bpost NV/SA (OTCPK:BPOSF) Q2 2022 Earnings Conference Call August 5, 2022 5:00 AM ET
Company Participants
Dirk Tirez – Chief Executive Officer
Philippe Dartienne – Chief Financial Officer
Conference Call Participants
Ivar Billfalk-Kelly – UBS
Frank Claassen – Degroof Petercam
Henk Slotboom – The Idea
Stefano Toffano – ABN AMRO-Oddo
Sumit Mehrotra – Société Générale
Operator
Hello and welcome to the bpost Second Quarter 2022 Analyst Call. My name is Courtney, and I’ll be your coordinator for today’s event. Please note, this call is being recorded. [Operator Instructions]
And I will now hand you over to your host, Mr. Dirk Tirez, Chief Executive Officer, to begin today’s conference. Thank you.
Dirk Tirez
Well, good morning, ladies and gentlemen, welcome. I’m pleased to discuss our second quarter 2022 results as CEO of bpost Group. Welcome to all of you, and thank you for joining us. I’m delighted to be joined by Philippe Dartienne, our new CFO since June, as well as Antoine Lebacq from Investor Relations.
We posted the materials on our website last night. We will walk you through the presentation. And of course, we’ll then take your questions. [Operator Instructions]
I’m pleased with our Q2 results and the management initiatives supporting them. I will share at the end some of the strong momentum in each business and how our efforts have been paying off since the Q1 results in this adverse environment.
You remember the initial EBIT guidance of €280 million to €310 million communicated in February before the world changed. I’m pleased to report that the results of the second quarter exceed the estimations underlying the initial guidance despite the ongoing macroeconomic pressures. How did that happen? Resilient mail volumes, continued nice growth at Radial North America and the successful implementation of the management actions we have shared with you.
We see that our group adjusted EBIT stands at €82.6 million with a margin of 8%. As expected, EBIT is down by 22.5% compared to the high comps of the second quarter last year with a full lockdown in the month of April in Belgium and the pre-VAT regulation period.
Our group operating income for Q2 stands at €1.035 billion and remained stable year-over-year. Also when combining the deconsolidation impact of Ubiway Retail and The Mail Group with favorable foreign exchange movements. This mainly results from the organic contribution of Radial’s new customers, partially offset by the decreased Asian cross-border revenues due to the new European regulation on VAT, slightly lower with resilient mail revenues and lower revenues from lower parcels volumes.
At Belgium, adjusted EBIT declined by €22 million to €62.8 million, mainly due to lower operating income from lower mail and parcel volumes, coupled with nearly stable OpEx, again, when excluding Ubiway impacts, despite the force recent salary indexations of 2% each and higher energy costs, which we are able to mitigate by FTE reductions and higher recoverable VAT.
At E-Logistics Eurasia, the adjusted EBIT stands at €7.1 million, a €15 million decrease year-over-year due to the lower cross-border activities and continued pressure on volumes and dine. We have a different picture at E-Logistics North America, where EBIT grew by more than €7 million and increased by almost 70% to €15.2 million with an improved margin of 4.8%, mainly thanks to the Radial’s contribution, which continues its path to higher growth and profitability.
These results were obtained despite the continued adverse macroeconomic environment, following the start of the war in Ukraine and the surge in inflation we observed a significant drop in consumer confidence in the month of March, which have continued to deteriorate in the second quarter 2022.
Only Belgium saw a slight recovery month-after-month until June. This contrasts with the trend observed in The Netherlands or in the eurozone, where consumer confidence deteriorated further. In all geographies, this indicator remained below last year’s levels, and first views on July levels indicate that consumer confidence remains fragile.
We also observed a continued decline in online retail sales year-over-year. The statistics suggest a softer decrease in the month of May in Belgium with a limited decline of minus 5% year-over-year and a 10% point sequential improvement on April. At EU aggregated level, the year-over-year pattern remained broadly unchanged over the past three months.
In the U.S., online retail sales show a different trend as they continue to grow year-over-year, but they are stabilizing on a monthly basis since February. In Belgium, inflation continued to decline from 8.3% in March to 9.7% in June, the highest reading since 1982. For the remainder of the year, global recession risks now arise as high inflation hurts consumer disposable income and retail spend capacity and central banks are taking measures with regards to their monetary policy to combat this inflation. I will later on elaborate more on the actions taken by the management to face and mitigate sudden impacts in the past quarter and also for the rest of the year.
