PostNL profits down 86% as network restructuring continues

[TrueBlueTerrier]

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Dutch postal service PostNL has seen profits slump in the second quarter of the year as it faces a startling 11.3% year-on-year decline in addressed mail volumes.

The company achieved relatively stable revenues in the quarter, down 1.4% to EUR 1.025bn, with growth in parcels and international mail offsetting decline in domestic mail.

Net profits were down from EUR 22m this time last year to just EUR 3m in the second quarter of 2013.

In the first half of the year, PostNL has seen revenues slip 0.5% to EUR 2.096bn, but has seen profits of EUR 655m in the first half of 2012 turn into a EUR 407m loss in the 2013 year so far.

Much of that loss has been caused by PostNL’s 29% stake in the integrator TNT Express. However, even excluding the affects of TNT, profit in the first half is down 63% to EUR 37m in 2013.

PostNL insisted that on an underlying basis its second quarter was actually an improvement on last year.

The company said it is ahead of schedule on its network reorganization, and performance in the second quarter was above expectations, although the decline in mail volume has been higher than forecast because of increased competition and the economic situation.

Herna Verhagen, the PostNL CEO, said so far the company has consolidated 79 of its planned 125 depots, 44 in this second quarter alone.

Despite the steep decline in mail volumes, she added that parcels showed good volume and revenue growth, and international mail activity was also showing good growth.

“Looking back at the first half year, we can conclude that PostNL is on track towards achieving the 2015 targets,” she said.

Domestic

In the second quarter, domestic mail revenues fell 7% to EUR 507m, as volumes fell 11.3%, an accelerated decline compared to the 8.3% seen this time last year. Domestic mail operating income grew 13.3% to EUR 34m thanks to cost-cutting efforts.

Parcel revenues grew 9% in the second quarter, to EUR 194m, as volumes grew 7% year-on-year, but operating income slumped 42% to EUR 21m as PostNL took over Austrian Post’s trans-o-flex businesses in Belgium and the Netherlands, while labour costs were extended by the new union deal.

PostNL said its parcel network restructuring is “fully up to speed” and on track for completion in 2015, with 10 depots opened so far and 55% of volumes now running through the new network.

International

PostNL’s international mail operations, including TNT Post in the UK, Germany and Italy, achieved a 6.2% growth in underlying revenue in the second quarter, to EUR 413m. Underlying operating income remained stable on EUR 5m.

PostNL said e-substitution remains the main driver of its mail volume decline, but in the second quarter there was also an impact from industry competition.

Revenue in the UK grew 6.1% to EUR 190m thanks to growth in addressed mail, packets and parcels. TNT Post UK’s end-to-end delivery service is now handling 1m items per week, with PostNL stating that its efforts to find a co-investor to help roll out the service nationwide is “well underway”.

Revenue in Germany grew 7.3%, to EUR 132m, with growth in volumes from existing customers as well as from new customers.

In Italy, TNT Post grew its revenue by 12.2% to EUR 55m, with the Formula Certa service expanding to 71% of Italian households, with volumes and revenues growing strongly.

Reforms

Looking ahead, PostNL has brought in a six-cent price increase for domestic stamps from the start of this month (August 2013). The company is expecting postal reforms to bring a halt to Monday mail deliveries and Sunday collections from the start of 2014.

Plans expected to be implemented by 2015 should include a cut in the number of mailboxes and post offices in the Netherlands, as well as a new universal service financing mechanism.

Proposals have been accepted by the Dutch Parliament, and should be approved by the Senate after this summer.

[NWpostie]

The reason for the decline is easy to work out, poor service, high price, cheap demotivated staff, cutting corners and standards for profit. When faced with this customers will look for alternatives.

[PMC Network Driver]

TNT pay there staff peanuts and still can't make a profit the business is doomed