Norway Post fell into the red last year despite good growth in e-commerce as profits were hit by a decline in oil sector logistics.
The company increased revenues by 2.7% to NOK 25,074 million in 2015. But the operating profit before non-recurring items (EBITE) dropped by 26.5% to NOK 686 million while EBIT slipped to NOK 239 million from NOK 844 million on a reported basis. Pre-tax profits slumped to NOK 151 million from NOK 720 million in 2014, and the company ended the year with a slight loss of NOK 21 million.
Norway Post said it continues to have a strong focus on cost-cutting measures but the decline in oil-sector activity and the ripple effects of this greatly influenced several business areas' results. Up to 130 jobs will be shed this year under various cost saving measures.
"We're experiencing a significant decline in activity in the Norwegian market and the downturn is stronger than we predicted. So our profit is weaker than expected and 2016 will be another demanding year for the group. We have implemented measures to deal with this trend," said CEO Dag Mejdell.
The logistics segment's revenue grew by 5.2% to NOK 16,777 million last year, driven by growth in Nordic operations and private e-commerce. The group's total e-commerce volumes increased by 6% last year.
But the lower level of activity in the oil industry considerably affected the logistics operations, both directly in the Offshore & Energy business area and indirectly in other business areas, and led to weaker profitability. Logistics profits dropped to NOK 71 million from NOK 407 million the previous year.
"In a difficult logistics market, e-commerce is an important growth area. We are already by far the experts on Norway and our growth now mainly comes from our Nordic operations," Mejdell commented.
In the mail business, the volume of addressed mail fell by 6.4% in 2015, resulting in lower revenues and profits. This decline is expected to accelerate in the future due to the transition to digital solutions in both the private and public sectors. In 2016, the Norwegian government and municipalities are legally obliged to communicate digitally with the public. Posten Norge offers the public a safe, free digital mailbox, Digipost, ready for this switch in communications.
"We can see that the decline in the mail volume is accelerating while the number of users of Posten Norge's Digipost is rising. More and more people are using Digipost and we already have 600,000 users," says Mejdell.
At the same time, Posten Norge is dealing with the decline in letter volumes by adapting its range of services and reorganising its operations, which has helped to maintain good mail segment earnings.
As from March, no letters will be delivered on Saturdays, a quiet day for deliveries, as part of the new Postal Services Act which came into force on January 1, 2016. Some 400 jobs are affected by this change while working shifts will change for some 10,000 employees as a result.
As the next necessary measure, Posten Norge has proposed to the Ministry of Transport and Communications to merge the A-mail and B-mail to create a two-day letter flow as from 2017. This will generate substantial cost savings.
"We've succeeded in adapting to developments and new customer needs by reorganising in time and have had good cooperation with our employee representatives. The need to reorganise will not become any less in the future. It's important that we manage to stay ahead of the game. If we lag behind, we risk ending up with a built-up need to reorganise," Mejdell explained.
