Norway Post halt Bring Citymail operations in Denmark

Norway Post is terminating its Bring Citymail Danmark subsidiary – which has operated in Copenhagen since 2007. Bring Citymail Danmark failed to be profitable during three years of operations, but the business will still operate in Sweden.

The financial crisis and unequal competition conditions have been cited as the key reasons behind the decision.

Negotiations are underway to terminate the mail distribution operations and dismiss 440 employees.

A Bring Citymail statement said: “[The company] has focused aggressively on mail distribution in the Copenhagen area as a challenger to Post Danmark. Its start-up was affected by the financial crisis and economic slump and Bring Citymail Danmark has also had a value added tax (VAT) disadvantage of 25% compared to its main competitor, Post Danmark, which is exempt from paying VAT.”

“We have not succeeded in making the mail distribution operations in Denmark profitable, and we apologise for this to Danish customers and companies that wanted an alternative,” said Dag Mejdell, CEO of Norway Post.

The plans entail Bring Citymail Danmark carrying out all its obligations and contracts with customers. It is now starting the process of providing information to and having discussions with the employee representatives.

Including the costs of establishing the company and the negative results achieved during its first years of operation, Bring Citymail Danmark has made a total loss of around NOK 500m ($88m).

“Our investment in Bring Citymail Danmark was estimated to be NOK 300m. Now we have invested an additional NOK 200m but can still see no prospect of profitability. We have to stop the losses and this is why we are terminating the mail distribution operations as from January 2010,” said Mejdell.

Plans to discontinue Bring Citymail’s operations in Denmark do not affect the operations in Sweden.

“Bring Citymail in Sweden will continue and make greater efforts,” said Mejdell.

In order to cope with the decline in economic activity, Bring Citymail in Sweden has implemented a cost-cutting programme. The efficiency programme is continuing and the company is also increasing its sales efforts.

“We expect the Swedish operations to be profitable over time, even though the financial crisis and geographic expansion have led to the company making losses over the past few years,” said Mejdell.