Swiss Post today reported a sharp drop in profits for the first nine months of 2020 as parcels growth failed to offset declines in letters and other businesses but hopes for a lower overall profit fall this year than first feared due to improving business conditions in the last few months.
The group’s operating profits fell 53% to CHF 176 million in the January – September 2020 period while net profits dropped by 48% to CHF 136 million. Revenues were down 3.5% at CHF 5,113 million. Separate Q3 figures were not disclosed.
However, Swiss Post underlined that the profit fall “appears to be stabilising somewhat” and the overall impact of the coronavirus pandemic on this year’s financial results “may be less severe than expected after the second quarter”. It stressed: “The annual result is now largely dependent on how the pandemic continues to develop and on business over the festive season.”
Higher parcels profits on 21% volume surge
Like most postal operators, Swiss Post has seen dramatic growth in its parcels business this year as the pandemic boosted online shopping by consumers. Volumes rose by 21.5% between January and September, generating a 10% rise in PostLogistics revenues to CHF 1,371 million. The parcels unit also improved its operating profits by 49% to CHF 143 million despite higher operating costs due to pandemic-related effects.
But Swiss Post cautioned: “At the same time, there is significant pressure on prices in the parcel business. The growing parcel volumes cannot offset the negative effects in the other Swiss Post business units.
“Investments in parcel logistics are also high. In recent years, for example, Swiss Post has expanded its three major parcel centers at a cost of around CHF 60 million and invested CHF 190 million in new regional parcel centers.”
Parcels growth fails to offset letters decline
In contrast, the letters business (PostMail) suffered a 6.8% volume decline over the first nine months of the year, resulting in a 4.9% revenue fall to CHF 1,819 million. Its operating profit tumbled by 30% to CHF 181 million.
There were also lower profits at PostFinance and Swiss Post Solutions, along with higher losses from the PostalNetwork and the PostBus passenger transport unit.
Some recovery beginning to show
“The final annual result depends on how the pandemic continues to develop and on the festive season, which is very important for our business,” explained Alex Glanzmann, Head of Finance. The forecasts are reviewed on a monthly basis and could change quickly, depending on the evolution of the Covid-19 situation, he noted.
But the CFO stressed: “Thanks to the good basis that Swiss Post has established in recent years, we can cope with the current financial challenges from our own efforts.”
Since August, there have also been signs of some stabilisation, according to the postal operator. A certain recovery and a catch-up effect are beginning to show, particularly in letter volumes. For example, the volume of promotional mailings or of priority letters has increased again in individual months in the past quarter, the group noted.
At the moment, Swiss Post assumes that the pandemic’s impact on its finances by the end of the year will be less severe than was feared at the end of the second quarter. Overall, however, Swiss Post still expects a negative impact on its result amounting to a figure in the triple-digit millions, with the biggest part played by market effects resulting from the coronavirus pandemic.
The smaller part of the negative impact on EBIT is due to one-off effects of the coronavirus. These include the thank-you bonus for employees in business operations (CHF 10.5 million), the procurement of protective equipment such as disinfectant, Plexiglas screens and face masks, and the employment of temporary staff (CHF 21 million).
Support for Swiss society and economy
Swiss Post also highlighted its actions to support the general Swiss economy and society as a whole during 2020. These include early payment of invoices, lower rents for tenants and PostFinance loans for SMEs.
Moreover, Swiss Post will not make any general price adjustments to the mass parcel and letter business next year. Any changes will be delayed until the following years.
Glanzmann emphasised: “With all of the measures adopted, Swiss Post has fulfilled its responsibility as a reliable partner of the Swiss economy.”
