Ecommerce helping Austrian Post in challenging economy

Growth of ecommerce shipping has helped Austrian Post to grow its revenues by 3.1% and its earnings by 13.5% in the first half of the year. The company said despite a “restrained” economic environment at present, its mail and branch division grew revenues by 2.1%, while its parcels division grew revenues by 4.9% compared to the first half in 2011.

Much of the growth has come from the continuing increase in demand for online shopping, with the Post noting that increasingly, small products are being mailed in packages classified as letter mail, rather than parcels.

Overall, revenues were up to EUR 1.17bn for the six months to the end of June, with earnings before interest and tax up to EUR 92.2m, in line with previous expectations.

Net profit after tax amounted to EUR 70.8m.

The trend towards electronic substitution of traditional letters is continuing, while among Austrian Post’s direct mail customers, the company said the challenging economy has dampened advertising spending, but customers appear to be shifting spending from standard direct mail to more high-quality lettermail products.

Austrian Post has been reinforcing its presence in the domestic parcels market this year, while on the international stage, the company has pulled back from the Benelux region, expanding mail operations eastwards and south-east instead, within Eastern Europe and the Balkans.

The half saw the company’s international trans-o-flex unit selling off its operations in Belgium and the Netherlands to PostNL Group, while buying mail businesses in Poland and Bulgaria. At home, Austrian Post has been building its parcels business with the acquisition of fulfillment business Systemlogistik Distribution back in April.

Earnings were also helped by cost-cutting measures, including a new pay-for-performance system for delivery staff, although higher transport costs from the growth in parcels and commissions for third-party post office operators ate into the improvement.

Operating expenses for materials and services rose during the half by 5% to EUR 379.5m, while labour costs for the 22,981 employees increased only by 1.7% year-on-year to EUR 549.5m.

Looking ahead, the company said revenue should remain stable, with addressed mail continuing to be affected by e-substitution and the economy, with increasing e-commerce helping parcels.

Austrian Post CEO Georg Pölzl said: “It can be assumed that the entire 2012 financial year will be impacted by a restrained economic environment. Nevertheless, we should succeed in achieving a stable or slightly rising revenue development on a comparable basis.”

Mail and Branch division

Austrian Post’s mail division, which includes its retail network, saw its revenues grow 2.1% to EUR 741.6m in the first half of 2012, with earnings before tax up EUR 12.4m (10%) to EUR 135m.

Taking out the branch network, which merged with the mail division at the start of 2012, Austrian Post’s letter business actually grew its revenues by 7% in this half, compared to the same period last year, to EUR 390.3m.

Although the e-subsititution trend continues, growth was helped by the fact that Internet purchases in Austria are increasingly being sent as letter mail items, rather than parcels.

Direct mail revenues fell to EUR 213.6m in the first half, with volume shifts to the letter mail business, but also a reduction in direct mail orders from Austrian businesses responding to dampening consumer confidence in the economy.

Austrian Post’s post office branches saw their revenue down to EUR 66.1m, with half of the decrease stemming from the reclassification of certain logistics operations into the parcel and logistics division, although there was also a decline in retail products and financial services sales.

The Post now has 1,889 postal outlets, with 1,283 of these run by third-party partners.

Parcel and logistics

Austrian Post’s parcel and logistics division grew revenues by 4.9% to EUR 430.8m for the half, with the domestic market generating the greatest growth, with “good revenue development” also in Germany.

Earnings for the parcel and logistics unit rose 10.5% to EUR 11.4m.

During the half, premium parcel services brought in 2.6% higher sales, to EUR 329.5m. This is mainly business-to-business next-day parcel delivery, with 60% of the revenue stemming from trans-o-flex’s German operations, which saw a “satisfactory” growth rate.

Austrian Post said parcel volumes from domestic customers increased at a “disproportionately” high rate, while price pressure tempered sales in South East and Eastern Europe, with standard parcel services as a whole bringing in 8.8% more sales, to EUR 86.5m for the half.

The half’s results include some business from Austrian Post’s Belgian and Dutch trans-o-flex subsidiaries, with the Dutch business sold in March, the Belgian business transferring in May.

During the half, Austrian Post strengthened its domestic parcels business with the addition of the warehousing, picking and packing specialist Systemlogistik, while it also transferred its value logistics subsidiary Wertlogistik from its branch division to its parcel and logistics division.