Strong double-digit e-commerce growth for PostNord in the fourth quarter of 2015 failed to outweigh a continuing slump in mail volumes that pushed down profits and has prompted more restructuring this year.
The Swedish-Danish postal group announced today that it will merge e-commerce and logistics activities into a single division while the communications division will in future cover the mail business and services provider Strålfors. In parallel, the Danish business is being reorganised to reduce operating costs.
In the October – December quarter, PostNord’s net sales dropped 2% to SEK 10,434 million and the group reported an operating loss of SEK 284 million compared to SEK 70 million one year earlier. However, the adjusted EBIT figure, excluding restructuring costs, showed a 14% improvement to a profit of SEK 501 million. Overall, the Q4 net loss more than quadrupled to SEK 337 million from SEK 80 million one year earlier.
The full-year figures were better, although net sales fell 1% to SEK 39,351 million. Reported EBIT rose by 61% to SEK 564 million, with adjusted EBIT up by 8% to SEK 927 million, and net income increased by 58% to SEK 278 million.
CEO Håkan Ericsson said the Q4 results were positively affected by implemented savings programs and healthy volumes related to Christmas shopping while the group’s “adjustment process is progressing well”.
He commented: “E-commerce broke records in the run-up to Christmas, and partly as a result of this, PostNord’s B2C parcel volumes rose by 17% during the quarter. About a third of new agreements are in the e-commerce segment.” B2C parcels increased by 15% in the year as a whole.
“During the quarter we also signed a number of new significant agreements, mainly within heavy logistics. The logistics business continued to show growth with an increase in parcel volumes totalling 8% for the quarter and 10% for the full year. The logistics market is highly competitive, which requires continued major focus on cost efficiency.”
The logistics division increased sales by 1% to SEK 4,411 million in the fourth quarter and by 2% to SEK 16,610 million in the full year.
In contrast, total mail volumes declined by 5% in the quarter, of which 9% in Denmark and 4% in Sweden, leaving revenues down by 4% at SEK 5,461 million. For the full year 2015 mail volumes fell by 8%, of which 16% in Denmark and 6% in Sweden, and revenues dropped 4% to SEK 20,490 million.
“The substantially reduced mail income in Denmark is adversely affecting the result, which is why we are implementing a comprehensive restructuring program for the Danish business. For instance, agreements have been entered into with the Danish trade unions in order to adapt terms and conditions of employment to boost competitiveness, with estimated annual cost savings exceeding SEK 200m as of 2016,” the CEO explained.
Moreover, current postal regulations are not fully adapted to the increased digitization in society and the consequent substantial drop in demand for classic mail services, PostNord pointed out. Work on new postal legislation is under way in Denmark, and in Sweden the government established an investigation of the Swedish postal legislation.
“We welcome these measures since an amendment to the regulations is required to ensure a good postal service under reasonable economic conditions throughout Denmark and Sweden,” Ericsson commented.
PostNord said that to strengthen the increased focus on digital communication, the decision was made to integrate Strålfors more closely into the rest of the group regarding service development and product ownership of physical and digital communication services. The organisation is being adjusted by moving eCommerce to the Logistics business area, which is now called eCommerce & Logistics, and forming Communication Services from the Mail & Communication business area and Strålfors’ service development business.
“During the year we have worked on building a stronger and more cohesive PostNord. We are on the right path and are gradually reinforcing our position as a leading communication and logistics operator with a Nordic end-to-end offering,” Ericsson said.
“An important step in this process is the launch of a joint brand that is being fully implemented in the Nordics through intensive work. Now we are delighted to be able to note that awareness of the PostNord brand has risen dramatically in the Nordics. A survey shows that in just under two years, we have increased the proportion of people who are “VERY” aware of the PostNord brand from 28% to 90% in Sweden, from 12% to 41% in Denmark and from 20% to 60% in Norway. In 2016 the introduction of our brand into Danish mail operations will be substantially accelerated.”
Looking ahead, the PostNord chief commented: “The rapidly decreasing mail volumes remain a major challenge. Further development of our logistics business, adaptation of the regulatory frameworks, own capacity adaptation, cost efficiency measures and service development in close cooperation with our customers are necessary measures to ensure long-term profitability in line with our owner objectives.
“The large-scale restructuring being made involve ongoing major challenges for our employees, and we are therefore working target oriented to create and strengthen insight into what the future holds for individual employees. With a strong customer focus we will continue to deliver on our promises.”
