PostNL, the future brand of TNT Post/TNT NV, will focus on stable profitable growth, will invest€240 million in its parcels business and is open to international partnerships, top executives said
yesterday.CEO Harry Koorstra told the company’s Capital Markets Day in London that PostNL is a “best-in-class operator geared to future mail and parcel services needs” with a track record ofstrong profitability and cash-flow management. The company, which will emerge from the separationof TNT Express from TNT NV at the end of this month, will have a “balanced strategy allowing for apromising dividend and growth”, focusing on mail, parcels and international business, heexplained.
“Upside opportunities” for the Dutch firm included potential for higher market shares in mostmarkets through organic growth while it was also open for partnerships in the international mailand parcels sectors, he said. The company was particularly interested in the Belgian market, Dutchmedia cited him as saying.
In 2010, PostNL had revenues of €4,293 million and generated underlying cash operating profitsof €341 million, which was a 7.9% profit margin, Koorstra told analysts. Looking ahead to 2015,PostNL aimed for low single-digit annual revenue growth, stable underlying profits in the €300 –370 million range and a stable profit margin of 7-8%, he said.
In the declining Dutch mail market, PostNL would manage the volume fall by implementing theexisting Master Plan savings and focus on cash profitability with a stable profit margin, Koorstrastressed. The company is planning to introduce a new ‘Basic’ service in 2011/12 offeringday-certain deliveries three days a week (Tuesday, Thursday, Saturday) to compete with similarservices of rivals. About 80% of letter mail volumes would be delivered on these three peak days.The company had Dutch mail revenues of €2,538 million last year and had a 10.6% underlying profitmargin. Its market share could drop back from 83.4% last year to about 75% by 2015, he said.
In the Dutch parcels market, the company’s parcels unit delivered 100 million parcels last year,generated revenues of €564 million and had a 14.4% underlying profit margin. PostNL could expandits existing activities into e-commerce-based products and services as well as consolidated parcelshipments. The company also wanted to develop added-value e-commerce services and solutions rangingfrom retail and marketing through to webshops, fulfillment and delivery services, Koorstraadded.
Herna Verhagen, head of Parcels & International, said the PostNL parcels business hadachieved average annual revenue growth of 11.8% and volume growth of 8.9% between 2005 and 2010. Itnow had 39% of the €1.1 billion Dutch parcels market ahead of DHL, DPD, GLS and UPS, she revealed.Post NL aimed to increase parcels revenues by a mid-single-digit figure and maintain a 13-15%profit margin up to 2015.
The business was benefiting from the growth in online orders and B2C parcels, demand fortimeslot and secure deliveries, and cross-border e-commerce growth. It could also expand intoadjacent markets such as pallets and distribution, and increase its outbound market share withdelivery partnerships in European countries, she added.
PostNL will invest €240 million in increasing the currently fully-used capacity of its parcelsnetwork by 40% from the present 100 million parcels to up to 140 million, Verhagen said. The firmwill invest €190 million in land and buildings and a further €50 million in sorting equipment. Thecompany would move from a classic hub-spoke system to a hybrid structure with 17 new depotsinterlinked through four central depots. All depots would have fully automated sorting andvan-loading directly at the sorting machine.
PostNL’s loss-making International mail activities will focus on profitable growth in future. In2010, they had a negative profit margin of 1.9% on revenues of €1,294 million, although onlyGermany was loss-making and the UK and Italy were profitable. Verhagen said the business aimed tobreak even this year with mid-double-digit revenue growth and achieve an underlying profit marginof 2-4% by 2015 with high single-digit revenue growth.
TNT Post UK was strongly positioned with 46% of the British downstream access market of sevenbillion annual items. The company would aim to grow in the £2.4 billion packets & parcelsmarket using either Royal Mail or subcontractors for deliveries, she said.
In Germany, TNT Post had 6% of the 17 billion item market and would expand its Mail Alliancepartnership to increase nationwide coverage to 90% of the country, she said. Loss-making TNTRegioservice had been given a deadline of 2013 to restructure, rationalize and become profitable.In Italy, TNT Post had 5% of the 5.5 billion item market and aimed to expand its nationwidecoverage and to grow revenue and market share.
