to the -- where I think they were phasing in, in the second half of the year because the program still needs to start up and then you take a provision. Has that now changed then? Is that what you're saying?

Hello? Hello? Am I still there? [technical difficulty] Hello?

Herna Verhagen

We're back again.

Pim Berendsen

Can I repeat the last answer? I'm not quite sure whether or not you've registered it. We had some issues with the line here.

Marc Zwartsenburg

No, you were disconnected already. So if you can repeat it.

Pim Berendsen

Yes. So in February, we did assume the total restructuring costs and one-off related to the cost saving plans to be accounted for in Q2. What we now say is that given the progress that we've made and the fact that it will not be one program, but different trajectories per business unit, that will not materialize all in Q2, but will phase over the 3 quarters. And at this point in time, I cannot be more precise. We're completing the plans. We're engaging with works councils. So that will be for later. And the kind of normal business performance is expected to come in at the level of last year. That is the answer I now have repeated.

Marc Zwartsenburg

Okay. Very clear.

Operator

Our next question comes from the line of Nikolas Mauder from Kepler Cheuvreux.

Nikolas Mauder

Can we talk a bit about Mail segment profitability seasonality? Because even when accounting for the non-recurring COVID-19 effects, first quarter profitability in the last 2 years was very strong. I appreciate that this year is for different factors. But given the many things that have changed over the course of the pandemic versus where we are now, can you perhaps describe a bit in your view how the profile of the profitability is going to look like going forward? Is this a normal level that we're seeing right now and what are your expectations here going forward?

Pim Berendsen

Thank you, Nikolas. Yes, what is normal there? So let's say, the seasonality -- the real seasonality pattern of the Mail business is coming back to normal, having no longer the COVID elements in it, which always means that Q4 will be, by far, by far, the biggest contribution to the profit in the Mail business. And then within this year, and the question is what is normal? And, well, it is obviously that in this year, we see exceptionally high organic cost increases that, let's say, are obviously impacting also the Q1, Q2, Q3 performances, relatively speaking, big, given the fact that we have not been able to offset those organic cost increases completely by price increases and cost savings together with the volume development. So, you would expect margins in Mail to come back to more or less pre-COVID numbers for the -- well, Q1, Q2 margin levels and still the fourth quarter to be significantly more valuable.

Then there's always going to be some deviations between the quarters that are driven by terminal due positions that get settled, that do impact the quarter-per-quarter margins and/or proceeds of real estate that are also part of the Mail segment, as you know. So, those are the elements to look at. All in all, the Mail performance and Mail margin of this quarter was in line with what we expected it from Mail, based on the outlook and the assumptions under the outlook that we've provided at the end of February for you.

Operator

Our next question comes from the line of Henk Slotboom from the IDEA.

Henk Slotboom

I've got 2. One, Pim, maybe I'm a grumpy old man and pessimistic, but I hear you talking about an improving environment. Perhaps you could shed some more color on that. Because if I look at consumer confidence, it's still very negative. If I look at the latest data that have been disclosed by the Dutch Central Bureau of Statistics, the retail sales are, volume-wise, still in negative territory. What is driving your optimism because I would like to share it if I can?

The second thing is with regard to fuel costs. There's been a temporary cut in the duties on diesel and fuel. That will largely disappear as of the 1st of July. Do you have -- and last year, I believe you didn't have the fuel surcharge as part of your tariffs. Is it now included in most contracts? Those were my questions.

Pim Berendsen

Thank you, Henk. Yes. Well, there's, let's say, it depends on, let's say, where in the day or the week, you get, let's say, you make your cut-off on the new stories. Yes, there are some positives. And also next day or next week, there could be some negative developments on the macroeconomic front. But what we did see, however, is that consumer confidence, albeit still negative is slightly improving. We have seen consumer spending coming up a bit. We did see inflation coming down.

Obviously, last week's announcement was that it is spiking up a bit again in April. So it's not a clear-cut message. There are some drivers where we see positive signs and still some -- there are still indicating that we're in, macroeconomically speaking, very difficult circumstance. And that's also why we say, yes, it is a good start of the year, but let's see how this continues, whilst we're still operating in a pretty volatile and uncertain time. So, there's some good, some bad, but all in all, still very volatile markets.

