Swiss Post will invest CHF 1.4 billion in logistics and digital communications including potential acquisitions, merge mail and parcels into one division, and end post office closures under a new medium-term growth strategy.
But the postal operator has also presented quarterly results showing a sharp drop in profits due to the effects of the coronavirus crisis, which could cost “hundreds of millions” of Swiss francs in 2020 as a whole.
The ‘Swiss Post of tomorrow’ strategy, presented last Thursday, is focused on stopping the decline in revenue and profits through targeted growth in order to continue providing a high-quality universal service and to fund necessary investments internally, the company said.
Swiss Post will develop its core business activities – the transport of goods, information and people as well as financial services – and provide a nationwide public service to meet the needs of “a Switzerland undergoing dynamic change”.
The main change in the new strategy, which goes into effect next January and runs until 2024 (but with scope for the next decade), will come in the post office network. The closure programme of recent years will be ended. Instead, the remaining 800 retail outlets will be opened to partnerships with other companies and public authorities.
“We want to continue to be a Swiss Post for the people and economy of Switzerland, so that they can develop in a dynamic way,” declared company chairman Urs Schwaller. At the same time, he emphasised: “The aim is for Swiss Post to grow again as a company.”
CEO Roberto Cirillo, who has headed the group for the past year, added: “We’re focusing on the competencies and markets that we believe will create the greatest benefit for Switzerland.”
He made clear that the company will have to invest substantially in generating this growth, which could well include M&A activities. “In logistics and digital communication, we want to build up new competencies and grow significantly. To do so, we will invest over CHF 3 billion over the next four years,” he said.
Swiss Post said it aims to strengthen and expand its service through acquisitions and partnerships in the fields of logistics and communication, in order to guarantee a future-proofed public service for Switzerland. The group will use its solid financial reserves and additional funds for this process and is considering steps such as selling individual non operations-relevant properties from its real estate portfolio.
More international logistics and last-mile deliveries
In the logistics field, Swiss Post is already developing new final-mile consumer delivery services, solutions for business customers and cross-border goods transportation to connect Swiss companies to international markets.
In future, Swiss Post aims to provide logistics services “based on cutting-edge solutions” and to help shape the digitization of logistics by forming partnerships and participating in logistics platforms.
Responding to the long-term volume shift from letters to parcels, the group will combine its letter and parcel logistics services into a single business field with two units ‘Logistics Services’ and ‘Communication Services’ in order to use existing resources, in particular the workforce, across all products and ensure it can continue providing attractive jobs in sorting and delivery.
As part of the reorganisation, the heads of PostMail, Ulrich Hurni, and PostLogistics, Dieter Bambauer, will not head the two new units and both will retire by 2024. Until then, both “will contribute their extensive experience” to the new Logistics Services unit. Hurni will focus on integrating mail and parcel operations while Bambauer will concentrate on the national and international goods logistics unit, in which significant investments are planned.
In parallel, Swiss Post will continue to support digital transformation in Switzerland by providing secure digital communications and information solutions for companies, authorities and private citizens from a reliable Swiss provider. “This need has become even more apparent during the coronavirus crisis,” the postal operator noted.
Stabilising and opening up the postal network
In the publicly sensitive area of post offices, Swiss Post underlined that its branches and access points “remain a cornerstone” of its activities. In future, the retail network will be stabilised at about 800 self-operated branches. In parallel, it will be opened to service companies and authorities to create local ‘service centres’ for different regions.
This clear change of course is designed to help bring an end to the systematic conversion of self-operated branches, the company explained. “The partners for whom the network is opened will benefit from Swiss Post’s service delivery as well as the possibility of offering their customers a physical contact point in this digital age through the Swiss Post branch network.”
PostBus remains a core business
Among other business activities, Swiss Post made clear that its public transport division PostBus, hit by a financing scandal in 2018, “remains a key element” of the group, retaining its leading role in regional road-based passenger transport services.
A key profit contributor, the PostFinance business, is the only bank in Switzerland with a universal service obligation for payment transactions. In the future, the aim is for PostFinance to be able to issue loans and mortgages independently. This is a matter for Parliament to decide. In the coming years, Swiss Post still anticipates a sustainable and future-oriented contribution to the overall result from the financial services business.
Finally, Swiss Post Solutions (SPS) “has transformed itself into one of the world’s leading outsourcing partners” for business process solutions and innovative services in the field of digital document management. Swiss Post said it is committed to ensuring that SPS “can continue its progress down its chosen path”.
Coronavirus crisis hits quarterly results
Meanwhile, Swiss Post today disclosed its quarterly financial results which were significantly hit by the coronavirus crisis. Operating profits fell by CHF 57 million to CHF 115 million while net profits slumped to CHF 84 million from CHF 130 million in the same period last year.
The profit decline was mostly due to weaker results at PostFinance and a 5.6% drop in addressed letter volumes. Parcel volumes rose by 10%, including a 17% rise in March as consumers bought more online due to COVID-19 lockdown restrictions.
“We anticipate that the coronavirus crisis will have a significant impact on the result for the current year,” said CFO Alex Glanzmann. Based on initial estimates, Swiss Post expects a negative effect on profit amounting to hundreds of millions of Swiss francs for 2020.
The financial consequences of the coronavirus crisis are likely to have an impact on all of Swiss Post’s business units for 2020 – even PostLogistics. While over 800,000 parcels a day were processed on peak days in April during the extraordinary situation, employees had to handle them in accordance with distancing and hygiene regulations which incurred substantial additional costs. Pressure on prices and margins also remains great. This means the higher number of parcels is not fully reflected in an improved result.
“The growth in parcels does not even begin to offset the negative effects in the other business units,” Swiss Post underlined.
The group also emphasised that its employees “have made an incredible effort” since the start of the coronavirus outbreak to maintain the provision of postal services in Switzerland and to guarantee the universal service nationwide. The company had invested almost CHF 10 million in worker protection measures by the end of April and paid out CHF 10.5 million in short-term bonuses.
