PostNL will continue to expand parcel services in Benelux, including a large network of parcelpoints, and restructure its Dutch mail operations after unveiling higher profits for the second
quarter of 2014 today.The postal group announced plans to create a network of 3,000 parcel points for consumers tocollect and drop off parcels and more innovative parcel products such as home deliveries of freshfood. At the same time, the ongoing “smooth” mail restructuring is paying off by reducing costs tocope with an 11% drop in Dutch volumes.
PostNL revenues increased by 3% to €1,016 million in the April – June second quarter whileunderlying operating profit improved by 24% to €88 million, pushing the margin up to 8.7%. Netprofit rose from just €3 million last year to €44 million.
Half-year revenues were up 1% at €2,049 million, underlying EBIT rose 25% to €191 million andthe net profit of €98 million was a strong improvement on last year’s €37 million.
The key factor in the improved results was the “strong” performance of the Dutch mail business.Its Q2 revenues declined by only 1% to €479 million thanks to above-inflation price rises andpositive product mix effects that nearly fully compensated for a steep 11.2% volume fall. Theunderlying operating profit doubled to €69 million due to €29 million worth cost savings.
CEO Herna Verhagen said: “We have further solidified the foundation of our company. Wecontinued to have good traction with the restructuring in Mail in the Netherlands. In Q2, wemigrated 22 depots with which we are now ahead of our initial target. The smooth execution of ourrestructuring plans resulted in cost savings coming in early.
“In addition, we see that the cost conscious mindset throughout the company is resulting inincreased cost control. This is all achieved while maintaining high delivery quality and increasedcustomer satisfaction,” she added.
Verhagen said that the new model of five-day mail deliveries (Tuesday to Saturday) introduced inJanuary had been implemented “faster than expected”, reiterated the target of €365 million worth ofcost savings by 2017 and confirmed the company would seek above-inflation mail price rises in thecoming years.
Under a proposed new postal law that the Dutch Parliament will consider in the autumn PostNLwould be entitled to raise prices not only to compensate for inflation but also for 50-60% of thevolume decline impact. The Dutch regulator ACM is reviewing this proposal and is expected to decideon the ‘tariff headroom’ in the third quarter.
Meanwhile, PostNL’s parcels business grew well in the second quarter, with a volume increase of8.2% and revenue growth of 5% to €204 million. The underlying EBIT improved by 3% to €22 millionthanks to revenue growth and better operational efficiency. Half-year revenues increased by 3% to€405 million while underlying EBIT was stable at €48 million.
More than 80% of parcel volumes are now handled at 16 new regional depots and the full NewLogistics Infrastructure (NLI) programme, with €240 million investment in 18 new depots, is ontrack for completion in 2015. This new network, involving the closure of older and smallerlocal depots, is more efficient due to automated handling and very late cut-off times, enablingparcels to be fed into the system until midnight ready for next-day delivery.
The strong Q2 volume increase resulted mostly from e-commerce growth which drove a 10.5% rise inB2C parcels, while B2B volumes increased modestly in line with economic growth, Verhagen said. Arise in volumes from large webshops which have lower shipping rates than smaller customers meantthat the average price per parcel declined slightly, she added.
Highlighting PostNL’s new parcel products, the CEO pointed to the new tests of evening andSunday deliveries as well as of fresh food deliveries through the normal handling system usingspecial packaging to keep items cooled.
Verhagen also said that PostNL now has some 300 parcel collection and drop-off points for Dutchconsumers. These are located at the GAMMA and KARWEI DIY stores under a cooperation that startedlast year. In addition, PostNL now has 300 parcel shops in Belgium under a separate cooperationthat started earlier this year.
Looking ahead, the CEO added: “We will expand these to 3,000 locations in the coming years. Thisis a lot and will give us substantial coverage in a lot of places.” But she declined to disclosethe names of future partners or locations.
PostNL’s third business area, International, increased revenues by 4% to €409 million butoperating profits declined from €5 million to €1 million, largely due to the costs of thefinal-mile delivery rollout in the UK.
In Britain, TNT Post UK’s revenues rose by 3% to €195 million driven by higher volumes and animproved product mix. But in Germany, the revenues of Postcon (formerly TNT Post Germany) droppedby 8% to €113 million due to tough competition in the consolidation business. In Italy, where thebusiness has re-branded to Nexive from TNT Post Italia, revenues increased by 7% to €59 millionwith higher volumes.
PostNL reiterated its full-year outlook for underlying cash operating income of between €260million and €290 million. In the first half-year underlying cash operating income totalled €137million. The company is targeting €115 – 135 million worth of cost savings in 2014 and expectsrevenue growth and improved profits in all three businesses.
“Overall, the first half year was strong and reflects the learning curve we experienced inrestructuring the company and the supportive and cooperative mindset of all our employees to adaptto the changing environment. All this fuels my confidence that we will achieve our 2015 targets,”Verhagen concluded.
