Itella to review operations seeking to cut €100m costs

Finland’s Itella Corporation has launched a major review of its business, seeking to trim EUR 100m from its operating costs over the next three years. The company said that although it believes Finns will continue to expect – and need – postal services alongside the internet and other communication channels, it will have to adapt to the changes in demand resulting from electronic communication.

In particular, Itella said lately its delivery of magazines and newspapers has nose-dived recently.

In the first half of this year, first class letter volumes dropped 13% compared to the same period in 2010, with some of that volume shifting to second class, which saw an 8% rise in volumes year-on-year.

With electronic substitution, overall addressed letter volumes dropped 1% while newspapers and magazines saw volumes fall respectively 5% and 7%.

Itella believes the extra competition now in the marketplace propelled the 9% drop in unaddressed direct marketing volumes.

“Traditional postal services have had to reliniquish their role as a means of communication for Finns, due to the breakthrough of electronic communication channels,” Itella said in a statement to its investors yesterday. “Consequently, postal operations are undergoing the greatest changes ever.”

Itella, which recorded a loss of EUR 3.4m in the six months up to June 2011, said it was impossible to tell the overall impact of its cost-cutting on its staff.

However, labour negotiations are set to be initiated next week, with initial expectations that around 430 jobs will be lost from three units that currently employ 820 – the post center in Lappeenranta, Posti shops and Itella Customer Relationships Marketing Ltd. The latter is not related to basic postal operations, Itella noted.

Earlier this month, Itella’s president and CEO Jukka Alho suggested that under Finland’s newly-liberalised postal market, it is increasingly difficult to provide nationwide postal services solely funded by postal rates.

Business mail rates are set to rise 2% from next month partly to help with rising operating cost and declining mail volumes.