PostNord today reported another difficult quarter, characterised by a ‘dramatic’ drop in lettervolumes, particularly in Denmark, only partly balanced by the growth of e-commerce within the
Nordic region.Net sales during its July-September 2011 third quarter fell 4 per cent, excluding structuraland currency changes, to SEK 9.2 billion (€1.01 billion), a decline which the Nordic postaloperator said was primarily due to the weak Danish economy and strong and increasing competitionfrom digital alternatives.
Operating profit (EBIT) was down 27 per cent, excluding structural and currency changes, toSEK 295 million (€32.5 million), giving an operating margin of 3.2 per cent, down from 4.6 per centthe previous year, although it was broadly in line with the margin achieved in the first twoquarters of the year. Year-to-date operating margin (EBIT) was 3.2 per cent, down from 4.0 per centin the first three quarters of 2010.
Letter volumes in its Danish mail business, Breve Danmark, fell 11 per cent year-on-yearduring the third quarter, causing net sales for the unit to fall by 9 per cent to SEK 2.17 billion,although operating expenses were reduced by 9 per cent, thanks to lower volumes and ongoingstreamlining activities. Magazine mail and UDM volumes also fell during the quarter due toincreased market competition. PostNord said the Breve Danmark unit had taken steps to boost salesto small and medium-sized corporate customers, and efforts were also being made to increase marketawareness in terms of the value of physical mail.
The group’s Swedish mail business, Meddelande Sverige, fared better, with net sales down 4per cent to SEK 3.43 billion. Letter volumes continued to be affected by competition from digitalalternatives, with an aggregate decline of 5 per cent. But its e-commerce activities remainedstrong and the number of mail items handled by Posten’s partner outlets increased during thequarter.
PostNord’s Logistics division saw net sales increase by 2 per cent to SEK 3.04 billion,having closed several strategic acquisitions during the quarter to further strengthen the group’scompetitiveness in the Nordic logistics market. Parcel volumes were unchanged year-on-year.
Within the Logistics unit, the Danish market continued to be characterised by toughcompetition, price pressure and the weak Danish economy. Sales were up for the Norwegianoperations, and the Swedish operations “continued to develop satisfactorily”. Despite the growth insales, operating profit fell by a third to SEK 66m, with operating margin down from 3 per cent to 2per cent.
CEO Lars Idermark said: “As in previous quarters this year, PostNord’s third-quarter earningswere characterised by a dramatic drop in letter volumes. Earnings were also impacted by thecontinued weak economic trend in Denmark and the deteriorated economic outlook in general.
“The Nordic e-commerce market continues to grow, compensating somewhat for drops in the mailoperations and driving portions of the logistics operations.” He said the group’s underlyingearnings capacity was “under pressure, but remained relatively stable under the circumstances”.
Idermark added: “The combination of a highly uncertain global economic trend and dramaticmail volume decreases presents a challenge for our business and imposes requirements for furtheradjustments to demand. During the third and early fourth quarter, we conducted extensive activitiesin several areas aimed at taking forceful action to reorganise the operations.”
He said such areas included group management and governance frameworks, which needed to allowfor greater agility in the execution of necessary changes in the business. Another area is thedevelopment of the group’s strategy, to ensure efficiency and profitability in the mail operationsand profitable growth for the logistics operations.
“We began work this quarter on the cost savings programme that will reduce our administrativeand indirect costs on all levels by approximately one billion SEK, with full effect as of 2013.” Hecould see potential efficiency improvements in the administrative function, particularly throughimproved coordination throughout the group.
“In spite of the fact that we are implementing extensive group-wide changes, it is gratifyingto note that our quality levels for mail remain high,” Idermark added. He said in an internationalperspective, PostNord holds a leading position in terms of quality, a position the company intendedto preserve. But further changes and cost-savings needed to be made.
“The earnings trend for the third quarter underlines the importance of implementing profoundchanges within the operations, so that we create the conditions necessary to counter changes in ourmarkets,” Idermark added. “Ultimately, these efforts are aimed at ensuring satisfactory,sustainable value development for the group. The activities currently being conducted within thegroup will enable PostNord to be the leading communication and logistics operator in NorthernEurope.”
