High restructuring costs and declining mail volumes outweighed logistics growth at PostNord lastyear, resulting in a 77% drop in operating profits and a similar fall in net profits.
The Swedish-Danish postal group said it will press ahead with further restructuring measures andlogistics expansion this year under its ongoing ‘Roadmap PostNord 2015’ strategy.
In 2012, the group’s revenues dropped by 1% to SEK 38.9 billion (€4.6 billion), the operatingprofit declined by 77% to SEK 364 million (€43 million) and net profits came in at SEK 257 million(€30 million), 79% lower than the previous year. However, the adjusted operating profit, excludingrestructuring costs and non-recurring effects, totaled SEK 1,550 million compared to the previousyear’s SEK 1,884 million.
In the October – December 2012 fourth quarter, net sales stagnated at SEK 10.5 billion. Thereported operating profit was 81% lower at SEK 122 million, while the adjusted operating profit,excluding restructuring costs and non-recurring effects, totaled SEK 549 million. The net profitwas down 84% to SEK 72 million.
CEO Lars Idermark, who will leave the company to take up another chief executive post,commented: “Group operating profit was impacted by significant restructuring costs. Extraordinarywrite-downs were also taken. Together, these items burdened operating profit by approximately SEK600m during the quarter and almost SEK 1,400m for the full year.”
PostNord made major cost cuts in the form of continuous adjustments of the operations to lowermail volumes. Another key cost-reduction measure was the programme to streamline the group’scentral administration, which was concluded during the year. The group’s underlying cost base wasreduced by nearly SEK 1.7 billion in 2012.
But Idermark pointed out: “Three of our four business areas are reporting improved adjustedoperating profits for the year, and cash flows from operating activities are stable. The group’scapital structure was further optimised while financial stability was maintained. In view of themarket development, this should be regarded as a satisfactory result. We can safely say that theimplementation of our strategy, the Roadmap PostNord 2015, is starting to produce results. Theextensive changes made by PostNord in 2012 have created favourable conditions for improvingprofitability already in 2013.”
PostNord’s mail division saw revenues drop 5% to SEK 23.2 billion last year, with Q4 revenuesdown by the same figure. The operating profit declined by 38% to SEK 775 million, leaving theoperating margin at 3%. Mail volumes declined by 7% across the division.
Idermark said: “Due to continued digitization and the macroeconomic trend, demand for maildistribution continues to fall. Mail volumes were down in line with our expectations. The drop involumes continues to put pressure on profitability, although we were able to mitigate impact onprofit in the Mail businesses with streamlining and cost-cutting measures.”
In Sweden, mail revenues fell just 1% to SEK 15.1 billion on a 5% volume decline and operatingprofits declined 11% to SEK 793 million last year. In Demark, the mail business has been heavilyhit by a 12% volume decline. Post Danmark’s revenues were 11% lower last year at SEK 8.3 billionand it slumped into the red with a small loss.
“Our Danish mail business has carried out extensive streamlining efforts in 2012 and has createdconditions for generating new profitability. The efficiency improvements were made possible inparticular by the new legislation that came into effect in 2011. We expect that regulatoryprovisions will be further adjusted to prevailing market conditions in Denmark,” the CEOcommented.
PostNord’s logistics division increased revenues by 8% to SEK 13.4 billion last year mostlythanks to acquisitions but operating profits were halved to SEK 113 million. The major acquisitionwas Green Cargo Logistics while parcel volumes increased last year due to e-commerce growth.
“We have continued to implement our strategy of creating end-to-end solutions and cross-borderlogistics capacity in the Nordic region. We also strengthened our existing logistics business withcomplementary businesses. One of Scandinavia’s leading players in the growing 3PL market wasacquired during the year. We also acquired logistics businesses in Norway, a market where wecurrently hold a strong position. The logistics acquisitions contributed SEK 720m to net sales forthe year and made a positive contribution to operating profit,” Idermark said. He highlighted thepositive effect of e-commerce on both the Mail and the Logistics businesses with greater volumes oflight and heavier parcels.
Looking ahead to 2013, PostNord predicted a continued decline in mail volumes, projected at6% in Sweden and 12% in Denmark, but further strong growth in e-commerce and logistics, resultingin improved overall profitability.
Idermark stated: “Our conversion efforts continued at a high pace during the year and we willmaintain this tempo in 2013. Our investments in production facilities and systems in the Mailbusinesses to improve scalability, efficiency and profitability are proceeding according to plan.The group will continue to develop the Logistics businesses under profitability and expand ouroffer and market presence in the Nordic region. We are maintaining our focus on reducing costs. Asreported previously, 2013 results will also be charged with restructuring costs as a result of theconversions.
“These are changes that PostNord needs to make. They create opportunities for growth andimproved profitability. They also improve PostNord’s capacity to continue to deliver high levels ofservice and quality in tomorrow’s communication and logistics markets and to meet universal postalservice demands,” he concluded.
