Economy squeezes Swiss Post’s half-year profit

In the first half of 2009, Swiss Post generated Group profit of CHF 358m – 16% lower than a year ago. The drop in profit is mainly due to higher wages and the increasing decline in letter volume due to the economic situation. The economic crisis has had a varied effect on the individual units’ contributions to the Group results. Due to the lower prices for letters which came into effect on 1 July 2009, Swiss Post expects additional pressure on profit and significantly lower annual results compared to the previous year.

Between January and June 2009, Swiss Post generated Group profit of CHF 358m. This is CHF 67m, or 16% less than in the same period of the previous year (CHF 425m). The main reasons for the decrease are a fall in earnings due to the difficult economic environment, and higher staff cost due to salary increases and increased headcount. In addition, the lower earnings from real estate sales had a noticeable effect on the results. Overall, operating income decreased by CHF 101m to CHF 4,275m (previous year: CHF 4,376m).

Various effects of the crisis

The current economic crisis affects Swiss Post’s individual units differently. The traditional logistics units in particular are experiencing the negative aspects of the current situation, whereas PostFinance and PostBus are growing.

While the addressed letter volume has been declining by an average of around 1.5% in the past few years – due to substitution –, by the end of June 2009, it was down by 4.8%. Thanks to the successful completion of the two-year commissioning phase of the new letter centres, delivery times have returned to their previous high level and savings could be achieved. The operating result of PostMail fell by only CHF 7m to CHF 127m.

At PostLogistics, the result dropped by CHF 3m to CHF 15m because of losses due to the economic situation and increased costs. The unfavourable economy also had a negative effect on the Strategic Customers & Solutions unit, which focuses on markets abroad, contributing significantly to the fall in operating result of CHF 18m to minus CHF 10m.

Thanks to new accounts and higher sales of non-postal products, the Post Offices & Sales unit was able to compensate for the ongoing decline in letters and parcels handed in at the counter, and at the same time maintain its operating income; however, its result fell by CHF 29m to minus CHF 67m due to higher staff cost.

PostFinance developed positively and increased its result by CHF 44m to CHF 198m, thanks to the continuous inflow of new money. With the operation of several new routes and due to a general rise in demand, PostBus was able to increase its operating income and also lift its result by CHF 11m to CHF 24m. Despite the recession, Swiss Post International maintained its sales volume compared to the previous year and generated a result of CHF 29m (previous year: CHF 16m ).

In the “Other” segment, the lower earnings from the sale of real estate in particular resulted in a fall in operating result by around CHF 65m to CHF 49m.

In view of the drop in earnings, which the company will experience as a result of the announced price cuts for letters since 1 July, Swiss Post expects increasing pressure on profit and significantly lower annual results compared to the previous year.