The week that was: 5 August 2011

Gloomy financial results from USPS and Poste Italiane while Deutsche Post DHL triples its profits, Australia Post agrees rural banking deal and New Zealand Post revises international services… Swarms of industry players from the northern hemisphere may be jetting off on their summer holidays this week, but that hasn’t stopped the news rolling in at Post&Parcel HQ. Let’s recap the last seven days…

The US Postal Service revealed that their financial troubles have continued apace in the third quarter of their fiscal year 2011, making a $3.1bn loss in the three months up to the end of June. Despite some growth in Standard Mail and competitive shipping services, USPS said mail volumes overall declined by 2.6% to 39.8bn pieces in the third quarter. So far in the first nine months of the year, USPS is making a $300m bigger loss than in the same period last year, losing $5.7bn in the year to date. Speaking to reporters, Postmaster General Patrick Donahoe and Chief Financial Officer Joe Corbett continued their view that there is no way USPS will be able to pay its $5.5bn obligation to the federal government this summer to cover future retiree benefits, and that cash supplies could be completely exhausted by October without action from Congress.

In better news this week, Deutsche Post DHL reported that its net profit had more than tripled during Q2. Between April and June, the German firm recorded a figure of EUR 278m, almost EUR 200m more than Q2 2010’s figure of EUR 81m, citing operational improvements, strong performance, and the continuing economic recovery as key reasons behind the growth. As a result, the Board of Management believes that the company’s operating earnings will finish the year at the upper end of its projected EBIT guideline of EUR 2.2 to EUR 2.4bn. Frank Appel, CEO of Deutsche Post DHL, said: “We are continuing to grow and have kept the positive momentum of the last quarters. The second quarter once more proves the quality and sustainable nature of the efficiency gains we have achieved over recent years.” Group revenues rose by 0.3% to EUR 12.8bn.

However, it wasn’t as rosy in Italy, as a difficult economy and increased competition hit profits at Poste Italiane in the first half of 2011. Italy’s state-owned postal operator saw a 6.8% drop in revenues in the six months to June 2011, to EUR 11.5bn, while profits dipped 5.6% to EUR 488m for the period. Along with the continuing “natural decline” of postal volumes, results were affected by a marked reduction in earnings at Poste Vita, the insurance arm of Poste Italiane, along with a cut in government subsidies. Among its divisions, Poste Italiane saw an 8.8% drop in sales for its postal services, to EUR 2.4bn, an 8.2% drop in insurance revenues to EUR 2.4bn, and a 1.9% dip in its EUR 6.4bn financial services revenues. Mail volumes fell 10.3% in the first half of 2011 compared to the same period in 2010, with Italians sending 308m fewer items during the six months. This included an 8.5% drop in direct marketing volumes, although a quarter of this was due to the reduction in election-related mailings.

Heading down to Oceania, Australia Post and the Rural Bank have proposed to join forces to offer banking services via regional and rural post offices across the country. The two companies have entered into a non-binding heads of agreement for the distribution of banking services. The parties are working towards agreeing a binding distribution agreement as soon as it is practicable. It is intended that customers will be able to open Rural Bank deposit accounts at 1,400 post offices across the country. In addition, 130 post offices in areas with a strong agribusiness presence will offer Rural Bank loans through dedicated Rural Bank Business Development Managers. The agreement will provide greater banking access and choice for regional Australia by bringing together Rural Bank’s innovative and specialist banking services with Australia Post’s vast retail network, the Post said.

Meanwhile, New Zealand Post has pulled the plug on its International Economy letter service, stating that low volumes have made the mailing method economically unviable. The operator will cancel the service – in which mail can spend up to three weeks in transit – on October 1. Customers will still be able to send parcels by the International Economy service; however letter senders will have to use the more expensive International Air Mail service, the price of which will remain unchanged. On the same date, New Zealand Post will expand the number of destinations for its International Economy Courier service. It already reaches 25 countries, and from October that will rise to 32 with the addition of Thailand, the Philippines, Vietnam, Croatia, Greece, Hungary and Portugal.