I would now like to hand over to Philippe for more details on the financials of the second quarter.
Philippe Dartienne
Thank you, Dick, and good morning to all. I’m very happy to be here to comment on our second quarter results, and I look forward to meeting you all. I’ve enjoyed my first two months at bpost Group. I am impressed by the energy within the group and the collective desire to drive change and implement the management actions Dirk mentioned.
For your reference, you will find on Page 5 an overview of the key financials for the quarter, both reported and adjusted. Dirk already mentioned our group top line and EBIT. Our adjusted net profit amounts to 71.1 – €71.4 million. It benefited from net financial result, increasing by €18 million year-over-year, reflecting lower financial charges related to IAS 19 employee benefit, in line with higher discount rates and thus a noncash impact. Effective tax rate being 27.3%, very close to the statutory tax rate.
Allow me to move directly to the details of Belgium on Page 6. Belgium at constant perimeter, external revenues decreased by €12 million to €519 million. Let me walk you through our subsegment. Domestic Mail recorded an underlying mail volume decline of 7.5% for the quarter against the post-COVID rebound of plus 1.4% in Q2 2021. This impacted revenues by minus €20 million, but was mitigated by a positive price and mix impact of plus €13 million, mainly through mail pricing. Altogether, Domestic Mail revenues decreased by €7 million year-over-year.
Admin main volumes were only slightly supported by some COVID-19 communication. We estimate a contribution of less than €11 million to the top line in the second quarter, which contrasts with the contribution of about €8 million to the top line in Q2 last year.
Parcels Belgium recorded a decrease of €11 million or minus 9.5%. Our volumes were 12.9% below last year. This volume trend reflects the tough comps of last year when there was a full lockdown in the month of April. It also reflects Amazon in-sourcing, without, which the underlying parcel volume decline stood at minus 2.9%. This is an improvement on Q1 when this amounted to minus 1.8%. Volume was supported by resilient demand in fashion in the months of May and June.
At the same time, the price/mix improved from plus 3% in Q1 to plus 3.4% in Q2, thanks to recent price increases and a favorable customer mix. This contrasts with the negative price/mix effect of last year. As a reminder, given the further inflationary pressure on cost, bpost announced in May a second price increase of plus 2.9% for its contractual product applied since the month of June. To put things in perspective, parcel volume remained 57% above the pre-pandemic second quarter of 2019.
Let me move to proximity and convenience retail network where revenue increased organically by €6 million, resulting from the new management contract. Recall that the management contract was already approved by the Belgian government in July 2021. On July 19, 2022, the European Commission approved Belgium’s plan to compensate bpost for providing service of general economic interest for the period 2022 to 2026 under the seven [ph] management contract.
In this subsegment, the consolidation impact of Ubiway Retail as from the month of March this year was minus €34 million in the quarter. Value-added services slightly increased by €1 million, mostly resulting from higher revenues from Fine Solutions.
Let’s move to the P&L of Belgium on Page 7. As a result of lower volumes, operating income decreased by €14 million in Belgium. On the cost side, excluding Ubiway Retail, the operating expenses remained nearly stable year-over-year despite inflationary pressure. We indeed suffer from, first, higher payroll costs per FTE, reflecting the impact of each of the plus 2% salary indexation of November 2021, February, April and June 2022 as well as the change in mind shift regulation. We also suffered from higher energy costs. But on the other hand, we benefited from lower fleet and subcontractor costs, less FTEs due to the lower parcels volume, and the execution of the dedicated management action Dirk will discuss later on in the presentation. We also enjoy higher recoverable VAT in this quarter.
Moving to E-Logistics Eurasia on Page 8. External operating income was down €27 million, contracting the strong growth in e-commerce logistics with lower volumes at Dyna and cross-border.
Looking at the revenue development per subsegment. We see that in e-commerce logistics, Radial Europe and Active Ants sales enjoy a healthy 12.8% growth mainly from new customers on boardings. Note that despite lower sales in April, sales of existing customer, the same-store sale, started to pick up in May and June.
At Dyna, sales were down around minus 20% versus last year, similar to the previous quarter and due to the volume in one and two men delivery DynaLogic exclusively driven by lower consumption spending in white goods and less devices to be repaired at DynaFix. Dyna development did offset the strong growth momentum at Radial Europe and Active Ants with a combined decrease of minus €2 million in revenue.
