PostNL profits slump on the back of TNT Express stake
Dutch postal service PostNL has seen its profits evaporate in the third quarter of the year, although sales increased 2%. The company’s profit was down from EUR 218m in the same quarter last year to just EUR 12m in this year’s third quarter.
Revenue grew to EUR 988m in the quarter, thanks to price increases, while operating profit fell 11% to EUR 53m.
The company was particularly hit by the falling value of TNT shares, since it still owns 15% of the integrator despite a plan to sell up within the next few years. Excluding the impact of TNT Express, PostNL said its profit for the period was EUR 8m, compared to EUR 2m the same period last year. The company took a EUR 125m hit from the fair value adjustment of its stake in TNT Express.
The continuing steep fall in domestic mail volumes, down 11.1% year-on-year in the third quarter, also contributed to the fall in profits, along with investment in package delivery infrastructure.
And, a tax bill of EUR 65m, compared to a EUR 73m rebate in the same period last year, also impacted on results.
Nevertheless the company insisted that its underlying cash income doubled in the quarter to EUR 34m, resulting in a “solid” quarter’s results.
Herna Verhagen, the PostNL chief executive, said: “This quarter demonstrated the ongoing improvement in PostNL’s operational performance. Our results improved mainly due to strong cost savings, price increases in Mail in the Netherlands and lower cash out for pensions and restructuring. Our addressed mail volumes in Mail in the Netherlands declined by 11.1%. Reduction of our cost level remains necessary to compensate for the ongoing volume decline in Mail in the Netherlands.”
Divisions
The domestic mail business, Mail in the Netherlands, saw its revenue down 4.5% to EUR 442m, with underlying cash operating income turning around a EUR 1m loss into a EUR 22m positive.
Addressed mail volumes were down 11.1% in the quarter, but this was better than the 13.5% decline seen this time last year.
The company also achieved a EUR 25m cost savings as it transferred the operations of 11 depots to its new network, optimising the operations at 28 locations. The company said it was on track to save EUR 115m to EUR 135m in 2014 as a whole.
A postal price increase will be implemented at the start of 2015, taking the price of the basic stamp from EUR 0.64 to EUR 0.69.
The PostNL Parcels division saw its revenue increase 6.3% to EUR 204m, driven by e-commerce growth that saw parcel volumes up 8.1% year-on-year. But higher subcontractor costs and the expansion of service offerings meant underlying cash operating income was down 5% to EUR 19m.
PostNL’s expansion has included evening deliveries on Tuesdays and Thursdays and the start of a pilot providing Sunday deliveries. The company has also expanded its fresh food delivery pilot.
The company is planning on deploying nine new parcel locker terminals in the fourth quarter of the year to provide added delivery convenience for online shoppers.
PostNL’s international division saw its revenue up 7.7% year-on-year in the third quarter, to eUR 420m, but underlying cash operating income dropped from EUR 6m in last year’s third quarter to just EUR 1m.
The company’s business in the UK, Whistl (recently rebranded from TNT Post UK) has seen revenue growth thanks to higher prices and an expanded product mix. Whistl, a joint-venture with equity firm LDC, brought PostNL a EUR 200m revenue in the third quarter.
There was also growth in the Italian business, Nexive, with volumes rising.
PostNL said its German business, PostCon, has seen results continue to struggle against “fierce” competition, but cost savings have been achieved to improve profitability.
