NTG Nordic Transport Group AS

CSE:NTG

Q3-2025 Earnings Call

[Operator]

Good day, and thank you for standing by. Welcome to the Nordic Transport Group Third Quarter 2025 Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Mathias Jensen-Vinstrup. Please go ahead, sir.

[Mathias Jensen-Vinstrup, executive]

Thank you, and welcome, everybody, to our Q3 2025 conference call, and thank you for dialing in. My name is Mathias Jensen-Vinstrup, and I'm the Group CEO of NTG. And I have Christian Jakobsen, our Group CFO, with me today. We will spend the next 20 to 30 minutes taking you through the highlights for the third quarter of 2025, and finish off with answering questions from the callers.

If we flip to the next page. We kindly ask you to read the forward-looking statement provided in the slide. And on Page #3, you see the agenda for today's conference call, which, as always, includes the quarterly highlights, including a short M&A update, a review of the financial performance of the group, followed by the 2 divisions, a presentation of other key figures, and finally, our outlook for 2025. By the end of the presentation, the line will be open to questions from the audience.

And if we flip to the next page, you see the key highlights of the third quarter of this year, during which both divisions achieved double-digit growth in gross profit, driven by organic performance and contributions from our recent acquisitions.

Despite a quarter characterized by challenging market conditions across modes and geographies, adjusted EBIT increased by 40% year-on-year on the back of organic growth in mainly Denmark and Sweden, but also in the Netherlands, the Baltics and in Switzerland, as well as continued positive impacts from the acquisition of DTK. The integration of DTK is close to finalized with only minor synergies yet to be realized, which is expected no later than by the end of this year, i.e., some 7 months after closing of the transaction.

In Germany, market conditions continued to impact both Schmalz+Schön and ITC during the third quarter of the year. And as communicated in previous updates, Schmalz+Schön's performance remains aligned with the broader market trends, reflecting persistent macroeconomic challenges within the German logistics industry. At the same time, ITC continues to face difficulties adapting to the current market environment, and the teams are working diligently to recover the grounds lost during the initial months of our ownership.

We are collaborating with the German and local management teams to implement commercial and operational enhancement initiatives, aiming to position ITC for a recovery, and an organizational restructuring has been completed to ensure that the appropriate competencies are in place within key roles going forward. Nonetheless, it's important to acknowledge that the recovery process for ITC will continue and the journey ahead will focus on upgrading the digital infrastructure and executing coordinated commercial initiatives to regain market shares in Germany.

Based on the results for the first 3 quarters, we have narrowed the full year guidance for 2025 to between DKK 560 million and DKK 590 million, which Christian will get back to later in the presentation. But before Christian presents the divisional and group financial results, I would like to take a moment to recognize the dedication and hard work of our teams and colleagues worldwide, who've continued to safeguard customer service and profitability despite continued challenging market conditions, a commitment and adaptability that, as an example, has been fundamental to our consistent outperformance of the broader market from an organic growth perspective within Road & Logistics.

With those words, I will hand it over to Christian, who will take you through the financial results for the third quarter of the year. Please go ahead, Christian.

[Christian Paul Jakobsen, executive]

Thank you, Mathias, and also warm welcome from my side. Before jumping into the financials, I just want to confirm that we, as promised, are now live with the generic pilot of the new groupage TMS system. From my side, I want to thank everybody who has been a part of this hard work. It was a journey, and we will start implementing the next in Q1 2026.

If we take a closer look at the financial highlights for the third quarter, net revenue for Q3 came in at DKK 2.941 billion, representing an increase of 28% compared to the same period last year. The growth was primarily driven by acquisitions, which contributed 30%, while organic growth was slightly negative at minus 1.2%, mainly due to the lower average ocean freight rates.

Currency effects were marginally negative at minus 0.8%. Gross profit increased by 44% to DKK 657 million, and the gross margin improved by 2.4 percentage points to 22.3%. This improvement was mainly the result of lower ocean freight rates and a higher share of groupage and warehousing coming from the German acquisitions.