Let’s move to cross-border. Cross-border, as expected, recorded a weak quarter against last comps – high comps last year. Revenue decreased by minus €25 million or minus 26%. Similar to the previous quarters, we continue to see the ongoing pressure on Asian parcel volumes. The minus 50% decline in Asian sale is the consequence of the termination of the VAT exemption on low-value consignment since July 2021, but also reflect the recent COVID-related lockdowns in China and the consequences of the Ukraine war resulting in delays or reduced shipments to Europe.
Note that as from Q3 onwards, we will start comparing with post-VAT regulation quarters. We continue to expect in the future a progressive recovery from VAT regulation impact, and sales in June were slightly recovering.
Let’s move to Slide 9. Operating expenses decreased by minus €40 million. Across that segment, we had for cross-border, lower transportation costs and lower intersegment OpEx charged by Belgium, in line with the lower Asian volumes; for e-commerce and logistics, lower magical cost, lower interim and transportation costs, in line with our volumes at DynaLogic and DynaFix, Dynasure; and higher payroll costs from inflation and recent site openings in line with our expansion and the strategic development initiatives for Radial Europe and Active Ants.
Moving on to our North American E-Logistics business on Page 10. The operating income of e-commerce logistics increased by €86 million, up plus 15% at constant exchange rate, a very healthy level of growth at Radial, but also Landmark and Apple Express that benefited from new clients or volumes won in 2021. Radial revenues amounted to US$321 million in this quarter. This is respectively plus 61% and plus 18% above the second quarter of 2019 and 2021, which reflects the structural e-commerce logistics growth and Radial’s expansion plan. You can also see the impact of the consolidation of the Mail Group in early August 2021.
Moving to the P&L on Slide 11. Operating expenses increased by 6.6%, excluding FX impact. Variable OpEx evolved at a slightly lower pace than the revenue development at plus 8.2% and include labor cost headwinds from wage inflation in fulfillment, but were also mitigated by some productivity gains. We also incurred lower SG&A costs and higher fixed costs from the new sites opening, which support our commercial successes. Year-over-year, E-Logistics North America adjusted EBIT increased by €7 million, almost 70% up to €18.1 million with an improved margin of 4.8%, reflecting the continuous progress at Radial.
Moving on to the Corporate segment on Page 12. External operating income slightly increased by €1 million year-over-year from higher billing sales. More importantly, lower OpEx include a reduction of 3.8% in overhead FTEs and interims, resulting in an improved EBIT.
Then we move to the cash flow on Slide 13. The main items to flag are the following. The cash flow from operating activities before change in working capital remained stable year-over-year, mainly resulting from lower prepayment of corporate income taxes, offsetting the lower operating results. The change in working capital and provision decreased by minus €62 million, resulting from lower supplies balance due to a different payment calendar, resulting in one additional accounts payable run in the month of June 2022 compared to last year, but also a different payment schedule of seminal use advances. These were made in the second quarter this year, whereas these advances were paid in Q3 last year.
These timing effects are expected to reverse in the coming quarters. The cash outflow from investing activities increased by €14 million to €42 million, including higher CapEx to support the logistics growth of Radial U.S. and the optimization of our domestic network, but also higher M&A activities, mainly from the acquisition of IMX in May, in line with our strategy to transform Belgium, build e-logistic Eurasia and grow E-Logistics in North America.
I now hand over to Dirk to cover our outlook for the remainder of 2022 and elaborate on management action that resulted in operational improvement in the first half of 2022.
Dirk Tirez
Well, thank you, Philippe. Whereas our first quarter was in line with the February guidance, our second quarter outperformed our full year 2022 EBIT guidance of €280 million to €310 million despite the difficult market conditions. This is notably thanks to the successful implementation of the measures explained in our May with our Q1 results in order to face and mitigate unfavorable impacts on EBIT.
The collective energy Philippe mentioned is certainly at work. However, as discussed in my introduction, adverse macroeconomic environment persists globally and still brings uncertainty for the remainder of the year driven by two external factors. First, with the rising inflation in Belgium and internationally, which results in even stronger headwinds than those anticipated in May. In Belgium, as illustrated in the backup slides, we know as of today, that’s due to a fifth consecutive indication of 2% that will now take place in September. We will incur this year an additional impact of approximately €7.5 million, which comes on top of the €70 million versus the guidance as introduced to you three months ago, when this indexation was still foreseen in December 2022.
