Posti results: increased net sales, decreased Group result

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

April–June

Financial highlights

• Net sales grew by 5.0% to EUR 411.3 (391.6) million.
• Adjusted EBITDA decreased to EUR 39.5 (44.2) million, or 9.6% (11.3%) of net sales.
• EBITDA decreased to EUR 38.9 (43.8) million, or 9.5% (11.2%) of net sales.
• Adjusted operating result decreased to EUR 8.5 (13.7) million, representing 2.1% (3.5%) of net sales.
• Operating result decreased to EUR 7.9 (13.3) million, representing 1.9% (3.4%) of net sales.

January–June

Financial highlights

• Net sales grew by 3.4% to EUR 802.4 (775.9) million.
• Adjusted EBITDA decreased to EUR 76.0 (88.7) million, or 9.5% (11.4%) of net sales.
• EBITDA decreased to EUR 73.3 (88.4) million, or 9.1% (11.4%) of net sales.
• Adjusted operating result decreased to EUR 15.0 (28.5) million, representing 1.9% (3.7%) of net sales.
• Operating result decreased to EUR 12.3 (28.2) million, representing 1.5% (3.6%) of net sales.
• Net debt to adjusted EBITDA was 1.4x (1.2x).

Operational highlights

• Slower economic growth, accelerated inflation and operational challenges impacted the profitability of Postal Services negatively, which affected the overall profitability of Posti Group.
• Successful acquisitions of Veddestagruppen and Mediatalo Keskisuomalainen Oyj’s early-morning delivery operations increased Group’s net sales.
• Fulfillment and Logistics Services net sales increased by 15.4% and were mainly driven by the acquisition of Veddestagruppen.
• Total parcel volume in Finland and the Baltic countries decreased by 3% (increased 16%) due to a shift in consumer behavior and slower economic growth.
• The combined external net sales of eCommerce and Delivery Services, and Fulfillment and Logistics Services represented 63.2% (61.6%) of the Group’s net sales.
• Addressed letters volume continued to decline and decreased by 6% (9%).
  • The share of mail items covered by the universal service obligation accounted for 2.3% (2.7%) of all Posti’s mail items delivered.

Outlook for 2022

Posti is adjusting its outlook for 2022. The net sales is expected to increase (previously, it was communicated that net sales is to remain on same level). The new outlook states:

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

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

On January 1, 2022, Posti changed its segment reporting to align with the company strategy, organizational structure, and to improve visibility on performance and results. Posti now 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 said: ” Our growth continued in the first half of 2022 due to a successful execution of our strategy as well as actions taken to support growth in the volatile market environment. The Group’s net sales grew by 3.4% to 802.4 (775.9) million and was driven by increased net sales of eCommerce and Delivery Services and Fulfillment and Logistics Services. In the second quarter Group net sales grew by 5.0% to EUR 411.3 (391.6) million despite declined volumes. Growth resulted mainly from successful acquisitions, price increases and higher volumes in warehousing storage in Fulfillment and Logistics Services.

Increasing inflation rate continues to be a concern for our operating environment. As expected, our adjusted EBITDA decreased to EUR 76.0 (88.7) million in the first half, and to EUR 39.5 (44.2) million in the second quarter. Declined profitability in Postal Services resulted in various challenges in Postal Services delivery processes, which impacted our overall profitability negatively.

During the first half, consumer behavior changed which resulted in declining parcel volumes in eCommerce and Delivery Services. Despite this, eCommerce and Delivery Services profitability increased. This was mainly due to the increase in transportation services’ net sales. Fulfillment and Logistics Services net sales and profitability increased, which was driven by the acquisition of Veddestagruppen. Also, new Transval’s warehouse in Sipoo opened in April, which expanded our warehouse capacity. Increased operational costs impacted Postal Services profitability negatively, also addressed mail volumes continued to decrease. Looking at the second half of 2022, we expect volatility in the market environment and cost pressure to continue.

In May Posti’s science-based net zero target were approved by the Science Based Targets initiative (SBTi), a global body enabling businesses to set ambitious emissions reduction targets in line with the latest climate science. We are proud to have achieved this as the first Finnish company and as the first company in our industry globally. In addition to the emissions caused by its own operations, Posti is committed to reduce the emissions of the value chain to net zero by 2040.

As postal turmoil continues in the coming years and the mail volumes are constantly decreasing, it is critical to renew the current Postal Act to more flexible direction and to introduce a fixed-term State aid for newspaper delivery in rural areas. We support most of the government proposal, that was submitted to the Parliament in April 2022. However, the new public service obligation, targeted separately at Posti outside of competitive tendering, to deliver newspapers at a regulated price would be very problematic, especially if the compensation paid does not cover the costs and a reasonable profit. We urge that the obligation must cover the costs and a reasonable profit as provided in the universal service obligation.

I am pleased that our growth strategy has been proven to be on the right track. As we have now entered the second half of 2022, we have started preparations for the high season at the end of the year to ensure that we deliver successful season period for our customers. We will also continue to focus on further improving the customer experience, which is at the centre of everything we do.”