Restructuring costs hit PostNord’s earnings hard in first half

Swedish-Danish postal operator PostNord has seen its earnings plummeting in the first half of the year, as it continues a major restructuring and investment programme. The parent company of Sweden’s Posten AB and Denmark’s Post Danmark said net profits fell by nearly 90% to SEK 59m ($8.86m USD) in the six months up to the end of June.

Net sales have remained relatively stable, down just 1% over the six months compared to the first half of 2011.

But, after a second quarter in which the company made a SEK 151m ($22.6m USD) loss, restructuring and non-recurring items took an operating profit that would have been SEK 769m ($115m) down to SEK 114m ($17.1m) for the first half of 2012.

Overall revenues for PostNord fell by 2% to SEK 9.4bn ($1.4bn USD) in the second quarter, and by 1% to SEK 19.4bn ($2.9bn) in the first half of 2012 compared to the equivalent periods of 2011.

During the second quarter, PostNord’s business was characterised by a 7% year-on-year drop in mail volumes, prompted mainly by an expected continuation of mail customers switching to Internet-based communication channels.

The mail division’s 5% drop in revenues was led by Denmark, which saw a 11% drop in mail revenues compared to a 2% drop in Sweden’s mail revenues within the Group.

With logistics revenues in the second quarter up 9% compared to the second quarter of 2011, the continuing trend in the results backs PostNord’s major restructuring and investments to reposition its business more towards logistics growth opportunities, while streamlining mail activities to ensure profitability.

Commenting on the results today, PostNord chief executive Lars Idermark (pictured right) said: “We are currently making major rationalisations and investments in many areas of the business. Second quarter operating profits were therefore charged with significant restructuring costs, totaling over SEK 300m.”

Streamlining mail

Idermark said the decline in mail volumes in the second quarter was in line with expectations, confirming the need for more cost reductions as investments are made in improving the flexibility and efficiency of the mail business.

With revenues declining by 3% in the first half of 2012 compared to the same period last year, the core mail business still represented just over 60% of PostNord’s total group revenue.

Logistics, which has seen a 7% year-on-year sales growth in the first half, contributes a third of company revenues overall.

Idermark said his company was continuing its strategy within logistics of developing end-to-end solutions and cross-border capacity to boost its growth prospects.

He said business was growing steadily in Norway and developing well in Sweden.

“Our parcel volumes are increasing, however we continue to be challenged by tough competition in Denmark,” he said.

Elsewhere, he noted his company’s acquisitions to build up its third-party logistics profile, including completion of the purchase of one of the Nordic region’s largest third-party logistics operators, Swedish firm Green Cargo Logistics.

Looking ahead, PostNord said its forecast for the rest of 2012 remained unchanged, with expectations of Danish mail volumes falling by around 12% and Swedish mail volumes by about 5%.

With a “highly uncertain” economic outlook for the rest of 2012, the company said it was expecting growth in the Nordic logistics market.

And, more significant restructuring costs are to come, as the company continues to reduce its costs and invests to improve efficiency.