Adjusted EBIT came in at DKK 160 million, up 40% year-on-year. The increase was primarily driven by the DTK acquisition and the organic growth in the Road & Logistics division. The operating margin improved by 0.4 percentage points to 5.4%, reflecting stronger performance in the underlying Road & Logistics business, especially in Denmark and Sweden. If we look at the market environment, the European road market remains subdued with muted demand and continued pressure on freight rates. That said, we are starting to see some stabilization following a prolonged period of decline, and we expect to see rate increases in selected markets during Q4 '25 and Q1 2026.

And if we go to the Road & Logistics division, market condition remains subdued, and we continue to operate in an environment with low visibility and have not yet seen any material changes in market demand. Market volumes were essentially flat year-on-year, but we are starting to see some stabilization after a prolonged period of decline, while overall environment is still characterized by high competition and muted demand.

Net revenue for the division increased by 47% to DKK 2.296 billion in the third quarter with organic growth of 6.8% and acquired growth of just over 40%, primarily from the DTK, Schmalz+Schön and ITC acquisitions. Currency effects were marginal at 0.3%. Gross profit was up 57% to DKK 511 million, and the gross margin improved by 1.4 percentage points to 22.3%. This improvement was, as mentioned before, mainly driven by the higher groupage and warehousing exposure from our German acquisitions, which typically carry higher gross margin.

Adjusted EBIT for the division increased by 48% to DKK 139 million, and the operating margin improved by 0.5 percentage points to 6.1%. The positive development in adjusted EBIT compared to last year was driven by both organic growth and by the contribution from recent acquisitions. In particular, we saw a strong performance in Denmark and Sweden, which helped to offset the lower activity in the U.K. If we look at the verticals, the automotive segment remains under pressure and continued to negatively impact our results in Q3. This trend is expected to continue through the remainder of 2025 and into 2026.

And if we move to the Air & Ocean division, the market environment in Air & Ocean remained volatile in the third quarter with the ongoing uncertainties surrounding U.S. tariffs and continued changes in market announcement. Ocean freight rates stayed below last year's levels and continued to be under pressure as additional capacity into the market. Air freight volumes were also impacted, although to a lesser extent, and air freight rates were slightly down year-on-year. Net revenue for the division decreased by 13%, primarily driven by lower average freight rates, reduced volumes and normalized project activity. Organic growth was down 18%, while acquired growth contributed 9% coming from the Schmalz+Schön and Freightzen acquisitions.

Currency effects were negative at minus 3%. Despite the decline in revenue, gross profit increased by 12% and the gross margin improved 5.1 percentage points. This improvement was mainly due to lower average ocean freight rates and the positive contribution from our recent acquisitions. The gross profit growth reflects the shift in our business mix with general cargo activities replacing last year's higher project activity. Adjusted EBIT for the division decreased by 19% as the high-margin project volumes seen last year were replaced by lower margin general cargo activities in Q3 2025. The operating margin decreased slightly to 3.3% and the conversion ratio was down to 14.4%, reflecting the lower contribution from the project volumes.

And if we flip to the next page and have a closer look at the key figures for the third quarter, net working capital was negatively impacted by the seasonality and elevated levels within the Air & Ocean, and we saw a negative development of DKK 90 million compared to previous quarter, but in line with last year's quarter. Cash flow for the third quarter was affected by the net working capital development with adjusted free cash flow totaling DKK 1 million.

If we look at the balance sheet, net interest-bearing debt, excluding IFRS 16 lease liabilities, was DKK 1.2 billion at the end of the quarter. This increase in net debt and gearing ratio compared to last year was driven by the acquisition completed during the last year, including Schmalz+Schön, DTK and ITC. Return on invested capital before tax declined to 18% compared to 25.5% last year, primarily due to the impact of the acquisitions and the higher capital base following these transactions. In summary, while we continue to see the effect of seasonality and acquisitions on our key financial metrics, we remain focused on disciplined net working capital management and maintaining a strong balance sheet.

And then if we flip to the last page, we have narrowed our guidance. As Mathias mentioned, based on the results during the first quarter of the year, we have narrowed to DKK 560 million to DKK 590 million. Taking the top of the range reflects the current market where we saw muted development across all modes and a cautious view on the Q4 that we are already halfway through. We continue to anticipate an unchanged market environment for the remainder of 2025, characterized by a soft macro environment and consumer sentiment.

And now I'll hand the word back to Mathias for the closing remarks.

