Australia Post expects substantial mail price increases and continued parcels growth to help it return to profit this year after reporting an 84% drop in half-year profits today.
The postal operator said its net profit dropped 84% to A$16 million in the six months ending December 2015 while it made a pre-tax profit of A$1.4 million. But the state-owned group did not release any figures for revenues or operating profit for the first half of the 2015/16 fiscal year.
The half-year result was driven by the accelerated decline in letter volumes across the fixed-cost network, according to the company. Addressed letter volumes dropped by 9.5%, within the forecast range of 8 – 11% but well ahead of the annual volume declines seen in recent years.
Australia Post noted that the parcels business was “performing well” with domestic volume growth but with “market pressure from global competitors rising”. Notably, the postal operator is facing more competition in the B2C sector from Japan Post-owned Toll Group and Singapore Post subsidiary Couriers Please while DHL Express and FedEx are expanding international e-commerce services to Australia.
Looking ahead, the organisation signalled it expects to return to a full year profit in 2016 following a $222 million loss last year. In particular, it expects changes to the letters service, implemented in January 2016 following parliamentary and competition authority approval, will reduce the rising losses in the mail business.
Australia Post increased the basic letter price from 70 cents to A$1 as of January 4, and in parallel launched a new priority mail service costing A$1.50. Under the new two-speed mail service, Priority letters are delivered within 1-4 days depending on destination, while Regular letters take two days longer.
Managing Director & Group CEO Ahmed Fahour said the half-year result highlighted why reform to the letters service was absolutely necessary to ensure future sustainability of the business.
"We have made a number of difficult decisions recently to help put Australia Post on the right path to take advantage of future growth in e-commerce," he said. "Our financial position is significantly stronger as a result and we are further encouraged by the solid performance of both our parcels and Trusted Services businesses.”
But he underlined: "It is essential we continue to look for new revenue streams for our business. We are working with our corporate and government customers to build on our demonstrated capabilities offered through our national network, which already includes passport registrations, identity checks, banking and payment services. Importantly, we have improved our service performance and will continue to maintain five-day delivery and our vast network of over 4,000 Post Offices.”
On the parcels strategy, he commented: "We will also look to further build on e-commerce partnerships to help our customers buy and sell online, both here in Australia and also internationally. This includes joining Asian e-commerce giants JD.com and Alibaba on some of their most popular online shopping platforms, including 1688.com and Tmall.com."
In response, the Australian Post Office Agents Association Ltd (POAAL) said the results came as little surprise.
“Globally the trend is for growing costs in letter delivery coupled with falling letter volumes, while parcel revenues are increasing,” said POAAL Director Bob Chizzoniti. “The parcels business is very competitive, in particular in metropolitan areas, so it’s vital that Australia Post finds new business streams to support the post office network.”
A decline in letters volumes might be bad news for Australia Post, but at least it’s good news for direct marketers using the post, whose messages now have more prominence in letterboxes, the association pointed out.
