PostNord’s restructuring moves are paying off with better financial results and the postal operator is now focusing on more sustainable deliveries.
The Nordic postal group increased turnover slightly by 1% to just over SEK 9 billion in the July – September quarter and reported an operating profit of SEK 57 million compared to a loss of SEK 73 million in the same period last year. The net loss was more than halved to SEK 51 million.
Overall, its e-commerce and logistics revenues grew by 9.4% to nearly SEK 5.5 billion thanks to an 8% rise in parcel volumes, including a 16% surge in B2C volumes. Overall delivery quality for parcels across the PostNord Group was 95.6%. In contrast, communication services revenues dropped by 8.8% to just over SEK 3.5 billion on a 9% decline in mail volumes.
In Sweden, quarterly net sales decreased fractionally as a 10% fall in communication services resulting from an 8% volume decline outweighed a 6% increase in e-Commerce & Logistics sales, driven by a 5% increase in parcel volumes. But EBIT doubled to SEK 223 million due to growth in e-commerce and third-party logistics, the return of mail customers from competitors, savings in air transportation and other efficiency measures that have reduced staffing.
Revenues increased slightly in Denmark on strong growth in E-commerce & Logistics sales that compensated for lower sales in Communication Services where mail volumes declined by 12%. The quarterly loss was reduced significantly. Elsewhere, sales increased strongly in Norway and Finland thanks to higher volumes of parcels, and international arm Direct Link increased revenues as much as 45% to SEK 400 million.
Annemarie Gardshol, acting President and CEO, commented: “The year’s third quarter shows continued positive progress and, in comparison with the same quarter in 2018, improved income. A clearer focus on the business and the ongoing transformation process are delivering improved profitability in Sweden, Denmark and Norway.”
She explained: “A more focused strategy was established in the quarter. Under the strategy, PostNord is focusing purposefully on its core business – parcels and mail – in order to secure a leading position in a world where patterns of communication and consumption have changed. In recent years, PostNord has brought in major changes to address the decline in mail. At the same time, we have taken to the offensive in gaining a leading position in e-commerce deliveries. Our prime business opportunity lies in our parcel services for end consumers. This fast-growing segment is characterized by high demands from recipients for convenient deliveries.”
One important area is to make deliveries more sustainable in response to surveys showing that three out of four online buyers in the Nordics always, often or sometimes take the issue of sustainability into account. “An offering adapted to consumer expectations, for example, sustainable delivery options, is essential. We are now working on all this within the Group’s new, customer-oriented and simplified organization,” Gardshol pointed out.
One important issue is to increase the capacity utilization in trucks by reducing the volume of air in parcels and by coordinating transport operations. “As regards our target of reducing the Group’s overall carbon dioxide emissions by 40% by the end of 2020 – relative to the levels in 2009 – we are now at just over 35%,” she added:
The returns issue also affects the climate impact of the parcels business. In September, PostNord published its E-barometer report for the second quarter. According to the report, free returns are now less common in Swedish e-commerce and the expectations of Swedish consumers for free returns has fallen since last year.
Gardshol continued: “The end consumer and the customer experience are becoming more and more important to our business. In Denmark, our delivery network has expanded considerably and PostNord has established a presence even closer to the end consumer. Since year-end, more than 300 new delivery points have opened in Denmark. The aim is to have nearly 500 in operation before the intensive Black Friday period.”
Addressing the ongoing restructuring measures, she said: “To secure a long-term future for the postal service under the strategy, we need to strive to achieve a service level that meets the market’s needs at reasonable cost. PostNord Denmark has entered the final phase of the ongoing transformation of the Danish business, and with a new, efficient service model in place the focus is now on improving the customer experience. At the same, the process of developing and establishing a new delivery system for mail in the Swedish market is ongoing.
“In addition, the current systems of regulation on Sweden and Denmark need to be updated and constructive dialogue is under way with both Swedish and Danish decision-makers. One step in the right direction was Sweden’s new Postal Ordinance in August, which opens the way to higher postal rates to offset falling mail volumes. On September 30, we announced that we would be raising the letter rate for domestic letters in Sweden from SEK 9 to 11 on January 1, 2020.”
Notable business transactions during the period include a scanning and EDI contract between PostNord Strålfors and Telia, new contracts for PostNord Sweden with Volvo Cars and Ahlsell and a logistics contract signed by Thanke AS and PostNord Norway. In the Swedish market, the group recorded good growth in Value Letter (Varubrev) and a continued flow-back of mail volumes following withdrawals by competitors from certain geographical areas, as well as renewed interest in unaddressed direct marketing (UDM).