[Mathias Jensen-Vinstrup, executive]

Thank you, Christian. This concludes our presentation. So moderator, please open the line to questions.

[Operator]

[Operator Instructions] Now we're going to take our first question, and it comes from the line of Kristian Godiksen from SEB.

[Kristian Godiksen, analyst]

A couple of questions from my side. So just maybe if you could add a bit of flavor to the narrowing of the guidance towards the low end. Actually, this is based on the fact that actually it's pretty strong Q3 numbers, especially within the Road & Logistics part of the business. That would be the first question.

And then secondly, interested on your view on the -- Christian, you mentioned it as well that you expect some selected price increases during Q4 and this year and Q1 next year. Can you maybe speak somewhat more about that? What should we expect? I believe we have seen high single-digit price increases announced. So what's the expectation we should have to -- on what prices will actually come through in actual rates?

And then thirdly, maybe if you could put a bit more flavor on your choice of the new TMS system within the groupage. When do you expect that to be fully implemented? As I heard you, we will start the implementation in Q1? And what kind of EBIT contribution on an annualized basis should we expect once it's fully implemented?

[Christian Paul Jakobsen, executive]

Yes, if we look at the narrowing of the guidance, please remember that with the acquisition of the 2 German companies there, our seasonality has changed somewhat. We will definitely see a good October and a pretty good November. But due to the higher fixed cost that you have in a groupage organization than December where they closed down in the middle of December, there you will see an awful December. So that is definitely, what you can say, the challenge with a high fixed cost in the group setup.

Then on the price increase, if we look at the price increases in general, I think a lot of our competitors have been out in the market and obviously also us where we are being pushed by the hauliers because they will either have to have price increases or they will run into bankruptcy. So we are a little bit in the same situation as we saw last year. And yes, we are still in the early days of the price increases. So we don't know how much the market will affect us, but we will have to see that in general, our industry has to have some price increases, because we can't simply absorb the price increases that we have to pay towards the hauliers.

Then on the new TMS system, the new TMS system is actually a full pilot that we started here Thursday. So it is running, and we had the first bookings coming through, but we also took a smaller entity to do the test on. It is like we also did with CargoWise. The pilot is always, you think you have done everything to prepare yourself and thought of everything, but you know in reality when you come live, then there will be something which you didn't sort of. And therefore, it's always good to start with something that is less complicated, if there's something. It seems to run smooth. And obviously, we are just -- as I said, we were live Friday morning. So it's not that we have a lot of test data, live data yet, but it seems to be running smoothly. And confirming also that the big project we have in Fellbach in the first quarter that we should be prepared for. So we expect that we can talk more about that when we are live in connection with the annual report.

[Kristian Godiksen, analyst]

Okay. So just a couple of follow-ups. If I may challenge you a bit on the reasoning for the narrowing of the guidance range, you mentioned that December is -- with the new German entities coming in, that is you have a higher fixed cost base in that regard. I acknowledge that, but I guess that was also the case in connection with the Q2 results. That's not something that's changed between Q2 and Q3. So yes, maybe some flavor on that.

And then I guess, on the price increases, I hear what you say and agree. But I guess I was just wondering whether you could maybe potentially be a bit more optimistic this year based on volumes having, if not improved, and at least not declining to the extent they were and then have stabilized. And also, it seems like there is a bit more positive optimism in expectations, not least in Germany. And hence, you could argue that you could be a bit more optimistic on how much of the price increases that will actually come through.

[Christian Paul Jakobsen, executive]

Are you asking me to be more optimistic? I mean we need to see it coming through, and we don't want to sit and promise you something that we can't deliver. So we would rather say that we are doing all we can, but I can't sit and promise you that we will see an uptick in the gross margin. Obviously, we are under pressure. And I think you also see some of our bigger competitors being under pressure. So I will not sit and promise you a lot on the effects of the price increases, but it's necessary.

But still looking at Q2, we were more -- the groupage business and logistics business is more hit by lower volumes in soft months. And that means that instead of full and part loads making a smaller profit, then you will typically see that logistics and groupage will deliver a minus in the smaller months. And if the volumes are a little soft, then they will be hit harder. And therefore, you will see that our strong months will keep being very strong and the soft months will be weaker than what we used to see in the legacy entity.

