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PERSPECTIVES ON CSR DFDS GROUP September 2019
PERSPECTIVES ON CSRDFDS GROUP
September 2019
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Disclaimer
The statements about the future in this announcement contain risks and uncertainties.
This entails that actual developments may diverge significantly from statements about the future.
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Content
• IR and CSRSøren Brøndholt Nielsen, Head of IR& Corporate Planning
• DFDS’ CSR strategySofie Hebeltoft, Head of CSR
• CSR from a Board perspectiveClaus Hemmingsen, Chair of DFDS’ Board of Directors
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DFDS’ business model builds on 3 core activities
Port terminal A
Port terminal B
Catchment area A
Catchment area B
Ferry routes
Port terminal A
Port terminal B
Pickup point
Delivery point
Door-door solutions Contract logistics
Freight &passengers
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DFDS’ ferry and logistics network
• DKK 16bn revenue
• DKK 3.6bn EBITDA
• 8,000+ employees
• 23 ferry routes – incl.9 passenger routes
• 8 port terminals
• 35 logistics locations
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Roll on, roll off • Ro-ro/ro-pax shipping: roll on, roll off of freight unitsand passenger cars
• Routes carry both unaccompanied and accompanied trailers
• Other types of cargo, e.g. heavy industrial goods and containers, are placed on carrying equipment (mafis) and tugged on to the ship
FERRY TYPES
Day ferry (ro-pax), Channel
Combined freight and passenger ferry (ro-pax)Cruise ferryFreight ferry (ro-ro)
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Our customers: Forwarders, industrials and passengers
Passengers17%
Forwarders and hauliers
47%
Manufacturers and retailers
36%
DFDS' three main customer groups, % of revenue
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0.4
3.2
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0DKK bn
EBITDA 2018 per division
Ferry Division
Logistics Division
Non-allocated items
DFDS structure, ownership and earnings split
DFDS Group
People & Ships Finance
Ferry Division
• 23 ferry routes –freight and passengers
• 57 ferries• 8 port terminals
Logistics Division
• Door-door transport • Contract logistics• 5,600 trailers and
3,500 containers• 2 sideport ships and
VSA/SCA*
DFDS facts
• Founded in 1866• Activities in 20
European countries, Turkey and Tunisia
• 8,000 employees
Shareholder structure
• Lauritzen: 42%• Free float: 56%• Nasdaq Copenhagen • Foreign ownership
share: ~30%
8.1% margin
28.6% margin
*Vessel sharing agreements/slot charter agreements on container ships
5.3
11.1
-2
0
2
4
6
8
10
12
14
16
18
DKK bn Revenue 2018 per division
Ferry Division
Logistics Division
Eliminations and other
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DFDS key figures – IFRS 16 applied from 2018
0
2
4
6
8
10
12
14
16
18
2015 2016 2017 2018 Q2 2019 LTM
DKK bn Revenue
Ferry Logistics
6
8
10
12
14
16
18
20
22
24
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2015 2016 2017 2018 Q2 2019 LTM
Margin, %DKK bn EBITDA & margin before special items
0
2
4
6
8
10
12
14
16
18
20
0
2
4
6
8
10
12
14
16
18
20
22
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2015 2016 2017 2018 Q2 2019 LTM
ROIC, %Inv cap, DKK bnInvested capital & ROIC before special items
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2015 2016 2017 2018 Q2 2019 LTM
DKK bnNIBD/EBITDA Operating cash flow & NIBD/EBITDA
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IR AND CSR
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IR and CSR
• Almost zero focus on CSR from analysts
• Limited focus from investors – how are they ‘incentivised’?
