PostNL runs fresh delivery trials with letter volumes down 10%

PostNL blamed the Internet today for a sizable 10% drop in its domestic addressed mail volumes, as it revealed its latest financial results. The Dutch postal operator saw its underlying operating income during the third quarter collapse from EUR 21m this time last year to just EUR 4m, “mainly” as a result of the drop in addressed mail volumes.

Thanks to a 4.5% growth in parcel volumes, and good volume growth in international mail businesses, PostNL’s overall revenues were up 1.2% to EUR 1.003bn for the quarter.

But Herna Verhagen, the PostNL chief executive, said the company’s domestic mail division, Mail in the Netherlands, “remained under pressure” after a slow start to the year.

Mail in the Netherlands saw its underlying revenues down 5.9% in the third quarter, to EUR 513m, with last year’s Q3 EUR 18m operating income turned into a million-euro loss.

“The third quarter was marked by a decline of addressed mail volumes of 10.1%, mainly due to substitution,” she said.

“We expect the addressed mail volume decline to be between 8% and 10% for 2012.”

PostNL saw its parcels revenues growing 28% in the third quarter (to EUR 183m) to help pick up the slack from its letters division, with the growth mainly due to the company’s acquisition of Austrian Post’s trans-o-flex business in Belgium and the Netherlands earlier this year.

International revenue were up 7.5% to EUR 389m in the third quarter, with the UK subsidiary TNT Post UK achieving 13.3% growth in revenue (to EUR 179m) thanks to a 7% growth in volumes and a Royal Mail price increase. German operations were still “on track” to break even in 2013, the company said, as revenues grew by 0.8% to EUR 123m, while Italian revenues were up 18% to EUR 49m in Q3.

Mail network

Having called off its restructuring plans for the domestic letter network earlier this year because of its impact on service quality, PostNL is beginning fresh pilot projects today to test a new approach to streamlining the system.

Verhagen said: “After the temporary stop of the roll-out of the new infrastructure in Mail in the Netherlands in April, improvement initiatives have been implemented, resulting in an enhancement of quality levels, which are now almost back to standard.”

The PostNL chief said the new pilot project would test a new letters process in three locations, with a “less disruptive” approach to restructuring letter delivery operations than previous efforts.

“After review of all alternatives, we will take a decision with respect to the further roll-out of the reorganization on which we will give an update at the latest with our Q4 results,” said Verhagen.

The PostNL CEO said as well as being confident about the network restructuring, the company was also expecting Parliament to agree to allowing it to reduce its delivery frequency by dropping Monday deliveries.

Parliament has requested extra studies on the proposal, with an amended bill expected to be sent back to Dutch lawmakers “soon”.

TNT Express

PostNL is still waiting for the sale of its near-30% stake in integrator TNT Express, the company currently targeted for acquisition by UPS. The Dutch postal operator values its stake in TNT at EUR 180m, but its stake pulled down PostNL’s own results in the third quarter.

Excluding TNT Express, PostNL said its profit for the third quarter would have been EUR 19m, down 29.6% compared to the same quarter last year.

With TNT Express, PostNL said it made a EUR 161m loss for the quarter, although this was an improvement on the EUR 313m loss seen in last year’s Q3.