The week that was: 29 April 2011

UPS in confident form, An Post plans job cuts to cope with losses, new ways to liberalise the Canadian market, and Russian Post seeks expansion and modernisation… This week, while a certain wedding offered distraction – and some retail opportunities for stamp sales – the mail industry has been facing up to the need for change in coping with declining volumes, while those in the parcels segment seek to build on good growth rates.

Confidence

Within our coverage this week, we saw that higher shipping prices and fuel surcharges helped UPS to grow its global revenue 7.3% in the three months up to March 31, 2011, to $12bn for the quarter. Operating profit increased to $1.43bn and margins expanded from 8.9% to 11.3%.

During the quarter, the UPS network saw a slight overall growth in volumes, from 14.9m pieces per day to 15m as UPS delivered 957m packages in the quarter, although US volumes dipped. Confident about its performance in the current economic conditions, the company raised its share guidance for the year, predicting diluted earnings of $4.15-$4.40 per share.

Kurt Kuehn, UPS’s chief financial officer, explained: “It’s more an affirmation that we feel the company is operating well than that the global economy has got a lot of up-side. We’re not gloomy on where the world’s heading, but we’re also cautious but we’re confident we can adapt to conditions as they occur.”

“Business reality”

In Ireland, the results of An Post were less rosy, with the company announcing plans to cut its workforce by nearly 2,000 over the next five years in response to declining mail volumes.

Group losses were not so bad as in 2009, but An Post still lost EUR 24.7m in 2010, despite a 3.5% cut in its operating costs.

Chief executive Donal Connell said going forward, his company would continue efforts to improve quality of service, cost reductions and a broadening of its revenue base.

“We will continue to align the Company, its structures and resources with the changing business reality and we look to the future in this fully liberalised mails market with confidence and a strong belief in our ability to deliver on every level,” he said.

Privatisation?

On the other side of the Atlantic, Canada Post has been profitable for 16 years in a row, but this week we heard from a think tank in Montreal that major challenges for the Crown Corporation should be tackled through privatisation and liberalisation of monopoly services.

Economist Vincent Geloso from the Montreal Economic Institute told Post&Parcel that an employee share ownership programme would give workers reward from increased productivity, through share dividends.

His report looked at privatisation in Germany, the Netherlands and Austria, and suggested that private companies would be happy to provide delivery services even to isolated northern communities in Canada if postal rates could reflect their costs. Improved tax breaks would be a more efficient way of helping rural communities cope with increased postal rates than forced service price restrictions, he said.

“The solution is not a public monopoly with a uniform price, the idea would be competition with prices allowed to fluctuate to what they really reflect,” he said. “If consumers in northern territories can be compensated by more direct means that means people in the more-populated areas can benefit,” said Geloso.

Expansion

And, we also reported this week on Russian Post, where good customer demand is prompting an expansion of the post office network, particularly in Moscow and other urban areas.

Russian Post’s deputy director-general Igor Mandrykin met with federal officials this week to discuss the need for a major modernisation programme, to include investment in automated technologies and RFID systems.

And finally…

We’ll be reporting from the National Postal Forum in San Diego next week as the US Postal Service and its customers take over the sea front, but the mail and express industry gathers in Europe in just a few weeks’ time at the World Mail and Express Europe event in Brussels. Find out more here »