PostNL Q1 profits slump as TNT stake value crashes

PostNL’s operating profits slumped in the first three months of this year as a 9.5% drop inaddressed letters outweighed parcels and international growth, and the firm plunged deep into the

The Dutch postal group reported a 32.7% fall in operating profit to €74 million, with underlyingEBIT down 26.8% at €82 million. The profit margin fell from 10.3% to 6.9% on a reported basis andfrom 10.5% to 7.6% on an underlying basis. Revenues were flat at €1.07 billion.

But the net result slumped by more than €1 billion from last year’s Q1 profit of €633 million toa deficit of €410 million. This was partly due to a €440 million fall in the value of the 29% stakein TNT Express to €927 million resulting from the substantial drop in TNT’s share price after theUPS takeover bid failed. Net profits excluding the TNT stake were 48% lower at €32 million.

PostNL reiterated that it expects to sell its TNT stake “over the medium term to create bettervalue for shareholders, after we have seen stability return to TNT Express”.
 
The operational business saw mixed fortunes. The Dutch mail business saw operating profitsfall by a third to €42 million with revenues down 5.4% to €538 million. The volume of addressedmail fell by 9.5% during the quarter, due mostly to electronic substitution, but the companyachieved a positive price-mix effect.

Herna Verhagen, CEO of PostNL, commented: “The first quarter developed in line with ourexpectations.The underlying performance of Mail in the Netherlands was, as expected, impacted bythe volume decline, which was within the guided range of 8-10% for 2013. The first results of thenew roll out of the reorganisation are satisfactory. We have migrated 35 depots. At the same timewe were able to restore our quality to 96.1%, above the statutory level and realise necessary costsavings. Furthermore, our Works Council has given positive advice on the implementation of theadjusted roll out.”

PostNL noted that the Dutch Minister of Economic Affairs plans to present his “vision for thepostal market” this month, including adjustments to the USO legal requirements, and alreadysubmitted a proposal to cancel the Monday delivery last month. In addition, the minister hasproposed to increase the basic rate for letters by €0.06 as of 1 July 2013.

The parcels division increased revenues by 23% to €198 million in the first quarter thanks toorganic growth and consolidation of the trans-o-flex businesses in Benelux that it acquired lastyear. Operating profits improved 12.5% to €27 million. “Parcels continued strong growth in volumeswith an increase of 6.2% like-for-like, and with good progress in the roll out of the newlogistical infrastructure,” Verhagen said.

PostNL’s international mail business increased Q1 revenues by 5.5% to €419 million andunderlying profits rose 20% to €6 million. TNT Post UK increased revenues by 5.2% to €181 millionas letter and packet volumes grew. Its end-to-end delivery pilot scheme in London is currentlydelivering some 600,000 items a week and plans are underway to expand into other parts of theBritish capital.

In Germany, TNT Post revenues increased 8.4% to €142 million due to new customers and morevolumes from existing customers. Italian revenues were 9.6% higher at €57 million but internationalmail unit Spring saw revenues drop 7.1% to €39 million.

Looking ahead, PostNL reiterated the 2013 outlook for underlying cash operating income in therange between €20 and €60 million compared to €130 million last year with stable revenues of about€4.3 billion. Full-year mail and parcel profits are expected to drop but international profitsshould be higher.