Cristian Nedelcu

Cristian Nedelcu asked for insights into 407 ETR's pricing for next year, the expected direction of 407 ETR discounts for 2026, and the reasons for the I-66 revenue per transaction decelerating versus Q2, along with its sustainability.

Answer

CFO Ernesto López Mozo could not comment on 407 ETR's specific pricing logic for next year but expected a similar announcement timeline. He reframed 'discounts' as 'promotions' focused on revenue and EBITDA growth, not providing a directional steer for 2026. For I-66, he explained the apparent deceleration was due to a strong Q4 2024 bump from dynamic pricing algorithms, which continue to improve.

Cristian Nedelcu asked about the upcoming 407 ETR pricing announcement for next year, the future direction of 407 ETR discounts, and the sustainability of I-66's Q3 revenue per transaction deceleration despite volume growth.

Answer

CFO Ernesto López Mozo indicated that the 407 ETR pricing announcement would follow a similar timeline to last year, but he could not comment on specific pricing logic or magnitude. He emphasized that promotions are viewed as incentives for revenue and EBITDA growth, not just discounts, and the focus remains on segmentation and client satisfaction. For I-66, Mr. López Mozo explained that the perceived deceleration in revenue per transaction was relative to a strong Q3 2024, when dynamic pricing algorithms were first optimized, and expressed optimism for future performance as the algorithm continues to improve.

Cristian Nedelcu of UBS Group AG asked about the 407 ETR's dividend policy, the annual increase in the Schedule 22 traffic threshold, and the potential for the I-66 and I-77 capital structures to be optimized.

Answer

CFO Ernesto López Mozo acknowledged that rating agencies see headroom for higher dividend payouts from the 407 ETR and I-66, suggesting potential for future optimization. CEO Ignacio Madridejos explained the Schedule 22 threshold calculation is complex, with annual increases between 0-3% varying by segment, making a simple timeline prediction difficult.

Cristian Nedelcu requested a month-by-month breakdown of the 407 ETR's average revenue per trip growth in Q1 to better understand the impact of discounts. He also asked for the heavy vs. light vehicle mix on U.S. lanes and clarification on the persistence of heavy traffic. Finally, he inquired about FX translation headwinds and the duration of hedges.

Answer

Executive Ernesto Lopez Mozo declined to provide a monthly breakdown for the 407 ETR but reiterated that the 22% Q1 growth rate is not sustainable. He clarified that the higher heavy traffic mix is likely to persist on the NTE and LBJ lanes, while the 35 West requires more monitoring. He explained that FX hedges are for cash flow and net investment, not accounting P&L, and provided the approximate size of the current hedges.

Inquired about how quickly withdrawn Transpacific capacity could be reactivated and the potential impact on Asia-Europe freight rates from repositioning this capacity.

Answer

Capacity can be reactivated very quickly, in less than 10 days, to meet a potential surge in demand if a trade deal is reached. So far, capacity management has not negatively impacted rates on other lanes; in fact, rates have been unusually stable for the past 6-8 weeks. The industry is showing more pricing discipline than it did in 2023, with prices normalizing at a sustainable level rather than hitting the floor.

Asked about the risk of needing to price aggressively for the new Gemini Alliance, potential for higher initial costs during the transition, and for a comment on their interest in GXO.

Answer

The CEO stated that Maersk chose not to participate in the GXO process. Regarding Gemini, he expects immediate improvements in production costs upon transition and sees no reason to discount prices for a higher-quality, more reliable service. The full transition will take about 13 weeks.

Questioned if weaker OpEx was behind the more cautious UK profit guidance. Also asked about the risk from increased competition at the Post Office and requested a breakdown of the drivers for Q2 domestic parcel volume movements.

Answer

Executives responded that OpEx is largely in line, but the guidance reflects investments in service quality. They view the Post Office competition as expected, as the relationship has been non-exclusive for years, and are confident in retaining customers due to brand trust and alternative services. They declined to provide a detailed breakdown of Q2 parcel volumes but stated that the key metric is outperforming the market, which they are currently doing.