Swiss Post delivers another proud profit

The Swiss Post Office said on Friday that it made a profit of SFr811 million ($616 million) in 2005.

The state-owned company, which is affectionately called the "yellow giant", also reported that it was ready for the partial liberalisation of its letter delivery service from next month.

"Swiss Post has again worked well during 2005," said Swiss Post head Ulrich Gygi. "We made a profit for the eighth time in a row.

"The SFr811-million figure is only just under the record result of SFr830 million from 2004."

Swiss Post said that there had been good results across all sectors. Turnover increased by two per cent to SFr7.499 billion.

However, the number of letters sent within Switzerland fell by 1.3 per cent and those abroad by 5.4 per cent.

Solid
Swiss Post said that it had built up solid foundations to be able to deal with an increasingly open market.

The company, which currently holds a monopoly on all letters delivered in the country, will face competition for the delivery of letters over 100 grams from April 1 this year.

The Swiss cabinet approved the move last year as part of steps towards privatising the company and opening the postal market to other licensed competitors.

Swiss Post said that the move would reduce its income, but that its remaining monopoly would help to counter the effects of the change.

It added that opening up the market further could put its universal service in jeopardy and called on politicians to take this into consideration.

Reactions
Reacting to Friday's announcement, Transfair, the public service union, said that despite the good results, Swiss Post had cut 7.4 per cent of jobs in the same period.

It called on the company not to slash any more positions and not to let working conditions deteriorate.

The union Communication said the figures showed that public service companies could make a profit and suggested that part of it could be used to shore up the ailing national pension fund, which would help out the government.

The union added that funds could also be used to counter the negative effects of Swiss Post's ongoing restructuring.

swissinfo with agencies

Swiss Post press release – 24/3/06
Swiss Post prepared for reduction in its postal monopoly
24.03.2006

Swiss Post once again achieved good results for the 2005 financial year. With Group profit of 811 million francs, it very nearly repeated the success of 2004 (830 million francs). Every segment once again made a profit, proving that Swiss Post operates in an efficient and customer-oriented way. The profit will enable Swiss Post to finance its investments from its own resources, strengthen its equity base and make a contribution towards improving the situation of the pension fund. Swiss Post has gone a long way towards ensuring that it can stand up to even fiercer competition once its monopoly protection is lowered to 100 grams on 1 April. In future, Swiss Post aims to increase the value of the company, maintain a high-quality basic service and remain a socially responsible employer. To do this, it will need not only good results but also operating conditions that allow it sufficient room for manoeuvre.

With Group profit of 811 million francs, Swiss Post ended the year 2005 in the black for the eighth year running. It narrowly missed matching the outstanding results of the previous year. Operating profit rose slightly by around 2 percent to 7,499 million francs compared with 7,348 million francs in 2004, while operating expenses increased by about 3 percent from 6,519 million francs to 6,694 million francs. The growth in sales was driven primarily by Financial Services, Passenger Transport and International, whereas sales in the Mail, Logistics and Post Office Network segments were down on the previous year. The trend towards lower traffic volumes in individual logistics services and products continued in 2005, causing the volume of addressed letters in Switzerland to fall by 1.3 percent and letters sent abroad by 5.4 percent. On the other hand, Financial Services (PostFinance) posted a 7.1% increase in customer deposits, as a result of which Swiss Post’s balance sheet total rose by 3,251 million francs to 50,130 million francs. In connection with the modernization of letter processing (REMA), investment was significantly higher in the reporting year, amounting to 347 million francs compared with 230 million francs in 2004.

Equity base further improved
Another year’s excellent results prove that Swiss Post is working in an entrepreneurial manner, providing its services more efficiently and meeting a wide range of customer requirements. These results will enable Swiss Post, as required by the Federal Council, to finance its investment programme from its own resources, continue to guarantee a high-quality basic service and remain a socially responsible employer. The retention of earnings, as agreed with the Federal Council, has made it possible to further improve the equity base, which is still unsatisfactory. Swiss Post has requested that the Federal Council make part of the profit (350 million francs) available to the pension fund as an employer reserve contribution. In so doing, Swiss Post hopes to make a gesture to its workforce, without whose commitment the positive results would not have been possible. As a token of its gratitude for their good work, Swiss Post is giving each employee a Reka card with a credit of 200 francs (or 100 francs for trainees and auxiliary staff and for employees who work less than 10 percent of a full-time equivalent). The Swiss travel fund Reka is set to introduce the Reka card jointly with PostFinance in mid-2006.

