Growth in unaddressed mail and parcels has brought a “satisfactory” first half of the year for Finland’s postal operator Itella Group, but addressed mail, newspaper and magazine volumes have continued to drop.
The company issued second quarter results yesterday showing 0.7% growth in net sales compared to the same quarter in 2011 with sales stalling within its Itella Mail and Communications unit compared to the first quarter, while increasing in its Itella Logistics and Itella Information divisions.
Growth in the second quarter slowed compared to the “auspicious” first three months of 2012, with the expected seasonal reduction in volumes.
But on the back of the strong first quarter, Itella said its net sales for the first half of 2012 were up 2.8% to EUR 958.5m, with growth in all business groups.
Despite around EUR 10.7m in one-off costs, seen mostly in the second quarter as the company continued facing up to declines in traditional mail volumes and growth potential in logistics, the first half saw Itella turning around a EUR 4.1m loss seen last year into a EUR 18m income.
Jukka Alho, the Itella Group president and CEO, said there was a clear increase in performance in the first half sales, and while he said the second quarter had been “slightly less robust” in line with seasonal expectations, he said overall he was pleased with the half.
“Given that the overall economic situation became increasingly uncertain in the second quarter, the result of the first half of the year can be considered satisfactory at the very least,” he said.
Volumes are growing in Itella Mail Communications at the moment by 18% for unaddressed mail and 6% within parcel services, the latter assisted by the company’s investments that include expansion of its parcel terminal network.
However, while there has been a 43% increase in electronic letter “volumes” compared to the same period in 2011, addressed physical letter volumes went down 3%, while newspaper volumes fell 9% and magazine volumes by 4%.
Alho said the market was now a “tough” competitive environment.
“In this respect, the forceful efforts to increase efficiency have been absolutely necessary,” said Alho.
As the volumes for addressed mail declined, Itella again raised questions about how Finland’s universal service is funded in the liberalised Finnish postal market. The universal service accounts for about 10.6% of Itella’s mail division’s revenues at present.
Itella, which has around 27,500 staff, has been reviewing its business operations as part of a EUR 100m cost-cutting campaign, and during this latest quarter sold off its German printing business, having sold off its Danish printing business back in January.
The second quarter results also saw a EUR 7m impact stemming from the 2008 acquisition of a Russian logistics business.
During the second quarter the company also reached agreement with state-owned rail company VT Group to buy its freight groupage business to help build Itella’s logistics business.
Alho said yesterday the deal remains subject to approval by competition authorities.
Looking ahead, Itella said the conditions exist for “modest growth” in the rest of the year, although any turn for the worse in global economic trends and acceleration in use of digital services would threaten such a forecast.
The company said its profitability ahas improved so far this year, but to secure profitability in the long-term, it would need to continue cost-cutting measures.
Source: Post&Parcel/Itella Group