Austrian Post profit boost as ecommerce drives “letter” volumes

Austrian Post has achieved a 14.7% increase in its earnings before tax in the first three quarters of the year, within a volatile market environment. In its latest results, the postal service said it has had stable revenues, up 0.8% compared to the same period last year to EUR 1.7bn, although sales would have increased 1.7% without its Benelux-based trans-o-flex businesses sold during the year.

Earnings before tax rose to EUR 125.6m, with improved operating results in both the mail & branch division and the parcels & logistics division.

Mail & branch

Letter mail volumes continued to drop, by 3.5% year-on-year in the nine months, in line with expectations though not helped by a 1.7% drop in direct mail and media volumes.

But Austrian Post’s mail and retail network achieved a stable revenue this year so far, with a EUR 1.09bn turnover, although earnings declined by EUR 7.9m to EUR 189m, with a 16.6% EBIT margin.

Mail service performance is increasingly being helped by the fact that smaller ecommerce shipments are being sent as “letters” instead of “parcels” – small packets can be handled as letters, rather than by more expensive parcel infrastructure.

This has meant that while direct mail and media volumes have dropped by nearly a point this year compared to the first three quarters of 2011, to 421.3m items with the “structural decline” in the catalogue business, letter mail volumes including small packets have increased by 3.4% in the nine months, to 571.9m items.

Austrian Post said it has been optimising its IT and logistics system across the entire delivery chain, and brought in a new branch network concept, including use of self-service zones.

The branch network has been steadily moving from dominance of in-house post offices to more branches run by partners. Legally required to provide 1,650 post offices minimum, Austrian Post currently provides 500 that it operates itself, along with 1,500 operated by partners.

The company has also been expanding its mail business outside of Austria, in its target region of Central, Eastern and South-East Europe, increasing its stake recently in Romanian firm PostMaster.

Parcels & logistics

The parcels and logistics business grew its revenue 2.3% during the nine months, to EUR 632m. Excluding the affect of trans-o-flex Belgium and Netherlands, which were sold to PostNL Parcels, the division would have seen 5.1% growth, Austrian Post said.

The parcel and logistics unit generated a positive EUR 16.4m earnings in the nine months, with a 2.6% EBIT margin, turning around a negative situation seen in prior year results.

Executives said there has been strong growth in Austria, from individuals as well as businesses, along with positive development in central and eastern Europe and the company’s trans-o-flex subsidiary. Germany proved weaker, with a 3% shrinking of sales in the third quarter dampening the nine months’ picture. Austrian Post’s German parcels business has grown only 1.1% this year so far, compared to 11% in Austria and 3.7% in central and eastern Europe.

Looking ahead to next year, executives said the “dampened” economic situation meant further volatility on letters and particularly direct mail items could be expected in the rest of 2012.

But, the disposal of the trans-o-flex Benelux businesses should have a positive impact on results.