Austrian Post improved operating profits in the second quarter of 2015 on flat revenues and higher mail profits, with good parcels growth in Austria and South-East Europe compensating for a downturn at German subsidiary trans-o-flex.
Group operating profits improved by 4.9% to €42.6 million while revenues increased slightly by 0.6% to €577 million in the second quarter. The Q2 operating margin improved slightly to 7.4%. Over the first six months of 2015, EBIT was down 2.3% at €96.5 million while revenues were 0.6% higher at €1,179 million.
CEO Georg Pölzl said: “Looking ahead to the 2015 full-year results, we assume that the basic trends in the mail and parcel businesses will continue, and expect a rise of group revenue in the range of 1-2%. At the same time, we are striving to generate an EBITDA margin of around 12% and a further improvement in our operating result.”
The mail division’s Q2 revenues dropped slightly to €360.5 million but EBIT improved to €68.8 million from €60.9 million, resulting in a margin increase to 18.1% from 16% in the same period last year. In the first half of 2015, the mail division’s operating profit rose by 4.7% to €145.4 million while revenues dropped slightly to €738 million as higher prices largely compensated for a 4% volume decline. Mail volumes are expected to decline “in the middle of the predicted range of minus 3-5%” this year.
The Parcel & Logistics division saw good profitable growth in Austria and South-East Europe in the second quarter while “the top priority” at German subsidiary trans-o-flex “remains the implementation of structural measures and the continuation of network restructuring”, according to company management.
The parcel division’s operating profit dropped in the second quarter to €5.3 million from €6.6 million while revenues grew 2.6% to €216.4 million, and the profit margin weakened to 2.4% from 3.1% in the same period last year. In the first six months of 2015, operating profits improved by 3% to €12.5 million while revenues increased by 2.4% to €440.9 million.
In Germany, representing 54% of half-year parcel revenues, revenues dropped by 2.2% in the second quarter and by 2.3% in the first half-year due to high price pressure in a very competitive market and lower diesel surcharges.
The restructuring of trans-o-flex, which is focusing more on temperature-controlled volumes, continued with structural measures and network reorganisation. Meanwhile, the search for a strategic investor for the underperforming business, which was disclosed by CEO Georg Pölzl in April, is continuing. Austrian Post management told analysts that “evaluation of strategic options” will be made by the end of 2015.
The Austrian parcels business, accounting for 37% of H1 revenues, grew well with revenues up by 8.7% in the second quarter and by 8.3% in the first six months. Volume growth was solid driven by online shopping, although competition increased in the expanding B2C market, while the B2B market remained largely flat.
Austrian Post emphasised that it is continuing to develop new parcel services, including the rollout of 24/7 self-service terminals, same-day and next-day deliveries with flexible delivery timeslots and a pilot project for Saturday deliveries. Use of pick-up stations, now numbering 170, is up by 230%, and use of the 10,757 pick-up boxes in apartment blocks has doubled. In addition, the company is expanding its food logistics services. According to a recent phone survey of some 500 consumers, Austrian Post is rated the country’s best parcel delivery service, especially for reliability, quality and friendliness.
Similarly, subsidiaries in Central and South-East Europe developed positively with revenues up by 8.8% in the second quarter and by 9.9% in the half-year. In particular, Slovakia and Hungary grew well. The parcel businesses are expanding their B2C services, although there is strong competition and price pressure.
Aras Kargo, the Turkish parcels company in which Austrian Post holds a 25% minority stake with an option for a further 50% next year, is achieving strong revenue growth and has “good profitability” thanks to cost optimisation. Aras is currently improving hub productivity, optimising its branch network and converting deliveries to a single driver/courier model, Austrian Post management told analysts.
On the full-year outlook for the parcels division, Austrian Post said it expects differing trends in the private and business parcel segments. Annual growth of 3-6% driven by the ongoing expansion of e-commerce is anticipated in the private customer parcel segment, depending on the region. In contrast, subdued economic growth prospects are unlikely to provide any impetus to the business parcel segment. Strong competition in the parcel and logistics business is resulting in an intensified struggle for market shares both in the B2C and B2B segments, it noted.
