PostNL Q2 boosted by “smooth” restructuring progress

PostNL Q2 boosted by “smooth” restructuring progress

Dutch postal operator PostNL has had a good second quarter of the year, as cost-savings from the restructuring of its domestic mail network came in early. The company has raised its expectations for the rest of the year as a result.

The universal service provider in the Netherlands said in its latest financial results that profits attributable to shareholders were up from EUR 3m in last year’s second quarter to EUR 44m.

Reported revenue was 3% up year-on-year in the second quarter, to EUR 1.02bn, while underlying cash operating income was EUR 60m, up 160% on last year’s second quarter.

In the half year, revenue was 1% up year-on-year to 2.03bn, with underlying cash operating income up nearly 200% to EUR 137m.

PostNL said smooth execution of its restructuring efforts to adapt to declining mail volumes and growing parcel volumes meant cost savings coming in early to boost results in the domestic mail segment. The parcels business progressed in line with expectations.

Addressed mail volume fell by 11.2% year-on-year in the quarter, but parcel volumes grew by 8.2%.

Herna Verhagen, the PostNL chief executive, said her company had achieved “good traction” in its restructuring, migrating 22 depots during the second quarter to put it ahead of initial expectations.

She said: “The smooth execution of our restructuring plans resulted in cost savings coming in early. In addition, we see that the cost conscious mindset throughout the company is resulting in increased cost control. This is all achieved while maintaining high delivery quality and increased customer satisfaction.”

Challenges

Verhagen said price increases helped the domestic mail unit, Mail in the Netherlands, but some challenges remain in the company’s international business.

Not least, the company is awaiting a regulatory challenge to its expansion plans in the UK through the TNT Post UK unit. Royal Mail has been pressing the UK regulator Ofcom to impose some kind of universal service-type obligations on TNT Post UK if it is to go on competing with Royal Mail’s own universal service by providing end-to-end mail delivery services.

Verhagen said the parcels business was performing as expected on the back of a growing e-commerce business and “moderate growth” in the business-to-business sector.

“We are focusing on innovation to consolidate our leading position,” she said. “Extra services that we started included, amongst others, evening delivery. In the quarter, Parcels saw its subcontractor costs increase and, due to a change in customer mix, the average price slightly decline.”

The company, which generated a EUR 4.3bn turnover in 2013, is expecting the full 2014 year to achieve a cash operating income of between EUR 260, and EUR 290m, up from the previous expectation of EUR 180-220m.

Verhagen said: “Overall, the first half year was strong and reflects the learning curve we experienced in restructuring the company and the supportive and cooperative mindset of all our employees to adapt to the changing environment. All this fuels my confidence that we will achieve our 2015 targets.”

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