• A few exceptions
• Questions concern mostly profit risk related to CSR-driven changes
• Push or pull CSR-agenda — other topics in focus, e.g. Brexit and Turkish market development
• Investment criteria seem overwhelmingly to be financial
• Company size may shift focus to CSR
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DFDS’ CSR STRATEGY
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The CSR journey in DFDS
• Dedicated resource responsible for environmental issues for +15 years
• Investments in scrubbers since 2009
• Group CSR strategy in 2018
• Innovative collaborations towards zero-emission
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DFDS’ CSR journey
• Nature of business has always fostered a high level of responsibility
• Annual consumption of around 700,000 tons of bunker
• Dedicated resource responsible for environmental issues for +15 years
• Investment in scrubber development since 2009, implemented 2015
• Group CSR strategy developed and approved in 2018
• Focus on innovative collaborations towards zero-emissions
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DFDS’ current CSR reporting
• Annual CSR report covering:
• Environment• Social and employee conditions• Human rights• Bribery and corruption
• CSR strategy - underlying ambitions:
• CO2• Health & Safety• Gender in top management
• Bunker consumption
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DFDS’ possible future CSR reporting
• SDG’s
• CO2/unit
• Gender split on all levels
• Renewable energy
• Recycling and waste management
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Focus on employee engagement
• CSR portfolio
• Internal communication
• SoMe activity
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External reporting needs keep on increasing
Customer requests
Our experience
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External reporting needs keep on increasing
Our experience
Customer requests via benchmark tools
Investor requests via benchmark tools
Investor analysis on public information
Benchmark related to the industry or market
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External reporting needs keep on increasing
Our experience
Time consuming
Value addingPrioritisation and
navigation
Lack of standards and alignment
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BOARD PERSPECTIVE
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Board involvement in DFDS’ CSR development
Board responsibilities include:
• Monitoring development in society
• Engaging Management and setting the agenda
• Support Management, issue mandate to act/invest/change
Board focus in DFDS:
• Marine, Land and Employee Safety (HSSE)
• The Organisation, Employees and working conditions
• The 17 Global Sustainable Development Goals
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External demands on Board for CSR development
• Demands are mostly “soft” and not mandatory requirements
• Board interprets and filters what happens in communities around us
• Community demands not formalised - need to be filtered and
assessed in relation to DFDS
• Investor demands rarely expressed and seldom discussed
• Employee demands often the most clear and worthwhile listening to
• Board needs to act responsibly, safeguarding the overall
sustainability of the company
• Balance CSR Investments (time, money, partnerships etc) with
Outcome (impact, image, profitability)
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Management of engagement between Board and Management
• Ideally CSR/Sustainability is an integral part of the
interaction:
• Place CSR/Sustainability firmly on the Board’s agenda• Formally include Sustainability in the Board’s Annual
Wheel• Engage next level management, i.e. below C-suite
• Place appropriate attention to the CSR/Sustainability
reporting:
• Goal setting, medium and long term• Reporting granularity• Follow up on outcomes
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Keep balanced sector perspective in mind
• DFDS is part of the infrastructure, both sea transport and logistics
• Environmental footprint from emissions is key impact
• Transport and logistics — on the other hand — enablestrade and travel among nations, people and businesses
• Positive impact on communities all over the world
• Transport and logistics supports the social SDG’, e.g.:
– No Poverty, Zero Hunger, Quality Education, Gender Equality, Decent Work & Economic Growth
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• MASH Energy produces biofuel from agricultural waste
• The biofuel is CO2 neutral and can be used in ships
• DKK 10m investment for potential 24% ownership
• CSR investment criteria vs traditional financial criteria
Example 1 – Investment in MASH Energy
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DFDS invests to improve air quality – key criteria
Develop a sustainable and commercially viable marine biofuel to reduce environmental impact
Scale up production to make it a serious alternative to fossil fuels
Replace fossil fuels on DFDS vessels and become CO2 neutral without changes to engines and equipment
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Example 2: Energy 2.0: New propulsion systems underway, partly driven by regulatory developments
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• DKK 1bn investment in renewal of Amsterdam-Newcastle ferries
• 30 year plus ferries swopped for ferries with 15-year lifetime
• 30-40 year lifetime for a new ferry
• 5-10 year horizon before new standard for ferry propulsion system likely to emerge
Example 2 – Investment in long term ferry assets
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Example 3 – collaborative strategy for zero-emissions
• Huge task to transform energy infrastructure of transport sector
• DFDS a niche European company
• Independent strategy not a realistic option
• DFDS part of ZEEDS project with complementary partners
• Task: To develop infrastructure for green bunkering
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Zero EmissionEnergy Distribution at Sea
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Concept builds on renewable energy, fuel production and autonomous distribution – all at sea
All based on known technology
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74 wind turbines required to supply each hub. Upper deck ammonia production facility, lower deck hydrogen production from water for upper deck process
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The DFDS network
8.000 employees
5.000 trailers
60 vessels
10 terminals
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EPV: Energy providing vessels tank from bunkering bouy
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Bunkering takes 2 hours at 6 knot speed
Each hub can supply 147 ships with their annual energy consumption
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Annual reduction of1 000 000 tons CO2
per hub
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DFDS’ purpose - We move for all to grow
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Q&A
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