At this stage, the Federal Planning Bureau also foresees two other salary indexations to follow in February and May 2023. Should inflation continue to further accelerate, the anticipated future indexations could still occur earlier than anticipated.
Second, there is a consumer behavior uncertainty linked to the inflation impact on discretionary spending, the rising risk of recession and the post-pandemic parcel volume normalization. These stronger headwinds and consumer behavior remain a source of uncertainty for the third quarter, which when looking at historical seasonality is a softer quarter with lower volumes during the summer period and for the end of the peak.
For the sake of transparency, we shared with you in May the way our perspective on inflation, energy and e-commerce market conditions may deviate from the initial outlook. Based on our perspective at that time, there was a potential downward risk of up to €40 million net to the initial EBIT guidance. Today, with one extra quarter behind us and the results from the management measures, bpost now revises downward this risk to up to €25 million net despite continued market disruptions.
Of course, management continues to take actions at all levels in order to face and mitigate these adverse impacts while positioning our business for success in the midterm and in a sustainable way as our ESG framework becomes embedded with the way we plan and execute.
As shown on Slide 15 and to name a few. We have in Belgium good progress made on our commercial parcels hunting plan with the objective to counter volume loss from Amazon and post-COVID normalization. On top of the large-volume customers already announced in May, namely Mespeso-Pumazu Plus [ph], we recently signed additional customers, such as Vince and the National Lottery. We were also successful in signing strategic partnerships with some carriers. These are expected to bring additional volumes as from the beginning of 2023. And as Philippe just recalled, we also applied since June a second price increase for our national contractual volumes.
As to costs, OpEx control measures are paying off and positive effects are beginning to be visible, notably in workforce management. In consultation with the social partners, several actions have been implemented and will continue to be implemented progressively in the coming weeks and months. The drastic implementation of the planned reorganizations for 123 of our distribution office in 2022 is further reinforced by an exceptional measure consisting in additional volume-driven workforce adjustments in offices that are significantly affected by lower volumes and not provided for in the reorganization plan. These measures are also supported by external mobility to other public or semipublic institutions from May and June as well as internal geographical and functional mobility.
Despite our relatively fixed cost base structure and lower than initially anticipated parcel volumes, these measures led so far to a productivity improvement of plus 2.7% year-over-year and around 780 FTEs less year-to-date, mainly in our operational network, but also to a lesser extent in overhead functions. And of course, this number excludes FTEs at Ubiway Retail. This improvement in overhead was supported by synergies in sales and marketing resulting from the combination of Mail & Parcels, the reviews of mail center positions and an external hiring freeze, altogether leading to a 3% FTE reduction year-over-year.
At E-commerce Logistics Eurasia, well, we had increased sales efforts being made in our cross-border activities to counter volume pressure from lasting impacts of the new VAT regulation and the lockdowns in China. We developed five new lanes and new business opportunities for our Asian activities. New lanes have also been created with Canada and between the UK and the U.S. for a famous brand in fast fashion. All these new opportunities should allow us to progressively get back to pre-COVID – to pre-VAT sales levels of Q1-Q2 2021 in the near term.
At Radial and Active Ants, contracts with new customers have also been signed in Belgium and in The Netherlands with famous retailers in health and wellness, fashion and pet food industry. Focus remains on further development of sales team in order to leverage the recently expanded capacity. We also continue to focus on other initiatives, such as cost optimization and productivity improvements across all our businesses.
At E-commerce Logistics North America, this adds pricing adjustments to reflect wage and shipping cost increases. Additional productivity actions are taken in fulfillment activities at certain Radial sites. And these include operational flow improvement and automation to reduce labor dependency. On the cost side, the focus on overhead management led to a reduction of overhead-to-revenue ratio while keeping investing in our operational structure to drive our future growth as planned.
On a side note, on our growth plan, Radial has just added a new fulfillment center in Vancouver to support client needs and Landmark Global and Apple Express have expanded their processing capacity through investments in additional facility space. As a follow-up of the announcement made previously, Radial is rationalizing the timing of new site openings in order to align with customer time lines. The opening of two new sites will be postponed from H2 2022 to early 2023, which also contributes to OpEx control measures. The North American market remains dynamic and attractive for Radial to pursue its accelerated growth plan.