On the fuel side, obviously, we are aware of those relevant timelines and dates that have been taken into account in our full-year outlook. Yes, there are fuel surcharges in the vast majority of our contracts that we've negotiated and have implemented as of the beginning of this year.

Henk Slotboom

Can I add a third question, Pim?

Pim Berendsen

Of course.

Henk Slotboom

With regard to the dividends, because when I do my calculations, you will probably end up at around the 2x debt ratio level. What determines the interim dividend? And normally, you pay out 1/3 of your dividend as an interim dividend. In August, you have to make up your mind. Sorry?

Pim Berendsen

No, you're absolutely right so far. Yes,

Henk Slotboom

Okay. What determines whether or not -- suppose that in August, the debt ratio is, let's say, 2.2x or 2.3x on a last month -- last 12 months moving basis, difficult to phrase. Could that be a reason to say, okay, well, we don't know whether we'll end up the year at 2x or less for a dividend? We'll skip the interim dividend. Is it something you will make up your mind as the year progresses? Could you allude on that? What your view on that is? Because that will be most helpful.

Pim Berendsen

Yes. I would put it differently. As long as we believe that we’ll get to the end of the year below 2x, and our expectation is that it will be and also the phasing of the cash flow in this quarter was not a surprise to us. So if we need to take the decision on interim, we’ll do that with the perspective going forward in mind as well. And so I have no doubt in my mind that we’ll just be able to pay the interim dividend, which is indeed 1/3 of last year’s dividends. It would only be really different, if by then, we had a very strong opinion that we would end up by the end of the year at a leverage ratio significantly above the 2x. We just said, we do not expect at all.

Operator

[Operator Instructions] Our next question comes from the line of Marc Zwartsenburg from ING.

Marc Zwartsenburg

Yes. I have one more left. On Mail [NL] and a minus 8.1% volume decline, was this stable through the quarter? Or would you -- were you also seeing some sort of improvement there on the back of the same arguments as the Parcel trend improved? And what did you see in your direct Mail advertisement segment? Was that weakening due to the consumer confidence coming down and maybe companies becoming bit more cautious? Maybe you can provide a bit more color there.

Pim Berendsen

Yes. Of course. Yes, no, whilst at Parcels, there was kind of a different trend line, January, February comparisons and then March. That's not the case in Mail. So, that was roughly month-over-month following the same pattern. And also in the product mix, no big changes between direct mail or transactional mail. So basically following the expected substitution trend lines, roughly speaking, for all products, for all the months of the quarter following the same trend line.

Marc Zwartsenburg

Okay.

Pim Berendsen

And maybe because you allow me, let's say, a second chance to obviously answer a question that you said before. I think cash-out on taxes related to last year is roughly speaking, EUR30 million to EUR35 million.

Marc Zwartsenburg

And that was included in your outlook as well?

Pim Berendsen

Yes.

Marc Zwartsenburg

Okay. And anything to add on net working capital movements for the full year? Any guidance?

Pim Berendsen

No changes. We do expect, all in all, as I said on CapEx to stick within the same full-year number, slightly phased to the beginning of this year, working capital and no fundamental changes to the expectations. Likewise, on tax and the EUR16 million obviously will not repeat itself on the transitional pension payments that have been made.

Marc Zwartsenburg

Can you remind us the guidance on the net working capital that you provided?

Pim Berendsen

Yes. Of course. If we go back to the bridge, at that point in time, we expect roughly EUR150 million of CapEx. And on working capital, just give me one second just to make sure. A slightly negative change in working capital, I would say, around about the EUR20 million to EUR30 million.

Operator

Our next question comes from the line of [Paul Kirchhoff] from Bank of America.

Unidentified Analyst

Paul Kirchhoff in place of Muneeba [technical difficulty]. Just had one question on the state of the market. You mentioned there's still overcapacity in the market present from the last year. Can you maybe talk a little bit about the trends in overcapacity that you're seeing? And maybe more generally and broadly about what you're seeing from the competition, what developments you're seeing there?

Pim Berendsen

Yes. I think what we talked about at Q4 was obviously that if you look at the fundamental changes in market dynamics as of end of February last year, before that, all parties in the market, the e-commerce market were organizing themselves on growth, coming back out of COVID, assumed to get to a relatively normal year of growth in e-commerce driven by GDP growth and online penetration growth.

