Norway Post profits up 21%, but parcel volumes down in Q3

Norway Post has seen its revenues fairly stable in the third quarter, but its underlying profitability is up 21% on this time last year. The postal operator has carrying out a cost-cutting programme in response to declining letter volumes, but at the same time has been investing in its parcels and logistics capability, particularly as ecommerce brings in more and more parcels.

Issuing its latest financial results this week, the Post said its operating income in the third quarter was NOK 16.8bn, down 0.5% on the same period last year.

Operating profit excluding one-off impacts was NOK 719m, 124m up on last year’s third quarter.

Dag Mejdell, the Norway Post chief executive, said: “The results show that we have managed to streamline and improve operations. Now the organisation is set for new growth in parcels and logistics, and is reinforcing efforts with a view to the ecommerce market.”

Volumes

During the third quarter, Norway Post’s addressed mail volumes decreased 7.5% year-on-year, while its unaddressed mail decreased by 1.7% compared to the same quarter last year. The company did see some growth in volumes in its Bring City Mail unit in Sweden.

The company also saw a decrease in its domestic packages, with overall package volumes down 4.6% in the quarter as a result, though there was growth in cross-border packages. The company said the market was facing strong competition, with margins under pressure as a result.

However, the Norway Post chief executive said his company was in a good position to chase the ecommerce market, which is “important” for Norway Post and its freight division Bring.

With nine out of 10 Norwegians now shopping online, Norway Post has prioritised the market for its investment, and recently restructured, creating a new ecommerce division, headed by former banking vice president Gunnar Henriksen, to focus on developing services for online retailers and consumers.

The Post said it is currently providing delivery for the largest Nordic ecommerce merchants, and has recently won new package customers.

“Ecommerce is growing at 15% annually in the region,” said Mejdell. “Almost everyone is online, and good distribution systems are important for online stores.

“Norway Post’s nationwide distribution network makes us qualified to lead this market.”

Logistics

Norway Post’s largest division is logistics, accounting for 59% of its revenue. The company revealed this week that it has just acquired a Swedish logistics business – Ekdahl Åkeri – to further strengthen its logistics operations in southern Sweden. Norway Post’s foreign customers currently account for about 28.2% of revenues, down 0.3% on the same quarter last year.

Mejdell said he was expecting the logistics sector to continue its growth.

Recently, the Bring division has won a major contract to provide home delivery in Sweden for government-owned alcoholic beverage retailer Systembolaget.

And, it has won a four-year deal to provide logistics for oil company Statoil at its operations around the Norwegian continental shelf.

Norway Post has been working with Statoil for 30 years, and the current contract is its largest single logistics deal. Norway Post said the deal could be extended to six years in length, and would involve around 200,000 transport movements a year.

“The logistics segment will continue to grow. We have improved our offering for Nordic customers through acquisitions and our own improvement programmes, which strengthen our competitive edge in a tough market,” said Mejdell.