Finnish postal group Posti saw revenues drop by 7.3% to €435.9 million in the first quarter of 2015 but improved its profits due to cost-saving measures.
The group, which has recently sold off various businesses to downsize its activities, increased its operating profit (EBIT) for the first quarter to €20.5 million from just €4.3 million last year.
Mail delivery volumes continued to decline substantially, while parcel services grew. In the logistics market, the situation remained weak and competition continued to be intense, Posti pointed out.
Postal Services, covering the Finnish domestic mail business, saw revenues drop by 0.8% to €195.8 million as mail volumes declined by 6%, but its operating profit improved to €21 million due to better operational efficiency, higher postal fees and various one-off effects.
Parcel & Logistics Services suffered a 10.6% revenue fall to €161.8 million, mostly due to a slump in sales in Scandinavia and international freight. However, Parcel Services grew by 5% to eight million parcels in the first quarter, and the division returned to profit with a slight profit of €1.1 million.
Itella Russia, which offers mostly warehousing services, had a 1.2% drop in sales, measured in rubles, due to weaker demand and the company expects volumes to remain low for at least the next six months. Due to the 28% fall in the value of the ruble, sales measured in euros declined by 33% to €27.7 million. However, the operating loss was reduced to €0.9 million from €2.2 million the previous year.
Heikki Malinen, President and CEO, commented: "The start of the year was marked by major renewal for Posti Group in the form of a new name and renewed organisation. The first quarter was nevertheless very challenging with respect to sales, as expected, due to the economic recession, tight market situation and declining mail delivery volumes.
“One of the most positive aspects of the first quarter was growth in parcel traffic increasing to 5%. Our investments in expanding our network of parcel points have proved to be the right move. The parcel points have received a great deal of positive feedback from consumers, and the volume of parcels sent via parcel points was up 45% year-on-year.
“In spite of the decline in net sales, Posti Group achieved a substantial improvement in its result. The result was supported by the Finnish parliamentary elections and Easter falling in the first quarter. The Group's operating result improved substantially year-on-year to EUR 20.5 million, and the operating result before non-recurring items for Parcel and Logistics Services showed a profit, which was particularly pleasing.”
Looking ahead, he added: “While our result for the first quarter was positive, there is a lot of uncertainty regarding the outlook for the rest of the year. Unfortunately, it does not appear that the Finnish economy will give a boost to the logistics sector. In Russia, the decreased purchasing power of consumers is also leading to lower demand for logistics services.
“In the coming years, digitization will be one of the most significant factors transforming the structures of society, the economy, and commerce. For Posti, this means a great challenge, structural transformation, but also a new area of growth: we will develop our service network and new digital services as paper-based communication declines and customer needs change. I am very pleased to note that Netposti, Posti's electronic mailbox service, is steadily growing in popularity. It now has 600,000 users. The cloud services and e-invoicing services of our IT services company OpusCapita also continued to see strong growth.
However, digitization will pose a threat to Posti's profitability in the coming years if the company is forced to satisfy the requirements placed on it by existing regulations despite mail delivery volumes being down by half. We hope that Finland's new Government and Parliament will be prepared to adapt the regulation of postal services to the digital era to ensure that postal services can still be produced throughout the country without taxpayer money."
