Profits slump at Poste Italiane as it undergoes “profound” transformation
Profits at Poste Italiane fell sharply last year despite improvements in its important insurance and financial services, mainly as a result of its declining mail volumes. The national postal service in Italy, which is in the process of preparing for privatisation, said yesterday that while its revenue grew in 2014 compared to the year before, up 11% to EUR 29bn, net profit slumped from just over EUR 1bn in 2013 to EUR 212m.
The company said some of its profitability was hit by one-off costs related to its ongoing transformation programme, the falling value of its stake in national airline Alitalia, and an increased tax bill.
But, discounting the one-off costs, the company’s operating profit for the year halved compared to the previous year’s EUR 1.4bn level, to EUR 691m.
Poste Italiane said its insurance and financial services divisions had performed well in 2014, unlike its core postal services.
The postal business saw demand hit by the “increasing trend of e-substitution”, as customers moved from paper-based communications to digital alternatives.
E-commerce did bring benefits for the express and parcels unit, which saw revenue growth of 13.8% compared to the previous year.
Poste Italiane claimed title as one of the world’s most profitable postal services just a few years ago, thanks in part to the successes achieved in the financial services and insurance sectors.
Faced with profits drying up because of the worldwide trend of falling mail volumes, the company began negotiations with the Italian government last year to bring in reforms to the universal service.
The company launched a new five-year business strategy last year, aiming to transform and modernise the company to achieve growth in the medium-term, while pushing for privatisation.
The company also simplified its organisational structure to take more advantage of synergies between its different divisions, for example between logistics and payment services.
Challenges
Francesco Caio, the Poste Italiane chief executive, said the company began a “profound” transformation last year to seek a new phase of growth and development.
“We have before us great challenges and opportunities,” he said. “On the one hand, the structural decline in mail volumes — across the world, not just in Italy — requires new rules and processes to ensure the sustainability of a quality universal service; on the other, the process of transforming the economy towards digitisation opens new opportunities for growth for Poste Italiane in e-commerce logistics and digital payments.”
Caio said the transformation process was a complex one for Poste Italiane, targeting a change of culture within the company to focus on quality of service and the needs of the customer.
“The process has started, but it will take time to see the full results,” he warned.
“That is why our strategy runs for five years. Nevertheless I am convinced that the Group has the resources, the skills and the determination to successfully complete its transformation. In this context, privatisation is a central element of the new plan, consistent with the development priorities of Poste Italiane.”