Now, obviously, we’ve seen that regular growth of a number of percentage points turned into a significant negative. And that led to overcapacity in the market, giving all capital commitments that were all made prior to, obviously, the Ukraine war starting. And – well, you see competition trying to fill up that capacity. We try to be disciplined and not follow those lower price points everywhere.

But that then also is one of the arguments why we do assume 1 percentage points or 2 percentage points market share loss. We do expect, however, that with 1 to 2 years of regular growth, that overcapacity will be absorbed by the growth expectations. Now we’re a little bit ahead of that schedule, given the better performance on Parcel volume that we’ve seen in the first quarter. So, that’s the way to look at it.

Operator

Our next question comes from the line of Nikolas Mauder from Kepler Cheuvreux.

Nikolas Mauder

I would like to come back to the flat Parcel volume outlook for the second quarter, assuming that the 1 percentage points, 2 percentage points of market share losses will also be at that run rate in the second quarter, it implies that the overall market is growing. Conceptually speaking, can you disentangle whether this is to consumer spending growth in real terms, which would sound odd at where we are currently? Or is it due to e-commerce penetration gains starting to pick up again post COVID?

Pim Berendsen

Yes. I understand the question, Nikolas. But for a quarter-to-quarter, I cannot make that split between consumer spending and online penetration. That is not feasible to do that in a reliable way. But, let's say, conclusion is that we indeed do expect, like we've seen in March, the market to grow a bit. And then, let's say, with that slight market growth and maybe continuing the trend on market share developments, we do indeed expect roughly flat line volume developments in the e-commerce space for the second quarter.

Nikolas Mauder

Okay. Then let's speak at -- after the second quarter again.

Pim Berendsen

Sure.

Operator

Next question comes from the line of Marco Limite from Barclays.

Marco Limite

Just one question left for me. Clearly, there was some negative news flow around Belgium last year. And if you could give us just an update on how things are developing there. I think there were some court ruling going on, if those have terminated and the read across from some of your competitors is also that you have lost a bit of market share there. So if you have in place some commercial effort to, let's say, regain some market share in Belgium?

Herna Verhagen

The status of the court cases in Belgium is that they are postponed again and we’re waiting for the next date. So, we don’t know yet. So to be honest, we’re still in the procedure. And there’s no court case has been done, and we’re waiting for the next date to have a court case. So no news in that sense. When it comes to commercially, in Belgium, of course, the biggest part of our volume in Belgium is import. And there we see, of course, opportunities, but those opportunities lay in the Dutch market because most of the volume comes from the Netherlands to Belgium.

Operator

We have time for one more question. Our final question comes from the line of Stefano Toffano from ABN AMRO ODDO.

Stefano Toffano

Yes. So one question left for me. And it has to do with the performance expected in 2024 or the margin improvements. You guide for at least 200 bps margin improvement at PostNL, mainly focused on the Parcels. And I'm just wondering about the difference in margin improvement on the EBIT versus the EBITDA level, given what we have seen in increases in investments, which should be reflected in increases in the D&A. So again, more an accounting question about what kind of different dynamic should we see on the EBITDA and the EBIT margin levels based on your guidance of 200 bps margin improvement?

Pim Berendsen

Yes. I think on the EBIT margin, what we’ve said is a step-up of not less than 200 basis points, of which, roughly speaking, 300 basis points in the Parcel segment and 100 basis points on the Mail side and then by the relative shares, you get to 200 basis points. We do have a step-up in the depreciation and amortization lines from ‘22 to ‘23. That’s also why EBITDA will develop a little bit stronger than EBIT, will develop. And there, what you should – as an assumption take is that additional D&A is all in the segment of e-commerce. So the D&A in the Mail side of things is more or less stable year-over-year.

Operator

Thank you. There are no further questions at this time. So, I'll hand the call back to Jochem for closing remarks.

Jochem van de Laarschot

Thank you, operator, and thank you all for participating.

The last thing to point out is that we are planning to have a deep dive on our cross-border activities at the end of June. Stay tuned for more information around that. We will host a live event and also make it available through a webcast. Thanks very much again, and see you later.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.