Positive results in every business area
For the second time in succession, all business areas made a positive contribution to Group profit. In the Mail segment, the operating result fell by 60 million francs to 218 million francs, down from 278 million francs in the previous year. This reflects the significantly higher contribution made towards post office network costs not covered by compensation payments (infrastructure contribution). Before factoring in the infrastructure contribution, profit for the year actually rose once again from 652 to 660 million francs. The new letter centres currently under construction will further improve the efficiency of letter processing from 2009. Despite a slight reduction in parcel volume (of about 1%) the profit from Logistics operations rose by 13 million francs to 87 million francs, up from 74 million francs. The Financial Services business area (PostFinance) improved its operating result by 34 million to 312 million francs, up from 278 million francs. In Passenger Transport (PostBus), the operating result fell by 8 million to 29 million francs, down from 37 million francs in 2004. This reflects an increase in expenditure, due partly to higher fuel prices. The operating result for Swiss Post International was slightly up on the previous year, rising from 33 million francs to 35 million francs. In the Post Office Network, an operating result of 27 million francs was achieved thanks to the sale of non-postal brand-name articles – 8 million higher than in the previous year (19 million francs). On the other hand, for the first time for some years, infrastructure costs not covered by compensation payments rose from 374 to 442 million francs. This was due primarily to the continuing sharp decline in postal transactions processed over-the-counter. Between 2000 and 2005, customers posted 37 percent fewer letters and 40 percent fewer parcels and made 10 percent fewer payments. This underlines the need for further modifications to the post office network to reflect changes in customer behaviour and for it to be operated more cost-effectively. This will still involve some 2,500 post offices, agencies and mobile phone post offices. Decisions in this area are expected to be made at the end of 2006.

Further deregulation will require adjustment to operating conditions
Swiss Post intends to continue providing a high-quality basic service in the future. To do this, it will need to maintain its good results, not least in view of the forthcoming reduction to 100 grams in the monopoly limit on letters on 1 April 2006, which will have the effect of weakening an important source of financing for the basic service. The residual monopoly in the letters market remains, in Swiss Post’s opinion, the most efficient way of funding the basic service. Further deregulation steps will call into question the present quality of supply and should be delayed until the political authorities have clarified the future scope of the basic service and how it will be funded. In this connection Swiss Post has identified four further points which need to be settled prior to further deregulation: anchoring the regulatory authority and its functions at legal level, releasing Swiss Post from the Federal Staff Act, extending the field of activity of PostFinance and, for all these changes, a review of the postal legislation.

Key figures for the Group 2005 2004
(adjusted) (1)
Operating income CHF million 7'499 7'348
Operating result (2) CHF million 805 829
As a % of operating income (return on sales) % 10,7 11,3
Group profit for the year CHF million 811 830
Total assets CHF million 50'130 46'879
Equity CHF million 922 269
Investment (3) CHF million 347 230
Swiss Post Group employees (excluding trainees) Full-time equivalents (4) 41'073 42'284
Swiss Post Employees (excluding trainees) Full-time equivalents (4) 37'033 38'972
Group trainees Full-time equivalents (4) 1'465 1'556

Selected key figures from the various business areas

Mail 2005 2004
Operating income CHF million 3'178 3'236
Operating result (2, 5) CHF million 218 278
Employees Full-time equivalents (4) 15'364 15'572
Addressed letters Millions of items sent 2'822 2'858

Logistics 2005 2004
Operating income CHF million 1'368 1'393
Operating result (2) CHF million 87 74
Employees Full-time equivalents (4) 5'540 6'075
Parcels Millions of items sent 105 106

Financial Services (PostFinance) 2005 2004
Income from business operations CHF million 1'030 977
Operating result (1, 2) CHF million 312 278
Employees Full-time equivalents (4) 2'390 2'246
Inflow of new funds CHF million 2'065 3'149

Passenger Transport (PostBus) 2005 2004
Operating income CHF million 559 538
Operating result (2) CHF million 29 37
Employees Full-time equivalents (4) 1'392 1'376
Number of passengers Millions of persons 105 102

International 2005 2004
Operating income CHF million 992 939
Operating result (2) CHF million 35 33
Employees Full-time equivalents (4) 898 723
Letters sent (from Switzerland) Millions of items sent 192 203
Parcels sent (from Switzerland) Thousands of items sent 875 888

Post Office Network 2005 2004
Operating income CHF million 1'875 1'939
Operating result (2, 5) CHF million 27 19
Non-covered infrastructure costs of the post office network CHF million 442 374
Employees Full-time equivalents (4) 12'046 12'911
Post offices Number 2'531 2'585

1 Adjustments due to changes in the provisions of IAS 39 (revised 2004)
2 Earnings before interest and tax (EBIT)
3 Investment in tangible fixed assets, participations & intangible assets
4 Average figures converted to full-time equivalents
5 The results of the Mail and Post Office Network business areas are shown after infrastructure contributions (compensation for non-covered infrastructure costs of the post office network as a result of reserved services of the Mail area). The following results are prior to infrastructure contribution: Mail: 660 million francs, Post Office Network: -415 million francs.