Austrian Post today revealed solid Q3 results as it faces up to competition from Deutsche Post DHL in its home parcels market and continues to review the future of German subsidiary trans-o-flex.
In the July-September third quarter, Austrian Post’s group revenues increased by 2.2% to €573.4 million while its operating profit improved by 14.6% to €38.7 million.
The Mail & Branch Network Division increased its revenues by 2% to €351 million in the quarter and its operating profit went up to €63.2 million from the previous year’s €56.7 million. The basic trend of e-substitution continued while the upward adjustment of postal rates as of March 1, 2015 had a positive effect.
The Parcel & Logistics Division increased its revenues by 2.8% to €222 million in the July – September quarter one year earlier but the operating profit slipped back to €4 million from €6.4 million one year earlier. The premium parcels business (delivery within 24 hours) in Germany, Austria and other markets increased Q3 revenues by 3.1% to €168 million while standard parcels (mostly B2C in Austria) had flat revenues of €44 million. At a geographical level, Q3 revenues grew by 7.7% in Austria and by 8.4% in South-East Europe but only by a slight 0.2% in Germany.
The main growth driver remained online shopping which is resulting in higher consumer parcel volumes. However, competition is intensifying in Austria with the market entry of Deutsche Post DHL, and Austrian Post is responding with investments in customer service. The company has a 77% share of the country’s growing B2C parcels market but only 28% of the B2B market, where there is little growth momentum from the country’s economy.
“Today 90% of all parcels are handed over to the intended recipients on the initial delivery attempt, a top performance only made possible by our experienced and well organised delivery operations. Our parcel service was recently expanded to include Saturday delivery,” emphasised CEO Georg Pölzl. In addition, Austrian Post offers a series of innovative customer solutions. 175,000 households already have access to convenient Post pick-up boxes. Furthermore, customers have 24/7 access to about 300 self-service zones and 200 pick-up stations throughout the country.
The international parcel business continued to show a differentiated development, Austrian Post commented. Market trends positively impacting the business operations of Austrian Post subsidiaries in South East and Eastern Europe as well as Turkey continued.
The top priority of trans-o-flex in Germany at the present time remains the implementation of structural measures and network restructuring. Austrian Post is simultaneously evaluating various strategic options for its German parcel subsidiary and is due to complete this evaluation by the end of this year.
“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 in Group revenue in the range of 1-2%. At the same time, we are striving to generate an EBITDA margin of around 12%,” Pölzl added. On the basis of the company’s performance in the first three quarters of 2015, Austrian Post is pursuing the objective of once again equalling or slightly surpassing the prior-year's operating result.
A stable business development is targeted for 2016, although the projected earnings range is somewhat broader due to the uncertain market environment. Next year the company expects a challenging mail market featuring a further decline in addressed mail volumes, as well as a highly competitive parcel market.
The company explained that the development of the Parcel & Logistics Division is impacted by differing trends in the private and business parcel segments. Considerable growth continues to be anticipated in the private customer parcel segment due to the steadily growing online business. At the same time, intensified competition is expected as a result of the growth momentum in this market segment. In turn, this could impact parcel prices and volumes and thus the company’s business development, especially in 2016. In contrast, subdued economic growth prospects are unlikely to provide any impetus to the business parcel segment. Furthermore, in particular the fierce competition is negatively affecting the parcel and logistics business in Germany.
In addition, the revenue forecast for the 2016 financial year also depends on the potential increase of the stake held by Austrian Post in the Turkish parcel services provider Aras Kargo from 25% to 75%. Keeping these factors in mind, annual revenue in 2016 could be in the range of minus 1% to plus 5% compared to 2015.
