Swiss Post executives today warned the company might not be able to finance future investments without structural changes as they presented lower revenues and profits for 2019.
The state-owned postal operator saw operating profits drop by 11% to CHF 450 million while net profits fell by CHF 149 million to CHF 255 million last year.
“These results are unsurprising as Swiss Post continues to operate in a challenging environment,” the company stated. The low interest rate environment, the decline in letter volumes and strong volume growth in parcels are the main challenges in the core markets and have led to a continued decline in results over recent years.
On the positive side, strong workforce commitment, successful market development and efficiency measures in individual business units ensured that Swiss Post’s result declined less sharply than the deterioration in the operating framework last year. The company also maintained delivery services at a very high level, meaning that it again exceeded government targets in 2019.
“Swiss Post aims to remain a robust, competitive and non-subsidised enterprise to continue financing the universal service from its own resources,” said CFO Alex Glanzmann. “When I look at the development of the financial results and also see how Swiss Post’s key figures are changing, then it’s obvious that action is needed,” he added.
Swiss Post said that for many years it has invested in infrastructure and service as well as in innovation, staff development and sustainability, including around CHF 470 million last year.
“Until now Swiss Post has financed these investments itself from the cash flow from operating business,” Glanzmann explained.
But as profits fall steadily Swiss Post now has a window of just a few years to successfully implement the measures required. During this period, Swiss Post, the owner and politicians need to respond to the major challenges and pave the way for solutions.
“Maintaining the status quo is not an option. If the political and entrepreneurial framework conditions remain the same, Swiss Post will not have sufficient financial leeway to be able to act within the foreseeable future,” the CFO warned. In particular, financing the universal postal service from its own resources could become a problem.
“We want to continue providing a valuable public service in future and are proud of the fact that we are self-financing,” emphasised CEO Roberto Cirillo.
At a divisional level, PostMail revenue dropped on a 4.8% volume decline and operating profit fell to CHF 370 million last year.
The fact that investment is often required before profit can be generated is evident at PostLogistics, Swiss Post pointed out. The 7.3% increase in parcel volumes “means investment of hundreds of millions” is required for new parcel centers.
Revenues rose by CHF 44 million to CHF 1,708 million but operating profits dropped by CHF 17 million to CHF 128 million. The sale of a group of subsidiaries as well as provisions and the consequential costs of the robbery of a cash transport vehicle had a negative effect on PostLogistics’ result.
Furthermore, revenues continued to decline at PostFinance owing to the ongoing low interest environment, although operating profits rose moderately to CHF 240 million. “This clearly shows that we cannot compensate for the competitive disadvantage of not being able to issue loans and mortgages ourselves in the current negative interest environment,” commented Hansruedi Köng, CEO of PostFinance.
