Norway Post generated higher earnings in 2010 thanks to cost reductions and despite a slightdrop in operating revenues. A new digital mail service and better logistics results are in focus
for 2011.The earnings before non-recurring items and write-downs for continued operations came to NOK 943million (€121 million) in 2010, a 22% rise on 2009, mainly due to cost-cutting measures. ReportedEBIT rose strongly to NOK 1.63 billion from NOK 248 million the previous year, largely due to therecognition of NOK 759 million as income in connection with positive non-recurring effects of thetransition to a new contractual early retirement scheme as from 2011.
The group’s operating revenues dropped fractionally by 0.7% to NOK 22.45 billion (€2.9 billion)in 2010. This was largely due to lower mail revenues and, in the first half year, lower logisticsrevenues. Foreign revenues dropped back due to the closure of CityMail in Denmark, and made up26.5% of overall turnover. In Q4, however, revenues increased by 4% to NOK 6 billion.
“The mail and logistics markets were characterised by low levels of activity last year followingthe financial crisis. The Spinnaker efficiency programme has made Norway Post stronger followingthe downturn. We are now seeing signs of increased activity in the market,” commented CEO DagMejdell.
At the end of 2010, the Spinnaker efficiency programme had had an accumulated effect of NOK 1.9billion since starting in 2008. This programme consists of a number of measures to reduce costs andincrease revenues in the group.
Norway Post’s mail division had fractionally lower revenues of NOK 10.3 billion last year.Letter volumes fell 2.6% in Norway as a result of the transition to electronic alternatives, andthis decline was reinforced by the economic downturn. The volume of A-mail and B-mail droppedby 7.2% while unaddressed mail advertising increased by 5.7% in 2010. CityMail Sweden, however,increased volumes by 6%, had higher revenues and improved its results.
Mail operating profits improved significantly to NOK 785 million. The effects of the Spinnakerprogramme and other measures as well as gains from the sale of property had a positive effect onprofit developments. The Mail segment also had significantly higher write-downs and restructuringcosts in 2009.
In 2011, Norway Post is launching a new digital mail system, offering a digital mailbox inaddition to the traditional physical mailbox, to target customers switching from physical toelectronic communications. Lower letter volumes are again expected this year.
Norway Post’s large logistics business returned to growth last year but its results sufferedfrom lower prices and higher costs. The logistics division increased its revenues by 1% to NOK 13.5billion with stronger business in the second half of the year after the weak economy and strikesaffected the first half-year.
Total parcel volume was 5.2% higher than 2009. Both cross-border parcel distribution and B2Cparcels and domestic B2B parcels contributed to the positive development in volumes. Growth inonline Christmas shopping contributed to record parcel volumes in both November and December 2010.The Express area had increased revenues from Home Delivery in the Norwegian and Swedish operations.The operations within Supply services and temperature-controlled transport had a positivedevelopment in the second half of 2010.
Logistics earnings in 2010 were negatively affected by the decline in volumes in the first halfof the year, price pressure, the start-up of the new warehouse in Berger, increased transport costsdue to delays in rail delivery and the transport strike. Profits were also affected negatively bysome impairment costs related to goodwill and intangible assets. However, these effects were partlyoffset by growth in volumes for parcel delivery as well as cost-cutting measures. In all, EBITdropped to NOK 365 million from the previous year’s NOK 531 million.
Prospects look better for this year, however. Both the Norwegian and Swedish economies areimproving and there were signs of a higher level of activity in the logistics market in the secondhalf of the year and early 2011, the company stated. However, increased competition and availablecapacity will put pressure on margins this year, it stressed. A specific improvement programme hasbeen initiated for the parcels and groupage/part-load areas in order to increase synergies betweenthe production of parcels and groupage/part-load.
Norway Post said it is also focused on developing its mail services in line with customers’needs while also reducing the state’s costs relating to unprofitable postal and bankingservices. A report recently published by Copenhagen Economics shows that there are groundsfor totally or partially doing away with Norway Post’s banking obligation.
“Independent surveys confirm that there are grounds for making changes to the postal services inline with new customer requirements. Norway Post has asked the Norwegian Minister of Transport andCommunications to consider changes which balance social considerations against new customer needswhile also reducing the amount debited to the national budget,” Mejdell said.