Finally, at corporate level, thanks to a strict hiring policy and governance, we have been able to capture some 65% of the natural attrition in the overhead population within bpost SA/NV [ph]. This means that only 35% of the departures are replaced notably, thanks to our focus on internal mobility. In the near term, we have the ambition to reach 80%.
This diligent execution of FTE reduction is also complemented with several initiatives to optimize the workforce needs in a sustainable way. The main initiative that in the last quarter has started to deliver is the launch in April of the bpost Business Services, BBS, our new corporate shared services center. So far, all these initiatives led to an FTE reduction of close to 4% or 60 FTEs visible at corporate level.
We remain active in our portfolio management as we are key to support our most promising activities and reassess those becoming more marginal. You will have seen our acquisition of IMEX, and we always assess accretive opportunities. Overall, these immediate actions are in line with the six priorities I shared with you for the year 2022 and have contributed already to the good results of the second quarter. We continue to see the need for bpost to be as best prepared as possible for the uncertainties ahead, and we proactively act on what we can control from management and our colleagues. bpost Group continues to leverage the ongoing disruptions in the market to further accelerate the transformation momentum.
We are now ready to take your questions. And thank you, operator for opening the lines.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes in from the line of Ivar Billfalk-Kelly calling from UBS. Please go ahead.
Ivar Billfalk-Kelly
Good morning and thank you for the presentation. If I start with a clarification, please, on the guidance. You stated that 1Q is in line with expectations, that 2Q was better. Does this imply that the reduction of the potential headwind from €40 million to €25 million did exclude down to a better outlook for the second half? Or does some of the better performance in Q2 actually contribute to that reduction? And like given that you haven’t actually reduced the headline guidance of €280 million to €310 million. Does that imply that there was actually a probe scenario where you could be above €300 million in the year? And secondly…
Dirk Tirez
Please accept our apologies, but the line is very difficult to understand. Would it be possible to clarify your questions again? And sorry for this.
Ivar Billfalk-Kelly
Sure. Is this any better now?
Dirk Tirez
Yes. Indeed. Yes.
Ivar Billfalk-Kelly
Sorry about that. I’ll start again and sorry, everyone, for the extra time. So you stated that 1Q was in line with expectations, but 2Q was better. Does this imply that the reduction in the potential headwind from €40 million to €25 million is exclusively down to a better outlook for the second half? Or does some of this outperformance in Q2 actually contributed to the reduction? And linked to that, given that you haven’t changed your headline outlook of €280 million to €310 million, does that imply that there’s actually a credible scenario where an EBIT above €300 million could be achieved for the full year?
And the second question then on the logistics division, can you give us an estimate of the proportion of the contracts that have been repriced or had indexation applied recently to reflect a higher cost basis? And is there any change in the contracts that you’re signing or renegotiating to change the split between open and closed book contracts at all? Thank you.
Philippe Dartienne
Thank you for the question. Relating to the outlook, let me put some numbers next to what Dirk already mentioned. So you will recall that in Q1, when it – the negative €40 million potential risk has been explained by several elements, of which the salary increases and the energy cost and the context of the macroeconomic environment.
If we look at the end, as we stand right in July after the June results, what can we say? We see still some pressure when it comes to labor cost in front of us and energy as well. So we expect this one to be roughly in the – roughly €8 million addition headwinds. On the other hand, we had outperformed our forecast for Q2, as you rightly mentioned it. So mechanically, we consider that we could reduce the risk for the total year 2022. And of course, also, I mean, we are at the end of Q2. When we have more clarity at the end of Q3, we will give you updates on where we believe we’re going to end in December 2022.
On the logistics reprice proportion of the portfolio, I’m sorry, but we don’t have the numbers readily available. Antoine will come back to you on that one. But indeed, it’s a dynamic which is ongoing with our customers. In some instance, we need to renegotiate one by one. Under other circumstances, this mechanism are totally embedded in the contract. So it’s not even in negotiation. It’s automatic.
Ivar Billfalk-Kelly
Understood. Then linked to that – to the new contracts that you’re signing, is there a change in strategy at all then to try and mitigate or reduce volatility in costs? Or is it business as usual?
