MaltaPost has warned shareholders that its profitability has fallen since April, that it is likely to continue falling, and that this trend “may even accelerate”.
The designated postal operator for Malta issued a profit warning on Friday revealing that its turnover has slipped since April, compared to the same period last year, while costs have risen “considerably”.
Battling ongoing declines in mail volumes in its loss-making domestic delivery service, MaltaPost said its international mail business has now been hit by “considerable” increases in costs related to changes in international tariffs.
Company secretary Graham A Fairclough told investors the company is working with its regulator, the Malta Communications Authority, to seek “realistic” international mail rates in light of the changes to the Universal Postal Union-regulated cross-border tariffs.
But, he said in the long run the company needs reform to the country’s postal regulations to cope with the decline in its profitability.
“The Directors believe that the trend in the decline in profitability that was reported for the six months ended 31 March 2012 will be reflected in the second half of the financial year,” said Fairclough in his statement to investors.
“Furthermore, the Board believes that this trend will continue, and may even accelerate, until the regulatory framework within which the Company operates is definitively and adequately revised.”
The MaltaPost company secretary said regulatory reform would allow the firm to plan and invest for the long-term economic viability of providing the universal postal service “providing it can be justified commercially”.
MaltaPost is a private company appointed as Malta’s universal postal service provider, with the company listed on the Malta Stock Exchange back in 2008. The company is currently majority-owned by the Lombard Bank Malta, with annual revenues of EUR 21.4m and a profit before tax of EUR 3.1m in the year up to September 2011.
MaltaPost’s current operator licence is due for renewal by May 2013.
Next year will also see Malta as one of the final 11 European Union Member States to fully liberalise its postal market, meaning that MaltaPost will give up its remaining monopoly, on letters under 50g in weight.
The company already has competition for other areas of the market like large letters and parcels.
Since April 2012, Fairclough said MaltaPost has registered an increase in revenue for its international mail, despite the negative impacts of the change in UPU tariff structure. Growth parcels is also helping the company financially.
“However, the local letter service remains a loss-making activity as the rates currently charged render the service commercially unviable,” said Fairclough.
MaltaPost is continuing to invest to expand its additional and non-core services to bring in more revenue, and is also continuing with its plans to upgrade post office branches.
Looking ahead, a postal rate increase could be needed to help the domestic letter service.
Malta currently has the lowest domestic postal prices in Europe, according to Deutsche Post’s annual letter price survey (correct as of April 2012), with its Euro 0.20 per letter domestic rate less than half the European average, and its EUR 0.37 per letter European rate also less than half the European average.
The MCA is currently running public consultations on regulatory changes to prepare for January’s liberalisation of the postal market.
Along with licensing system improvements, the regulator said the kind of regulatory controls on postal tariffs at MaltaPost will apply to any company that gains a significant market power in any segment of the market.
Meanwhile, in areas where MaltaPost does not have significant market power, it would have its tariff regulation rolled back in line with rivals.
A regular market review process will guide the MCA’s controls on postal rates for operators with a significant market power, according to the proposals.