Solid performance down on previous year at Swiss Post

Swiss Post has turned in a solid set of results for 2008. Group profits of 825m Swiss francs were down 84m Swiss francs on the previous year (909m). Swiss Post has turned in a solid set of results for 2008. Group profits of 825m Swiss francs were down 84m Swiss francs on the previous year (909m).
Operating income rose to 8.9bn Swiss francs. The drop in profits is mainly due to rising transport and staff costs, declining volumes, write-downs and the cut in federal subsidies for transporting newspapers. The fall in profits was mitigated by one-off revenues from real estate transactions. The result enables Swiss Post to contribute towards the necessary bolstering of its pension fund, to further top up its still insufficient equity capital and to pay the Confederation an adequate share of profit. Owing to the economic crisis, the ongoing decline in volumes and increasing competition, Swiss Post expects its 2009 results to be significantly below the level of 2008.
In the financial year 2008, Swiss Post Group generated profits of 825m Swiss francs, 9% lower than in 2007. Operating income rose by 3% to 8.9bn Swiss francs. With earnings up by 254m Swiss francs, the bulk of this increase can be attributed to PostFinance. In addition, real estate transactions (reversion of Zurich-Sihlpost letter centre and disposals) generated 133m Swiss francs more in extraordinary income than the previous year. Earnings were down at the logistics units overall, mainly as a result of declining letter volumes and the cut in federal subsidies for transporting newspapers, which was only partially offset by price adjustments. Additional costs for wages and fuel as well as write-downs of financial assets together exceeded the Group’s growth in sales, resulting in the bottom line lower operating result. The operating profit margin fell from 9.9% to 9%. Thanks to the positive result, Swiss Post was able to boost equity (before profit distribution) to 2.85bn Swiss francs. Swiss Post is aiming for an industry-standard equity base, which in 2008 would have required equity capital of 3.5bn Swiss francs.
Increasingly difficult climate
In view of the deteriorating economy, a profit of 825m Swiss francs represents a solid performance, confirming the efficiency and competitiveness of Swiss Post. The economic crisis, the ongoing decline in volumes and increasing competition will create a more difficult operating environment for Swiss Post. For the current year, Swiss Post thus expects a lower year-on-year profit. However, Swiss Post Group needs to keep generating good results in future in order to contribute to financing its pension fund (the shortfall, incl. fluctuation reserves, currently stands at approximately 3.6bn Swiss francs), further build up its equity capital, support further development and pay the Confederation an appropriate share of profit. The Board of Directors will suggest to the Swiss Federal Council that 250m Swiss francs be used to finance the pension fund and 170m Swiss francs be paid to the Confederation as a share of profit.
All product-carrying units in the black
In varying degrees, all product-carrying units contributed to the positive result. The Group unit PostMail, faced with a cut in federal subsidies for transporting newspapers of around 50m Swiss francs, only partially offset by price adjustments, as well as a further decline in B-Mail volumes, registered a fall in operating income to 2,916m Swiss francs. However, as a result of productivity increases and lower payments to the Post Offices & Sales unit following the assumption of delivery services, PostMail’s result of 249m Swiss francs was still slightly higher than in the previous year. Thanks to innovative business customer solutions and higher parcel volumes, PostLogistics was able to grow its operating income to 1,516m Swiss francs. Yet as a consequence of rising costs (namely for wages and fuel), at 39m Swiss francs the results of this Group unit were almost halved compared to the previous year.
Although the operating income of Swiss Post International fell by 111m to 1,034m Swiss francs, the unit succeeded in boosting its result by 2m to 36m Swiss francs. The drop in income is primarily due to the currently lower exchange rates. The Group unit Strategic Customers & Solutions, which likewise mainly operates outside Switzerland selling document, dialogue and e business solutions, improved its result to 9m Swiss francs. Sales increases achieved locally were eaten into by negative currency effects, but overall operating income in Swiss francs rose to 708m.
In the Group unit Post Offices & Sales, the transfer of delivery services to the PostMail unit led to a drop in earnings from internal payments. Together with a fall in income due to declining volumes of letters, parcels and payments at the counter, this resulted in a lower operating income of 1,337m Swiss francs. The operating result therefore fell to 95m Swiss francs. PostFinance again reported a substantial inflow of new money over the year (around 6bn Swiss francs) and succeeded in raising its operating income to 2,191m Swiss francs (2007: 1,937m). Due to writedowns of 179m Swiss francs made necessary by the international financial crisis, PostFinance's operating result of 229m Swiss francs was less than in the previous year (318m). Thanks to an increase in demand, PostBus grew its operating income to 604m Swiss francs. Yet greater expenditures as a result of higher wage and fuel costs caused the operating result to fall to 27m Swiss francs.