Philippe Dartienne
I would say it’s a – sorry to answer that way. It’s a mix of both. Of course, it’s not only about signing new contracts, but trying to be as much protected as possible as everyone is doing in the market. So whenever we could automatically include this formula, we do it. Sometimes we are successful, sometime we are not. So the strategy of remaining – trying to be protected for any potential increase is unchanged compared to the past.
Ivar Billfalk-Kelly
Understood. Very clear. Thank you very much.
Operator
The next question comes in from the line of Frank Claassen calling from Degroof Petercam. Please go ahead.
Frank Claassen
Yes, good morning all. I have two questions. First, on the mail volume decline. What is currently reflected in your guidance for the full year? If I recall well, you started the year with minus 8, minus 10. Then you said at Q1, closer to minus 8. What do you currently expect? And what are the main drivers? And then secondly, a similar question, I would say, on the CapEx guidance. You started the year with around €250 million gross CapEx. Is that still valid? Or do you expect it to come in lower because of the slowdown of the economy? Thank you.
Philippe Dartienne
Thank you for your question. So the first one relating to the Mail, we keep the full year guidance. Indeed, we are closer to minus 8% than minus 10%, thanks to the good performance of H1. And our perspective on H2 is, of course, lower volume in Q3.
Relating to the CapEx. So the budget, we have €250 million as a full year spending. We are roughly around €60 million at the end of June. We will continue investing to support our growth. But this one is also dependent on the speed at which our customers are requesting expansion. So we will continue matching the investment in terms of CapEx with the higher demand or capacity installment – installation to meet our customers’ requests.
Frank Claassen
But as it looks now, you stick to the €250 million, but it could be lower dependent on your clients?
Philippe Dartienne
Absolutely, absolutely. We rather go – we rather see being slightly lower than €250 million than higher.
Frank Claassen
That’s understandable. Okay, thank you.
Operator
The next question comes in from the line of Sumit Mehrotra calling from Societe Generale. Please go ahead. Hi, Sumit is your line muted?
Okay. We’ll move on to the next question, which comes in from the line of Henk Slotboom calling from The Idea. Please go ahead, Henk.
Henk Slotboom
Good morning all and I’ve got two questions. And if I may, I can ask a third one as well. But let me start with a question I’ve been asking before. We’ve heard a lot of noise from the shooter at the end of last year and early this year on labor legislation in Belgium. And it’s been terribly silent of late. Have there been any developments? Have I missed something? Or can we expect something? Perhaps you can shed some light on that?
The second question relates to the shift in volumes in – the moving parts in Parcels. You successfully recouped about 40% of the volume you lost to Amazon. And I’m reading in the text that the contracts you gained came from small and midsized enterprises and from parties like the National Lottery, National Lottery and Vintage. As far as the small and midsized enterprises are concerned, I assume that these are relatively new players on the e-commerce market because I would assume also that small and midsized enterprises, when they start, they first go to the former incumbents mostly. Perhaps you can shed some light on that.
Vintage is not – if I speak to your colleagues, it’s not a party that makes you very rich, to put it in those phrases. They often go for the lower store tariffs. And I’ve got no idea what to think of the National Lottery. I can’t imagine that the lottery tickets are so big that you need a parcel for it. So perhaps you can provide more granularity as to what is driving this 40% recoupment of volumes. And attached to that, Amazon formally announced that they will open a Belgium platform later on this year. And obviously, they will try and promote the Amazon Marketplace and fulfillment and shipment by Amazon as well. And to what extent could that be – could that cause a second wave of shift in volume to Amazon or, yes, even worse that Amazon in sources that part of the volume as well? Those were my questions. Thank you.
Dirk Tirez
Well, thank you, Henk. And maybe to go back to your first question on the social level playing field and the actions taken by the Belgian government. As far as I understand, and I think it’s publicly available information, the minister has declared in the Belgian Parliament that indeed, there are – the need for regulation and to take preventive measures remain in place, in particular relating to the subcontracting model in the Belgian parcel delivery markets.
She reported in parliament that discussions are still ongoing in the government level. She clarified that in Parliament that she has indeed tabled a draft bill on the table of the government with additional parameters, and these parameters include an in-sourcing obligation revised to 50%. But also, she added additional parameters, such as an obligation of transparency, minimum prices, maximum package delivery quantities per FTE or a prior certification mechanism. And we expect that the discussion at the government will continue after parliamentary recess, so in September.