[Mathias Jensen-Vinstrup, executive]

In addition to the effects of the groupage activities, it's also fair to state that from an Air & Ocean perspective, we do expect a lower activity in the fourth quarter compared to our expectations during the second quarter given that we've seen some sort of front-loading of volumes given the elevated uncertainty in the market in general.

[Kristian Godiksen, analyst]

And the lower volume within the groupage network, say, sequentially between what you expected in Q2 and expect now, is that due to market expectations? Or is that the pickup in volumes in your German acquisitions that are the main reason for that?

[Christian Paul Jakobsen, executive]

Maybe we should give room for the next ones. But we are seeing in general that the German market is softer than the Nordics at the moment.

[Operator]

Now we are going to take our next question, and it comes from the line of Lars Heindorff from Nordea.

[Lars Heindorff, analyst]

Also, I'll limit myself to 7 questions. So the first one is on Roads. Quite impressive organic growth in the third quarter. Can you maybe help us explain how you achieved that? And as usual, I'm interested in the split between what is volume, what is price? Are there anything else in there? Just to get a sense for the development? That's the first one.

[Mathias Jensen-Vinstrup, executive]

I mean, we don't provide the exact split between price and volume. What we are able to say is that it's mainly -- I mean, the organic performance, as mentioned in the introductory speech, is driven by Denmark and Sweden. And in both countries, we have seen quite a big uptick in volumes also, in particular, in Sweden, which came from a lower point in 2024. They have continued the positive momentum from the second quarter and from the first quarter into the third quarter, really taking market shares all across the board. So sort of from a net customer inflow perspective, we have seen quite a positive tailwind across the Danish and Swedish entities, in particular, the 2 biggest ones being the Road entities.

[Lars Heindorff, analyst]

Okay. And then on Air & Ocean, I mean, earnings in that division has been sort of tagging along with the development of market in general. And I mean, you still have a subscale. I think that's not a secret. You have exposure -- too much still exposure to the spot market. So the question is basically, what should we see here? I know you're doing some stuff in terms of how you organize your cargo. But if we assume that the sea freight market will be under pressure well into next year because of structural oversupply in the container business, I mean, what should make the earnings in Air & Ocean actually recover, or will there be a recovery? And then also as an add-on to the Air & Ocean part, can you maybe indicate -- I'm not sure how precise you want to be, but indicate how much impact the project business that you don't have this quarter, how much actually is that of a swing factor?

[Mathias Jensen-Vinstrup, executive]

No, on the latter question first, the sort of design in front of the growth development in EBIT would be different had we sort of excluded the project-based business. So it is quite a big swing factor. And if you look at the underlying business or the business excluding the project activities, it would be a sort of satisfactory development from a percentage perspective. But by the end of it all, it's the bottom line that matters, everything included. And so looking at the Q3 numbers, we delivered a 14.4% conversion ratio and a 3.3% EBIT margin in the Air & Ocean division, which is even despite the sort of insufficient scale, not satisfying.

Now we do expect that the markets will continue to be and perhaps be slightly more challenged as we move further into Q4 and into 2026. And this will necessitate an even greater focus on the cost base also to make sure that we protect what we have and also strive to optimize the business from a 360-degree perspective. But it will be challenging as it looks right now moving into '26 on an Air & Ocean perspective.

[Lars Heindorff, analyst]

But Mathias, I mean, does that mean that we will see that the cost base will decline on a quarterly basis as we head into next year?

[Mathias Jensen-Vinstrup, executive]

I mean everything is up for analysis and investigations as we speak, and we will do everything we can to protect the earnings that we have, but also drive further growth in the volumes even in challenging markets. But the cost base needs to come down within the division in order to improve the results no matter what happens in the market.

[Operator]

Now we are going to take our next question. And the question comes from the line of Ulrik Bak from Danske Bank.

[Ulrik Bak, analyst]

Mathias and Christian, also a couple of questions from my side. So first on Road & Logistics. I was just wondering if you could elaborate a bit more on the 2 German acquisitions, both the current state of them and perhaps also if you have insight into their customers, the volumes, how they have trended versus 1 quarter ago. But also if you could guide us in any way about the earnings contribution from Schmalz+Schön and ITC over the coming 12 months, because this year, looking at the M&A contribution, I assume that most of it comes from DTK. So it's roughly neutral contribution to EBIT this year. So if you can guide us in somehow to what you expect for the coming 12 months there?

