Subsidiary plans revealed as Itella publishes Q1 results

Itella, the Finnish postal operator, has announced that it will spin off its postal operations into a subsidiary on 1 January 2011. The announcement came as the operator released its Q1 results.

Once in operation, Itella Mail Communication will be organised in the same way as other business operations, the company said. In March, the working group appointed by the Finnish Ministry of Transport and Communication published its report on the new Postal Services Act which is scheduled to take effect in the beginning of 2011.

In terms of results, Itella Group’s net sales in Q1 totalled EUR 453.9m (EUR 477.6m in January-March 2009). International operations accounted for 31%.

Itella Information recorded largely unchanged net sales while Itella Logistics and Itella Mail Communication saw their net sales decline.

Operating profit was EUR 18.3m (EUR 19.9m), representing 4.0% (4.2%) of net sales.

Profitability weakened in Itella Mail Communication where the long-term declining trend of letter deliveries continued. Profitability improved in Itella Information and Itella Logistics.

Personnel costs decreased by EUR 13m during the reporting period. Net cash flow from operating activities strengthened.

Jukka Alho, president and CEO: “The overall review of the first quarter did not suggest any clear changes in the economic conditions. It is only recently that slight positive movements have been observed. However, there is no certainty of a permanent upturn.

“As far as the new Postal Services Act is concerned, we expect it to provide more clarity. Clear and unambiguous guidelines are required for issues such as the definition of universal services, the financing of postal services in sparsely populated areas, and the allocation of costs incurred by the shared delivery network on regulated products and other products, such as newspapers and magazines. According to the report issued by the Ministry of Transport and Communication, the new law provides an opportunity for funding through public subsidies, but the threshold to its introduction is, in our opinion, quite high. Continuous operational efficiency improvement will continue to be necessity for Itella in the future.

“All operations associated with postal services in Finland will be transferred from the parent company to a new subsidiary, Itella Posti Oy, at the turn of the year. The new legal structure will simplify management and increase the financial transparency of operations. After the change, Itella Mail Communication will have the same company structure as Itella Logistics and Itella Information, which also operate through subsidiaries.”