I think within the government and a clear understanding that a lack of regulation has brought a lack of income from social security and tax perspective. And now as the government is establishing the budget and getting the public budget deficit, we expect that in September, the government will look at how to address the social level playing field in the parcels delivery markets.
The second question relates to indeed parcels. I think in Q1, as I recall, we said that the in-sourcing would be between 55% to 60%. I can say that in Q2, we still confirm that. There has been no more in-sourcing. And it is also our view that the distribution center impact in Antwerp would have no further impact as we have included that in our guidance that we gave in Q1.
It is very clear that, what bpost has done in terms of management actions and management priorities that we have proceeded with a parcels hunting plan that is not only focused on the clients that you cited, but it’s also focused on existing volume customers. And we see an increase from our existing volume customers. We have hunting large customers and also have engaged with strategic partnership with some carriers. We do expect at this stage to counter indeed around 40% of Amazon’s volume loss on a full year basis. And we continue to work on a promising pipeline.
So what we see is that we will continue to improve and focus all our commercial efforts. And the commercial plan typically relies on bpost’s competitive NPS, the quality of our services and the customer experience we are able to offer to the sender and the receiver. So this allows us that we will stabilize the volume loss of Amazon. And at this stage, Amazon has not provided any new plan to us. So we currently expect to remain stable at least for the coming months.
I also point out that in Belgium for several years; Belgians are already using Amazon.nl and Amazon.fr. So also the Belgian website will propose the same products, and the logistic flows will remain the same. And we also believe that, therefore the launch of their website does not represent a higher risk to bpost. So that’s a bit what we have seen so far. And the impact, I think, of the commercial hunting plan is shown in the numbers of Q2, in the Q2 results as you have seen.
Henk Slotboom
Okay, that was very helpful. Thank you very much.
Operator
The next question comes in from the line of Stefano Toffano calling from ABN AMRO – Oddo. Please go ahead.
Stefano Toffano
Yes, good morning everybody. Congratulations on the results. Three questions from my side. First question relates to the online retail sales. Obviously a clear improvement, relatively speaking. If you can maybe shed a light on that. Any particular reason? And maybe what you expect going forward and what you have been seeing over the past few months, so July and maybe beginning of August?
Then two more America question one, if you can quantify the impact of the high recoverable VAT. The second one relates to the working capital. Very big change, obviously, what we have seen. If you maybe can explain that a little bit more into detail. From what I understand, a partial part of the movement seems just a one-off or a step down. So I don’t know if you maybe can shed a little bit more light on that. Thank you.
Philippe Dartienne
Let me take part of it, and Dirk will take some as well. On the working cap, it’s what I’ve explained when the – explaining the slide, Page 13, which is the trading working cap is decreased by €66 million, which is for both elements – timing elements. On one hand, we have one additional AP rent in the month of June 2022 compared to last year. And the second one is the terminal use advances that were last year paid in third quarter has been paid in second quarter. So on a full year basis, it doesn’t change. It’s just that it’s, how can I call it, a cutoff item in June that will reverse in the coming quarters.
On the higher vehicle recovery, yes, it’s an amount that fluctuates year-on-year and quarter-to-quarter. And it has been indeed an amount which is higher than what we have experienced in the first quarter.
Dirk Tirez
And maybe on the question, I think, on online retail sales, if I talk to Parcels, I think with the answer to Henk’s question that is being answered that – what I’ve seen in the North America is that the U.S. market remains really dynamic and attractive for pursuing the accelerated growth plan. We are, of course, taking different actions. And on our growth plan, we have added a new fulfillment center to support client needs. We have expanded processing capacity at our global and FX expressed through investment in additional facility space. For the remainder of the year, I think we are rationalizing the timing of new site openings in order to align with customer time lines.
And if I look at E-logistics Eurasia, we are also focusing on countering and taking action on countering the cross-border volume decline by ongoing sales efforts, new business opportunities. And we have opened new lanes and new customer wins that we expect to bring us progressively back to the pre-VAT agent sales levels in the near term.
And on e-commerce logistics levels, well, it is true that DynaLogic volume pressure in a one to two man delivery is lower, but that is not because of churn of clients. It’s driven by lower consumer spending in white goods and home furniture. But what we see in Active Ants and Radial Europe, we continue and reaffirm the expansion plan that we announced in the third quarter of last year and which consists of growing by five times the sales of 2020 by 2026. And indeed, given online retail sales demand, we have meanwhile opened new sites.