[Mathias Jensen-Vinstrup, executive]

No, happy to do so. I mean, from a Schmalz+Schön perspective, the customer portfolio continues, by and large, to be fixed. I mean there's always a little bit of a churn, but nothing significant at all, and we are also adding new customers to the portfolio. And in terms of the larger accounts within the Schmalz+Schön family, we are very optimistic about the long-term collaboration with one account in particular. And so what we have been seeing and sort of continue to see is a muted activity level, and there's no immediate signs of recovery within Q4, but we do see what could be a turning point in terms of order intake expectations as we move into 2026.

So from a Schmalz+Schön perspective, it's steady at a low level. And as Christian mentioned, we do have quite a big milestone as we move into 2026 in terms of the migration onto the new groupage system in the biggest entity within the Schmalz+Schön family in addition to the live pilot that we have in the Eastern part of Europe all ready. So from an ITC perspective, the situation is fairly constant from a customer portfolio perspective compared to the second quarter and what we discussed back then. But there's no doubt that the road to recovery is longer and more difficult than is the case from a Schmalz+Schön perspective. But the groupage system that we will launch in the southern part of Germany in the beginning of '26 will also be applied in the ITC universe. And we do expect to see sort of so far externally unquantified productivity improvements similar to what we believe is sort of market conform when upgrading the digital infrastructure of an entity. So that's my 5 cents opinion.

Sorry, Christian, go ahead.

[Christian Paul Jakobsen, executive]

Should I give a little on the expectations? Then as Mathias mentioned, we will see some productivity improvements with the new system. But we always see that the first 3 months, there will be no improvements. And then afterwards, we can definitely take more shipments per employees within the systems, and that means the sales guys should definitely go out and find some more. And if we look at the contribution, then we also took some measurements on the cost side within the German organization, and that should also improve the results compared to where we are this year.

[Ulrik Bak, analyst]

Okay. Could you quantify that and just the restructuring costs, just remind us.

[Christian Paul Jakobsen, executive]

No. But I think you have seen that our special items were a little higher than what we originally announced. And some of it is obviously coming from that we lost some customers within the ITC and therefore, we have closed the terminal in Schwieberdingen and moved it into Fellbach. And that cost saving is -- I'm not giving you quantified, but that cost saving will obviously affect us positively next year.

[Ulrik Bak, analyst]

All right. Then a question on the price increases that you mentioned will be phased in, in Q4 and Q1. So which markets are you increasing prices on, or attempting to increase prices? And you mentioned that you are being under pressure from higher whole year costs. So is this just a measure to cover costs? Or could it also be a source of earnings growth?

[Mathias Jensen-Vinstrup, executive]

Well, so the price increases will, similar to previous periods, mainly be applied within Denmark and in Sweden, the 2 biggest markets, but it will also be applied sporadically in Germany given the circumstances and the situation that we are facing there. It will, similar to previous periods, also be a very sort of diversified rollout plan, taking the different entities, markets, trade lanes and customers into account. So the percentages will range from low to high single-digit numbers in this case.

[Ulrik Bak, analyst]

Understood. But is this just to cover cost, just to repeat.

[Mathias Jensen-Vinstrup, executive]

No. I mean, basically, look, it's to ensure and safeguard capacity, right? So we do believe with the limited sort of elasticity of supply, if you may, we do believe that having capacity in case of a market rebound, if and when it occurs, will be crucial to ride the wave of a potential uptick. And in order to safeguard that capacity, we need to pay more than what is the case today. And in order to be able to do that, the price increases will be a necessity. So basically, it's a little bit of a reactive approach to ensure that we have the capacity and can continue to service customers if and when volumes will rebound. And that's when we do see the sort of more proactive benefits of the increases. But by the end of it all, we do believe it's about securing capacity.

[Operator]

Now we're going to take our next question. And it comes from the line of Emilie Fung from Barclays.

