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Post Danmark chief warns of limits to cost-cutting

Tuesday, February 26th, 2013

The chief executive of Post Danmark has warned that there is a limit to the amount of cost-cutting his company can achieve and continue delivering the mail six days per week.

KB Pedersen was speaking after his company’s parent group, Danish-Swedish postal operator PostNord, revealed last week that its profits dropped by 80% last year.

Denmark is seeing particularly steep declines in its mail volumes at the moment, with Danes opting to communicate via email and Internet-based platforms – including the Post Danmark-backed eBoks service.

Post Danmark, which forms PostNord together with Sweden’s Posten AB, made a loss of DKK 124m (EUR 16.6m) after in 2012, a DKK 267m (EUR 35.7m) slide from the previous year.

Pedersen, who won the World Mail Award for Industry Leadership last year, said his company’s “sharp” drop in profit was a direct result of the significant decline in letter volumes.

But, he noted that package volumes also declined at Post Danmark, despite growth in the market overall, because of the intense level of competition.

Pedersen said 2012 was a “transition year” in reshaping the company for future profitability, noting that target cost-cutting had reduced operating costs by DKK 305m a year, thanks in part to legislation changes made in 2011.

But while he said more work was continuing to adapt operating capacity for smaller quantities of mail, he said there was a limit to the cost-cutting that could be carried out.

He said: “We must in the coming years continue to streamline, but there is obviously a lower limit to how much more can be reduced in costs, when we must maintain a combined distribution network delivering mail to all addresses in Denmark six days per week.”

Volume declines

According to PostNord’s results statement last week, its Mail Denmark division saw a 9% drop in its net sales in 2012 compared to the year before. The Swedish mail business, by comparison, had a 2% drop in revenues. Danish operating margins were negative 3.2%, compared to positive 5% in Sweden.

The company said Danish mail volumes fell 12% during the year (compared to 5% in Sweden). This was mainly driven by priority mail volumes for small businesses and private customers, but advertising mail and newspaper volumes also fell because of a weak Danish advertising market and increased competition.

Cost-cutting included personnel cutbacks and rationalisations within production and distribution. PostNord said its Danish workforce was cut by more than 1,200 year-on-year.

Looking ahead, PostNord is predicting a 12% mail volume decline for Post Danmark in 2013 and a 6% decline in Sweden.

Source: Post&Parcel/Post Danmark

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