NZ Post CEO: our financial performance was pleasing, but we have much higher expectations

NZ Post has recorded a net profit after tax of $102 million for the year ended 30 June 2022, a $70 million increase over the prior year.

NZ Post Chief Executive Officer David Walsh says this profit result has been driven by an increase in earnings from NZ Post’s share in Kiwi Group Holdings and growth in NZ Post’s parcel segment.

NZ Post has since agreed to sell its 53% shareholding in Kiwi Group Holdings Limited (the parent company of Kiwibank) to the Crown. We expect this transaction to settle in the first half of this new financial year.

“Reflecting on the last year, given all the factors we had to navigate, our financial performance was pleasing, but we have much higher expectations on long term performance” says Walsh.

“The next couple of years will be extra challenging as we face into rising costs and a tight labour market. In the shorter term we’ve prioritised our people. We will also have costs impacting our earnings until both our network investments and a mail solution begin to deliver the expected benefits.”

“Revenue from our parcel segment continues to perform strongly, in line with the growth in online shopping seen during the 2021/2022 financial year. This revenue growth was driven by volume increases, including lockdown related volume surges and large peaks of online spending during holiday and event shopping days.”

“We continued our strong control of costs, actively reducing our cost structures in support areas. At the same time, we saw our direct costs increase from processing and delivering this un-forecasted parcel volume, which included bringing on more people, sites and transport combined with the difficulty and inefficiency of operating in a COVID environment. Despite this, we did not begin to pass on COVID related costs to our customers until the second half of the year, supporting them in delivering for their customers while suppressing our earnings. We also made a conscious decision about paying our people fairly, understanding the margin impact that this would have.”

“We note that volume growth in the parcel segment has since returned to more normal levels post New Zealand’s lockdowns of 2021” says Walsh.

NZ Post Full Year Financial Results 2021/2022 and other highlights include:

• Net profit after tax of $102m, up $70m on the previous year
• Parcel revenue has grown to $658m, up $137m on the previous year (reflecting volume growth – 93m parcels delivered, up by 8m on the previous year, pricing adjustments and the acquisition of Fliway)
• NZ Post signed a financing agreement with New Zealand Green Investment Finance (NZGIF) to accelerate the transition of the NZ Post fleet and its delivery contractors’ vehicles, to low emission vehicles
• In the 2022 financial year there were 238m letters delivered, a decrease of 36m (or 13%) on the previous year contributing to an overall $45m decline in revenue in the Mail segment
• In FY22 we acquired Fliway Group Limited to broaden our product and service offering, extending into larger items and broadening our logistics and supply chain capability

“During the year, the investment into our parcel processing infrastructure has continued at pace. The Christchurch Processing Centre officially opened in August 2022, and the new Wellington Super Depot is scheduled to be formally opened in October 2022. A new processing centre in Wiri, Auckland, is scheduled to commence operations in 2023. This investment will enhance customer experience through delivery efficiency and greater digital parcel transparency,” says Walsh.

“This financial year NZ Post acquired Fliway Group Limited to broaden our service offering to customers. Fliway provides transport, warehousing and international freight services. This acquisition directly responds to our customers’ needs to process and deliver a wider range of products, particularly oversize items. The Fliway purchase, along with the acquisition in July 2021 of 50% of Supply Chain Solutions (NZ) (2021) Limited, continues to support our strategy to enable e-commerce growth and deliver what New Zealander’s care about,” says Walsh.

“Letter volumes continue to decline as New Zealanders choose to communicate more online. In the 2022 financial year there were 238m letters delivered, a decrease of 36m (or 13%) on the previous year contributing to an overall $45m decline in revenue in the Mail segment. We are continuing to progress work on a sustainable long-term solution for mail services, which will include pricing, cost and operating model changes,” says Walsh.

“Our people are integral to our success and this year has been particularly challenging for many, with the continuing social and economic impacts of COVID-19. To address some of these challenges, particularly the increasing cost of living and inflationary pressures, we have worked constructively with our Unions to deliver a significant pay increase for our frontline workers. We are confident that this will make a difference to many of our people and will address the wider challenges around attraction and retention of talent into NZ Post,” says Walsh.

“We continue to be conscious of the local and global economic uncertainties and how this might impact our customers and our business. We are proud to continue to rise to the challenge of being the best delivery business for New Zealand, and the critical role NZ Post has in the recovery and growth of the New Zealand economy,” says Walsh.