PostNord suffers "dramatic" drop in letter volumes in third quarter

Scandinavian postal operator PostNord has said its results for the third quarter of the year underline the need for “profound” changes in the organisation to respond to declining mail volumes. The Swedish company formed from the merger of Posten AB and Post Danmark has seen its net sales decreasing 4% year-on-year in the three months up to September 2011, excluding currency and restructuring costs, to SEK 9,195m.

Net profit for the quarter was down 21% to SEK 286m as margins narrowed 1.4 percentage points to 3.2%.

In the year to date, the company headquartered in Solna, in the Stockholm area, has seen its sales down 3% to SEK 28.9bn, with net profit down 19% to SEK 784m.

Commenting on the figures, CEO Lars Idermark noted that his company has begun a SEK 1bn cost-cutting campaign this quarter to reduce administrative and indirect costs by 2013 by better co-ordination within the Group.

But, with a “dramatic” drop in letter volumes during the quarter, which was also affected by continuing weak economic conditions in Denmark, Idermark said: “The combination of a highly uncertain global economic trend and dramatic mail volume decreases presents a challenge for our business and imposes requirements for further adjustments to demand.”

Quality

Idermark said growing e-commerce volumes in the Nordic area was compensating to some extent for the reduced letter volumes, and he said quality levels for PostNord services “remain high”, particularly on the international side.

Among the PostNord divisions, Danish mail revenues were down 9% to SEK 2,177m in the quarter, thanks to an 11% drop in letter volumes and declines in periodicals and unaddressed mail due to increased market competition.

Swedish mail revenues were down 4% to 3,434m for the quarter, though a 5% decline in volumes was partly because last year’s volumes were affected by Swedish elections.

Idermark said: “The earnings trend for the third quarter underlines the importance of implementing profound changes within the operations, so that we create the conditions necessary to counter changes in our markets.”

Changes to group management have already been made by PostNord, aiming to improve “profit focus” with the establishment of a slimmed down five-member executive team. The latest change has seen Mats Lönnqvist appointed as executive vice president and CFO.