Restructuring, the weak economy and an 8% decline in mail volumes contributed to a significantlyreduced third-quarter operating result at Scandinavian operator PostNord, despite improved results
for the group’s parcels and logistics businesses.PostNord’s net sales were down 3% year on year to SEK 28.4 billion (€3.32 billion) during thethird quarter, reflecting “the continued high levels of digital substitution and a weakenedmacroeconomic situation”, the group stated.
Operating profit dropped by more than 56% to SEK 128m, and group operating margin dropped to1.4% from 3.2% last year. Excluding restructuring costs and non-recurring items, operating profitwas down, year on year, by almost 44% at SEK 232m.
PostNord President and Group CEO Lars Idermark stressed that the Swedish-Danish postal groupwas “going through a major conversion phase in 2012 and 2013”, aimed at securing profitability forits mail businesses and developing the logistics business. “We are making major cost reductions andinvestments in many areas of the business,” Idermark said. “Operating profit is therefore chargedwith significant restructuring costs, totaling SEK 764m to date.”
Idermark said mail volumes in Denmark and Sweden were down in line with expectations, claimingthat PostNord had “performed well in light of this trend. Due to focused efforts on streamliningand rationalisations, PostNord is showing continued profitability and a stable operating cash flowdevelopment.”
Excluding restructuring costs and non-recurring items, the group’s operating margin was 2.6% forthe quarter and 3.5% for the first nine months of the year. That compares with 3.5% and 4.2%,respectively, for the same periods last year.
“Three of our four businesses are reporting improved operating profits this quarter,” saidIdermark. “Our logistics business is reporting continued growth and slightly improvedprofitability. The business area’s net sales also grew organically.”
He said the group was continuing to implement its strategy to create end-to-end solutions andcross-border logistics capacity in the Nordic region, recently signing another agreement for theacquisition of a “complementary” logistics company in Norway. Sales for the group’s ‘Logistics’business area increased due to acquisitions and organic growth, while growth within e-commercegenerated increased demand for the distribution of goods “via mail and parcel delivery”, thecompany reported.
Idermark added: “We continue to benefit from the growth of e-commerce in both the mail andlogistics businesses. Volumes for B2C parcels and goods mail are growing strongly and we are seeingincreased flows at our partner outlets and distribution points.”
Net sales for the group’s ‘Logistics’ business area were “affected by the negative economictrend and increased price pressure”, but rose 7% to SEK 3.26 billion. The increase was primarilyattributable to the group’s acquisitions in Sweden: Green Cargo Logistics, with third-partylogistics operations, and NH Logistics, focused on forwarding. The acquisitions contributed SEK280m and SEK 48m to net sales respectively during the quarter.
The Logistics business area’s sales grew 1% excluding acquisitions, divestments and currencyeffects. Operating profit within the Logistics business rose 24% to SEK 82 million from SEK 66million, with the acquired companies contributing SEK 14m to operating profit. The operating marginrose to 2.3% from 2.0% last year, while the adjusted operating margin rose to 2.7% from 2.0 %.
The Norwegian logistics business reported increased sales, but, excluding acquisitions, salesfor the Swedish logistics business were down slightly “due to negative economic effects and pricepressure in certain areas”. Sales and volumes continued to fall for the Danish logistics business “due to tough competition and price pressure”. However, total parcel volumes for the group wereessentially unchanged, due primarily to strong growth in B2C volumes based on the expansion ofe-commerce.
For the remainder of 2012, PostNord said it anticipated continued strong volume decreases formail in Denmark and Sweden due to competition from digital alternatives. PostNord’s unchangedassessment for the full year 2012 is that mail volumes in Sweden will fall approximately 5% andthat mail volumes in Denmark will follow the 2011 trend, falling approximately 12%. The groupexpects continued growth in the Nordic logistics market.
Neighbouring Norway Post last week reported strong quarterly profit growth, thanks to itson-going ‘Spinnaker’ efficiency programme, as the group confirmed its intention to increase itsfocus on e-commerce and on Sweden. Thanks to “extensive improvement programmes”, Norway Post’soperating profit before non-recurring items and write-downs of NOK 719 million was 21% higher thanat the end of the third quarter last year. The group’s operating revenues came to NOK 16.8 billion,which is 0.5% less than at the end of Q3 2011.The drop in revenues reflected the continuing volumedecline of addressed mail, which fell by 7.5 % compared with last year.
Within Norway Post’s ‘Logistics’ business unit, despite strong competition in the parcels marketand a slide towards services with lower margins, cost-reducing measures and positive revenue trendsin most of the other logistics areas contributed to an improvement in EBIT before depreciation andnon-recurring items compared with last year. At the end of the third quarter, total parcel volumeswere 4.6% lower compared with the corresponding period last year. Domestic volumes fell, but growthin e-commerce contributed to increased cross-border parcel volumes compared with last year.
Finnish postal operator Itella last week also posted a much-improved third-quarter operatingresult with increased revenues in its mail and logistics businesses, thanks to efficiency andcost-restructuring measures, as well as the integration of the newly acquired VR Trainspointgroupage logistics business into Itella Logistics.
Itella Group’s net sales fell slightly, by 0.8% to 445.6 million in July-September 2012, butoperating profit before non-recurring items rose to €11.9 million, compared with the €21.5 millionloss during the same period last year. The operating margin improved to 2.7% of net sales. ItellaLogistics increased its third-quarter revenues by 1.9% year on year to €188.1 million.