[Emilie Fung, analyst]

I just have 2 questions. So first one, following on from an earlier question on the full year '26 trends you see in Air & Ocean, could you discuss perhaps your view into the full year '26 Road dynamics? So what are the main moving parts you see with respect to the German recovery, pricing, the groupage TMS system? So that's the first one. And the second one is that some of your American competitors have been discussing AI and its impact on the forwarding sector. What's your view on this?

[Mathias Jensen-Vinstrup, executive]

No. Thank you for the questions. I mean in terms of the expectations for 2026, as a starting point, we prefer to comment on that in connection with the publication of our guidance for that particular year. And given that we only guide on 2025 at the time of speaking, we will limit ourselves to the commentary on '26. From sort of a dynamic perspective, though, I do think that you can sort of -- you can split up the 2 divisions, in particular, the Road division into the full and partload activities, which is mainly sort of Nordic-based, and then sort of what is south of the border being the groupage activities.

And on the Air & Ocean side, similar to the impact in the third quarter, you can split it up to the general cargo activities and the project-based activities. And there's no doubt that the full and part load activity seems to be recovering quicker than what is the case for the groupage activities. But we do have hopes and expectations and plans for sort of idiosyncratic initiatives within Germany, in particular, on the groupage side to elevate performance, as Christian alluded to, both from a cost-out perspective, but also from a productivity perspective as we continue to migrate onto the new groupage platform.

On the Air & Ocean side, it looks challenging, in particular, as the capacity continues to come online within ocean freight, in particular. And on the project-based activity, we continue to be at the normalized level that we are seeing also this particular year. So I don't know if you have anything to add.

[Christian Paul Jakobsen, executive]

If I should give a shot on the AI?

[Mathias Jensen-Vinstrup, executive]

Yes.

[Christian Paul Jakobsen, executive]

On the AI, we are also working on the AI and definitely, at the moment, on the back office part, we already have a lot of AI running a lot, but definitely have AI running. And we're also now on the front side looking at the AI on the booking platforms and we have already some projects that will go live within the next 3 months. So we will definitely also see an improvement on our productivity due to the AI. So this is definitely also a theme in our organization.

[Operator]

Now we will take our next question, and the question comes from the line of Dan Togo Jensen from DNB Carnegie.

[Dan Jensen, analyst]

Yes. Just a few left for me here. Maybe some color on how the Q3 progressed starting point and exit point, because I understand you're being cautious on Q4 due to seasonality, as you mentioned, et cetera. But it seems like you're underlining that things are muted at the moment. Did the exit of Q3, was it weaker than the entry, so to say? So you came out of Q3 on a more soft note? So that would be the first question.

Second question, maybe a bit on the business case for ITC now. I think you originally planned for around EUR 13 billion in EBIT, including synergies, et cetera. Where do you see that now basically? Has this halved potentially? Or where are we on the math here? And then maybe just some color on the DKK 19 million special items. I understand you are closing down the site here. How many FTEs are made redundant here, just to get some sort of understanding of the potential impact from this. I know there was a question alluding to this before, but maybe some color on maybe how many was made redundant in that connection.

[Christian Paul Jakobsen, executive]

If we look at the seasonality, then we saw, and that was maybe also in particular in Germany, that the holidays were a little later. So in average, I think when I asked Copilot, then the average was 1 week later that was moved into the August. So we were actually a little bit better in July than anticipated, and then August was weaker than anticipated. And I think September was spot on. So we didn't see a lot of movements within the quarter, except from the holidays. So it's not that we saw that we came out very strong or something like that. We came out strong, but we also anticipated that with the September being one of the strongest months within our Road business.

[Mathias Jensen-Vinstrup, executive]

And on the ITC acquisition and business case, I mean, we did communicate in connection with closing of the transaction, I believe, at least in connection with signing of the transaction, an expectation of EUR 10.8 million as sort of the expected contribution on an IFRS basis to the group. I mean, right now, as also alluded to and communicated in the second quarter of the year, we are sort of fluctuating around the breakeven levels on a month-by-month basis. And that is the new baseline that we are working from and rebuilding from going forward.

Now if and when the market improves and the activity improves, in particular because of the cost structure and the fixed component of the cost structure, we do expect there to be a decent upside, but the EUR 10.8 million expected initially is quite a lot higher than a potential run rate of that particular part of the German business going forward.

