Posti Group financials: the challenging operating environment impacted profitability

Posti Group financials: the challenging operating environment impacted profitability

Posti Group has released its financial figures for  1-3/2022: net sales grew however “parcel volumes did not grow as consumers increased consumption of services instead of goods, and the war in Ukraine reduced consumers’ confidence in economy”.

Unless otherwise stated, the figures in brackets refer to the corresponding period in the previous year.

January–March

Financial highlights

  • Net sales grew by 1.8% to EUR 391.1 (384.3) million.
  • Adjusted EBITDA decreased to EUR 36.5 (44.6) million, or 9.3% (11.6%) of net sales.
  • EBITDA decreased to EUR 34.4 (44.6) million, or 8.8% (11.6%) of net sales.
  • Adjusted operating result decreased to EUR 6.6 (14.8) million, representing 1.7% (3.9%) of net sales.
  • Operating result decreased to EUR 4.4 (14.9) million, representing 1.1% (3.9%) of net sales.
  • Net debt to adjusted EBITDA was 1.4x (1.2x).

Operational highlights

  • The war in Ukraine has no direct effect on Posti’s financial position. Posti has no operations in Russia, Belarus, or Ukraine. Russia’s invasion of Ukraine affects Posti through market situation and business environment.
  • The difficult operating environment affected Posti Group in the first quarter of 2022. The war in Ukraine has increased energy prices and accelerated inflation further. The war impacts consumers’ behavior resulting in lower consumption of goods which reduced parcel volume growth. Due to the COVID-19 pandemic, absences continued, requiring overtime hours and use of additional temporary workforce.
  • In January-March, total parcel volume in Finland and the Baltic countries remained at last year’s level.
  • The number of addressed letters continued to decline and decreased by 7% (14%) in Finland.
    • The share of mail items covered by the universal service obligation accounted for 2.5% (3.1%) of all Posti’s mail items delivered.
  • The combined external net sales of eCommerce and Delivery Services, and Fulfillment and Logistics Services represented 62.5% (59.9%) of the Group’s net sales.
  • On January 17, Posti announced that it had signed an agreement with the owners of the Swedish logistics company Veddestagruppen, under which Posti Group acquired the entire share capital of Veddestagruppen AB. The acquisition was completed on January 31. Veddestagruppen is integrated with Posti Group’s Swedish subsidiary Aditro Logistics.
  • Posti has changed its segment reporting to align with the company strategy and organizational structure and to improve visibility on performance and results. As of January 1, 2022, Posti has three reportable segments: eCommerce and Delivery Services, Fulfillment and Logistics Services and Postal Services. Comparison period 2021 has been restated accordingly.

Outlook for 2022

Posti’s outlook for 2022 remains unchanged. In 2022, Posti is expecting its net sales to remain at the previous year’s level. The Group’s adjusted EBITDA in 2022 is expected to decrease from the previous year. In 2021, Posti’s net sales from continuing operations were EUR 1,595.0 million and adjusted EBITDA was EUR 181.6 million.

The potential continuing inflation and the increase in interest rates may impact consumer demand. The changes in consumer behavior affect Posti’s business and could impact our actual results.

The Group’s business is characterized by seasonality. The net sales and operating result in the segments are not accrued evenly over the year. In consumer parcels and Postal Services, the first and fourth quarters are typically strong, while the second and third quarters are weaker. The postal service volume decline is expected to continue.

Changes in reporting

Posti has changed its segment reporting to align with the company strategy and organizational structure and to improve visibility on performance and results.

As of January 1, 2022, Posti has three reportable segments: eCommerce and Delivery Services, Fulfillment and Logistics Services, and Postal Services. Comparison period 2021 has been restated accordingly.

eCommerce and Delivery Services offers parcel, transportation, and e-commerce services to corporate and private customers in Finland, Sweden, and Baltics. eCommerce and Delivery Services also develops Posti’s digital services for an improved customer experience.

Fulfillment and Logistics Services consists of two operating segments: Transval and Aditro Logistics. Transval is the market leader in providing logistics outsourcing solutions in Finland. Aditro Logistics is one of the leading logistics companies in Sweden and the Nordics.

Postal Services offers mail delivery services as well as supporting digital and multichannel solutions.

Turkka Kuusisto, President and CEO commented: “Our growth continued in the first quarter of 2022. Net sales grew by 1.8% to EUR 391.1 (384.3) million driven by the growth of eCommerce and Delivery Services, and Fulfillment and Logistics Services. The overall volumes of Logistics Services were high, and the acquisition of Veddestagruppen increased our sales in Sweden. However, the parcel volumes did not grow as consumers increased consumption of services instead of goods, and the war in Ukraine reduced consumers’ confidence in economy. Furthermore, the decline of Postal Service’s net sales continued.

Our adjusted EBITDA decreased to EUR 36.5 (44.6) million. The declining net sales of Postal Services combined with the increased costs affected the Group’s profitability. Growing energy and fuel prices, inflation, and absences due to the COVID-19 virus that required overtime hours and temporary workforce increased costs. In contrary, eCommerce and Delivery Services, and Fulfillment and Logistics Services improved their profitability. The improvement was due to promptly implemented profitability measures that brought results already at the end of the quarter.

In February, the war in Ukraine changed the lives of millions and our operating environment overnight. The situation has shocked us all and Posti has wanted to do its part to support and help Ukrainians. We assist various organizations and other parties in the transportation of humanitarian aid within Finland and to Ukrainians. We also donated EUR 50,000 to Unicef Finland and the Finnish Red Cross. Furthermore, as of April 11, we suspended all letter and parcel traffic between Finland and Russia as well as between Finland and Belarus until further notice.

Even though our operating environment is changing, we continue to work towards our long-term goals. We continue to develop the company in line with our strategy. For example, our warehouse capacity is expanding through Transval’s new warehouse in Sipoo, which will be opened this month. Also, the expansion of our green fleet continues, as we deploy over 200 new green vehicles this year.

Sustainability is at the heart of our strategy, and I am very pleased that consumers chose Posti as Finland’s most sustainable parcel and logistics brand in the 2022 Sustainable Brand Index™ survey. Our sustainability report 2021 was published in March, and we were again able to show very strong progress. Our emissions declined by 10 percent and the Group’s accident frequency was 23 percent, improving by 32 percent from the previous year.

I would like to thank all Posti employees for their hard work that has made the continuation of smooth services to our customers possible. While the current situation will continue to challenge us and require flexibility and extra effort from us all, our outlook for the year 2022 remains unchanged. Our direction is clear, and we continue to develop our services in line with our strategic focus area of delivery and fulfillment.”

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