Swiss Post is pessimistic about the potential for parcel revenues to fully compensate for the declining mail business and worried about a forthcoming referendum that could limit its profits.
The Swiss postal operator improved profits last year despite falling revenues but this was largely due to one-off financial effects, and its core business faced “challenging” trading conditions.
Peter Hasler, board chairman, said at the 2015 results press conference last week that “the economic situation and technological changes remain challenging” while the company faces tougher competition and the continuing e-substitution of mail volumes. The impact of the volume decline can still be partly compensated by efficiency improvements and cost reductions but “in the medium term it will impact substantially on results”, he warned.
Moreover, the post office network faces a “deficit”, Hasler said. “Counter volumes are declining sharply, which increases the deficit. Our delivery workers have to serve an increasing number of households with lower mail volumes.”
He continued: “The Post is changing. It has to adapt to new patterns and changed customer needs, and position products and services for these. Our customers are mobile, expect high convenience and services ‘on demand’ whenever and wherever they happen to have time. And they expect this for a low price.”
Swiss Post has already responded in recent years with new electronic services for consumers, businesses and public authorities, and has moved ahead with tests of drone deliveries and self-driving passenger buses, he pointed out.
However, the company faces a political threat this year from the ‘Pro Public Service’ referendum on June 5, he warned. “This is a dangerous initiative which does not support public services but threatens them. The initiative would limit the profits of state-owned companies, amongst other things. Without profits we would not have the means to invest in a modern basic provision and the quality of our services.”
In addition, the Swiss Parliament is due to debate a further liberalisation of the postal market at the end of this year, including how to finance the public service in future, which services remain necessary and what freedom Swiss Post has to enter new markets, Hasler pointed out.
“The Post must be able to develop. We want to respond to our customers and their new needs. Switzerland will only have a modern public service in future with a modern postal operator. And only a successful Post guarantees we can finance the basic service from our own resources in future and will not have to call on taxpayers,” he declared.
In 2015, Swiss Post suffered a 1.8% drop in revenues to CHF 8,224 million but the net profit improved by 1.1% to CHF 645 million.
CEO Susanne Ruoff explained that the profit improvement was essentially due to changes to book profits at PostFinance while revenues in all three divisions were under pressure.
The main ‘cashcow’, PostFinance, booked a 20% rise in operating profits to CHF 459 million despite a 1.5% drop in revenues. The Mail division improved profits by 6.9% to CHF 263 million despite a 3.5% drop to revenues of CHF 4,678 million while addressed mail volumes declined by 1.4% last year.
PostLogistics, based on the parcels business, increased operating profits by 2.8% to CHF 145 million but revenues dropped a fractional 0.6% to CHF 1,552 million. Parcel volumes rose by 3% to a record 115 million items. “At PostLogistics, customer losses in freight transport and warehousing resulted in lower revenues. The higher parcel volume only compensated partly for this,” Ruoff pointed out.
“The (parcels) market is characterised by strong international competition, low margins and high price pressure. New suppliers from outside the industry are moving into the market. They don’t need to make any profits in logistics as they make them in their core business,” she commented. Moreover, “unfortunately, the parcels boom cannot compensate for the volumes that we are losing through electronic substitution,” she admitted.
Ruoff stressed that Swiss Post has been modernising its ‘access points’ for years through innovations such as postal agencies with longer opening hours, 24/7 parcel points, and deliveries in the evening and at weekends. The 1,447 post offices in Switzerland are now complemented by 747 postal agencies, 201 parcel points and 57 self-service parcel terminals, and diverse other retail outlets.