[Christian Paul Jakobsen, executive]

And if you look at the special items, I mean, most of it came from Germany. And if you look at Schwieberdingen, where we closed the terminal, we still have some offices there. There, we spent, I think it was EUR 680,000, so a little over DKK 5 million on that for the quarter.

[Dan Jensen, analyst]

That is cost that they are exiting. Is that the way to understand it?

[Christian Paul Jakobsen, executive]

That was the cost of closing down the terminal activities. It's subleased and then you have the difference between what we are paying and then sublease, and then you have the termination of the people that we had to terminate.

[Dan Jensen, analyst]

Is there anything feeding through to Q4 on special items? Will there be a part left there?

[Christian Paul Jakobsen, executive]

Not in Schwieberdingen. That's, no.

[Dan Jensen, analyst]

Okay. But there would be special items in Q4. Is that how to understand this?

[Christian Paul Jakobsen, executive]

That is to be expected, yes.

[Operator]

[Operator Instructions] And now we're going to take our next question. Just give us a moment. And it comes from the line of Lars Heindorff from Nordea.

[Lars Heindorff, analyst]

Just a few follow-ups. The first one is on ITC. Clearly, the most troublesome of those acquisitions that you made. Mathias, you alluded to a bit of upside if you can get these things right. So how are -- now with the closure of Schwieberdingen, how far are you into that restructuring process of ITC? And what I'm trying to get at here is risk of revenue loss going forward. I mean this is people business. Have you done the redundancies that you need to do? Are there risks if you need to do more that you will lose more revenue and hence, perhaps also with the share fixed cost that, that will pull in the other direction? Yes, that's the first one.

And then the second one is on M&A. I mean, we need to touch a little bit on that. Leverage still fairly high. I mean, do you feel comfortable now also, in light of the 2 recent acquisitions in Germany, to go out and make acquisitions either in Road or in sea and air (sic) Air & Ocean? And what's sort of your thoughts about the M&A part of the story?

[Mathias Jensen-Vinstrup, executive]

On the ITC question, I mean, the biggest risk, set aside a deterioration of the market in general, is naturally the loss of customers going forward. So that's where all of our focus rests and where our efforts primarily are focused on. So we are, by and large, done with the reorganization from a sort of staff perspective, and all the new competencies that were needed in order to start preparing for and actually executing on the turnaround and the recovery of the ITC business is in place right now. That doesn't mean that it's a quick fix, and a big portion of the uptick from an earnings perspective will also be the introduction of the groupage system. So the risks prevail in terms of customer losses. but we are diligently working on meeting with and engaging with all of these customers. But also, as was the initial idea with the German acquisitions, also pushing for and promoting the services across Germany and not just within the Aua area of the country in this case.

From an M&A perspective, the focus remains on Germany for the time being for all of our colleagues within the Road & Logistics division. And from an Air & Ocean perspective, as we have communicated before, we are keen on and interested in doing Air & Ocean acquisitions subject to leverage allowing and subject to us staying below the 3x. However, as we also communicated, the market looks challenging as we move further into Q4 and into 2026. And this may give rise to sort of a bid-ask spread challenge similar to what we did experience in 2023, when the sellers were sort of extrapolating from COVID levels, and we were extrapolating from significantly lower levels from an earnings perspective. So that's kind of where we are right now. So we are in a bit of a waiting position on the M&A side, and we use the period, until any potential opportunity would materialize, to delever.

[Lars Heindorff, analyst]

And just on the deleverage part, if you don't do -- let's assume that you're not going to do any M&A, how much further down do you need the leverage to come before you will start doing share buybacks?

[Mathias Jensen-Vinstrup, executive]

That's a good question, and it's a case-by-case evaluation. We definitely need to come down further. And I guess we need to be trending in the lower end of the 2 to 3 range before we engage in share buybacks.

[Operator]

[Operator Instructions] Dear speakers, there are no further questions for today. I would now like to hand the conference over to Mathias Jensen-Vinstrup for any closing remarks.

[Mathias Jensen-Vinstrup, executive]

Well, thank you, everybody, for the questions. Thank you for dialing in. And please do not hesitate to reach out to our Investor Relations Officer in case of any follow-up questions or meeting requests. Thank you, and have a nice day.

[Operator]

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.