Australia Post profits slump as letter losses “overwhelm” parcel profits

Australia Post profits slump as letter losses “overwhelm” parcel profits

Profits at Australia Post slumped over the past 12 months, as the company’s letters business lost a record $328.4m. The state-owned postal operator’s latest financial figures include a 34.5% drop in net profits for the year up to the end of June, to $116.2m.

Revenue grew 8.3% year-on-year to $6.38bn.

Growth came from the parcels business with delivery volumes up almost 13% from 12 months ago, but even with the company’s retail division achieving stable results, it was not enough to counter the decline in the traditional letters business.

The situation has meant that Australia Post made an overall loss in the second half of the year, for the first time since it was corporatised in 1989.

The loss amounted to $105.9m on a reported basis and $42.9m excluding restructuring costs, during the six months.

Ahmed Fahour, the Australia Post chief executive, said that even with three months’ worth of a stamp price increase boosting letters revenue, the state of the letters business had “overwhelmed” the profits from parcels services.

The Australia Post boss said the results press the case for reforming the company’s universal service obligations.

Fahour said: “These results are a stark illustration of the urgent need for changes to the regulations governing our letters service.”

“Without these, a government-commissioned external report estimates that we will incur $12.1bn cumulative losses in letters, and $6.6bn for the enterprise over the next 10 years.”

“No surprise”

Australia Post wants to cut back on letters delivery frequency and introduce a new tiered letters pricing system in order to improve the sustainability of the letters business, which would involve splitting the current delivery service into “priority” and “regular” services, with regular services taking 1-2 days longer.

The Post’s business strategy also involves investing in digital services like the MyPost Digital Mailbox, and focusing more on the parcels business.

Fahour said in a speech last week that letter volumes were about to “fall off a cliff” as public sector organisations switch their communications to digital alternatives.

Australia’s post office operators said today that the reduced profit and falling letter volumes at Australia Post came as “no surprise”.

Bob Chizzoniti, director at the Post Office Agents Association Ltd (POAAL), said his organisation had repeatedly stated the need for Australia Post to transform its business.

“If Australia Post starts to record losses, this could diminish its ability to invest in new technology and in infrastructure to remain competitive in markets such as parcels, banking and identity verification services. These markets are the future for the postal network,” he said.

POAAL, which represents the operators of licensed post offices across Australia, said it had concerns that Australia Post’s pursuit of new business streams would further impact on post office services and rural delivery.

“Going digital is all well and good, but where does that leave the bricks-and-mortar post office?” said Chizzoniti.

“Rural Australia can’t be written off and given a second-rate letters service,” he added.

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