So just for your information, we have accumulating eight sites for Radial, four sites for Active Ants. And we’re going to open in UK in September a new sites given our client demand. And we have indeed required capacity to onboard new customers.
Stefano Toffano
Thank you.
Operator
The final question comes in from the line of Sumit Mehrotra calling from Société Générale. Please go ahead.
Sumit Mehrotra
Sorry, took me a while to unmute myself. Yes, so could I have your views on the Q1? The segment-wise ambitions that you would have, that you shared at the beginning of the year, are they in line largely from what you stated, the segment-wise margins, or there have been some variations?
Secondly a large one, on Radial. Yes, I’d like to know a little bit more about your top line ambitions, your margin ambitions, midterm, beyond this year. And in that perspective, we’d like to hear a little bit more about how the churn has been, how the mix of new customers have been. So yes, a little bit more beyond this year for Radial would be good to hear. And lastly, your ambition of – for Radial in Europe, what are your margin ambitions are going to be for this business in Europe? Would it be in line with what you saw for Radial in U.S.? Thank you.
Philippe Dartienne
Okay. So let me start with Radial in the U.S. In fact, what is our view on what’s going to happen in the second half, as you have rightly pointed out, we enjoyed significant growth in the second quarter as well in the first quarter, which is a result of the contract that has been signed and onboarded in 2021.
From an operational standpoint, you need to know that, in fact, customers prefer to change operator in the first half of the year because in the second half of the year, first, you have the summer period. And second, they are preparing themselves for the year-end peak deliveries. And they do not want to take any risk to move operator at that period. So what I would say is that, in fact, we will softly land in terms of growth at Radial U.S. for the year 2022. The growth will come again in 2023 with the onboarding of new customers. So second quarter in terms of top line growth rate would be definitely lower than what we have enjoyed, but it’s totally anticipated and expected.
Despite that, because your question is on the top line, but I wanted to restate that it’s not because the top line will not grow at the same pace as in the first half, that the profitability will degrade in terms of Radial U.S. It will remain to be – as you have seen, it’s improved and will continue to be strong.
So for Belgium, the question on the two metrics, which is – the top line and the margin and the low range of the range, so the low part of the range, it’s confirmed. We have not changed on our guidance on that one. And I missed the last one, which was – your third question was?
Sumit Mehrotra
Yes. I’d rather go again. On the second one, I just wanted to know – you shared the segment-wise EBIT margins with us before the downside risk guidance that came in. So has – how far are you from achieving those indicated targets by segments? And lastly, Radial Europe EBIT ambitions. Would it be identical to those of Radial U.S. in the midterm?
Dirk Tirez
Well, I think on North America, we maintained the parameters of the initial guidance. On Belgium, given what we see in the markets, we also – the margins are at the lower end of the range that we have been given, given the headwinds that we are mitigating and softening in Eurasia. It is true that given the performance you have seen in H1, particularly on cross-border and Dyna, the top line and EBIT margin ambition might be more challenging. What we do in terms of ambition of management is that it should not be that far given the expected recovery in H2, thanks to the commercial efforts in Eurasia.
So the general, I think, ambition is that bpost is delivering on the promises. What we want to do is make bpost predictable again and more agile. You have seen that we are meticulously planning and execution the management priorities in the three businesses and that we have a clear focus and cost discipline in the three businesses, but particularly in Belgium relating to taking overhead out. And that’s why, I think we are revising the downward risk to the outlook, we confirm.
Sumit Mehrotra
Radial Europe, please?
Dirk Tirez
Excuse me?
Sumit Mehrotra
Your views on Radial Europe’s ambitions in the long-term?
Dirk Tirez
In the long-term, I think we have said that our plan is – I think we announced in Q3 last year, is to grow with Active Ants and Radial Europe five times and we maintain on the – currently the ambition to grow five times between 2020 and 2026.
Sumit Mehrotra
Thank you very much.
Operator
That was the final question in the queue. So I shall hand the call back over to yourselves for any concluding remarks.
Dirk Tirez
Well, I would like to thank everybody in the call for having taken the time to be with us and for your interesting questions. We will hear from you at the conferences. So we’re going to attend in London in September. We look forward to staying in touch, and third quarter results will be released in November. And I would like to wish you all happy holidays. So thank you very much.
Operator
Thank you for joining today’s call. You may now disconnect your handsets.
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