PostNord improved its first-quarter profits significantly thanks to cost savings measures, including 800 job losses, but is stressing more restructuring remains to be done amid tough trading conditions.
The Swedish-Danish postal group nearly tripled its operating profits to SEK 312 million in January-March 2015, improving its operating margin to 3.1% from 1.1% in the same quarter last year.
Håkan Ericsson, President and CEO, commented: “The results from the quarter confirm that we are on the right path, but given the continued decline in mail volumes, more restructuring work will be needed as well as continue to create the right conditions to build a stronger and better integrated PostNord. We will make sure that we deliver on our promises.”
On the cost side, the restructuring programme to phase out just under 800 administrative positions was completed. “The restructuring programmes completed are yielding results, but with mail volumes continuing to decline, continuous efficiency improvements in both production and administration are essential,” the CEO added.
Revenues were flat at just over SEK 10 billion in the quarter but there was an underlying 2% drop, excluding acquisitions and exchange rate effects. The markets remain characterised by e-commerce growth, tough competition in the logistics industry and declining mail volumes, the group pointed out. Mail revenues dropped 4% to SEK 5.3 billion while logistics revenues were 5% higher at SEK 4.1 billion.
E-commerce continued to show strong growth, generating higher volumes in mail and parcel distribution. Parcel volumes increased by 15%, with e-commerce-related B2C parcel volumes rising 21%. “During the quarter, we signed several substantial service logistics contracts for home delivery of food groceries, laundry and other consumer items, and we also signed new parcel delivery contracts,” Ericsson commented.
However, the company cautioned that rising parcel volumes cannot fully compensate for the declining mail volumes at a net sales level. As a result of continued digitalisation, mail volumes declined year-on-year by a total of 7% in the quarter, 15% in Denmark and 5% in Sweden.
At a country level, PostNord Sweden had flat revenues of SEK 5.8 billion, with mail revenues down 3% but logistics revenues up 5%. The division’s operating profit more than tripled to SEK 228 million, pushing the profit margin up to 3.9%.
PostNord Denmark also had unchanged revenues of just over SEK 2.5 billion, with mail revenues 6% lower and logistics revenues 13% higher. However, the operating loss more than doubled to SEK 47 million.
In the other Nordic markets, PostNord Norway increased revenues 3% and had a small profit of SEK 11 million while the small PostNord Finland unit increased revenues 8% and showed a break-even.
Addressing other issues, Ericsson said: “Late April saw the verdict of the European Court of Justice on the case brought by the European Commission against the Swedish State for non-implementation of EU rules regarding value added tax on postal services. The verdict went in the Commission’s favour, with the result that postal services not covered by individually negotiated agreements are to be VAT-exempted. PostNord awaits changes in Swedish legislation on VAT.
“In Denmark, a planned review of the country’s postal regulation is in progress. In Sweden, a special commission on postal legislation has been announced. It is vital that changes in the postal regulations should be based on the continually changing needs of customers, primarily through digitization and the growth in e-commerce, and should therefore be governed by sustainable economic conditions.”
