Profits up at Russian Post in 2011, but questions over future

Russian Post said yesterday that preliminary financial results for 2011 show a 12% growth in its revenues compared to 2010, with operating income up 14% to 120bn rubles ($4.04bn USD). The company said net profit was expected to range between 700m to 750m rubles ($23.6m to $25.4m USD), also up on the previous year.

For the first time in the past few years, Russian Post was unable to achieve growth in its letter mail, it said, with the backdrop of a global downturn in mail volumes. However, growth in the company’s competitive services was expected to be around 22%, mainly thanks to surging parcel volumes, which have risen 10% from 2010 to 2011, from 47.8m items to 52.3m items.

Express mail shipments also saw growth in volumes, from 3.9m items in 2010 to 4.9m items in 2011, thanks to the development of e-commerce and the regional development of Russian Post’s online express delivery services.

Russian Post said around 45% of its operating income came from postal services, with financial services accounting for about 38% of its operating income and other goods and services accounting for about 17% of its income.

The preliminary data showed that revenue growth in Russian Post’s financial services division was at 16% compared to 2010, on the backs of growth in pension and benefits services and also on higher revenues from utility bill payments and things like school fees and traffic fine payments.

Later this year, Russian Post aims to build on this growth by moving fully into accepting payments online for telecommunications companies.

Last year’s profit growth came despite an increase in labour costs in 2011, which Russian Post said demonstrated the success of its modernisation process and development of advanced services. With national insurance costs increasing from 26% to 34%, Russian Post also saw average wages increasing 15% per employee in 2011, but labour productivity grew 21%.

Investment

During 2011 Russian Post invested around 8bn rubles ($270m USD) into its organisation, with nearly two thirds of this part of its efforts to modernise its postal services and logistics network.

The company said it would be continuing to increase its investment in its systems and technology base in order to continue developing its most profitable activities. This year will see the start of a large-scale project to deploy a network of multi-service centres that will be able to provide a range of state and municipal public services, it said.

The potential for extensive development of the company remains “almost exhausted”, however, unless the federal government agrees to provide support or privatise the company, said Russian Post.

“The state must decide whether Russian Post should be purely a state-owned company, in which case it should be financed from a modernisation budget, or whether it should be a commercial company. Then it must by law be allowed to raise the required money for its own development, while maintaining the required level of quality and accessibility for government-guaranteed services,” the company said.

Fine

Separately, Russian Post has been fined $1,000 by the Moscow Commercial Court this week for delays in some of its mail deliveries. The postal service blamed an air carrier for hold-ups during November 2011.

“The mail was provided to the air carrier in timely manner, but it failed to forward it on time,” the Post claimed.