Austrian Post parcels growth hit by competition levels in Germany

Austrian Post parcels growth hit by competition levels in Germany

Austrian Post has said a “subdued” economy and “intensified” competition is hampering its parcels business. The company issued its financial results for the first quarter of 2015 showing that growth in the parcels business is more than countering the ongoing decline in the mail business caused by the electronic substitution for physical letter volumes.

But Austrian Post said high levels of competition, particularly in Germany where 55% of its parcels business is generated, is putting pressure on prices and its market shares and hitting growth despite the boost from the growing e-commerce industry.

The Post has been working on improving efficiency in its mail and parcels processes, and said it will continue to focus on improving profitability as it targets EUR 80-90m worth of capital investments on sorting technologies, logistics and customer solutions.

The company’s German parcel business, trans-o-flex is in the process of reorganising its process, distribution and staff structures as part of efforts to improve efficiency.

The first three months of 2015 saw Austrian Post’s overall revenue up just 0.6% compared to the same period last year, to EUR 601.9m. Pre-tax earnings fell 7.4% to EUR 53.9m.

Austrian Post said it believes it will grow revenue 1-2% in 2015 as a whole, with hope for an improvement in earnings.

Revenue growth within the parcel segment during the first quarter was 2.2%, although the Post is forecasting 3-6% for the year as a whole. This offset the slight decline in revenues — 0.3% year on year — in the mail and branch network division.

Austrian Post said as well as investing to improve its process efficiency, it is also pressing ahead with investments to improve the customer experience, including the expansion of its self-service facilities. The company now offers 270 self-service zones around Austria, and 150 pick-up stations for parcels.

The company, which is majority-owned by the Austrian government but has been listed on the Vienna Stock Exchange since 2006, said it was positioned as “reliable dividend stock” since it was able to issue a EUR 1.95 per share dividend at the end of April.

Austrian Post CEO Georg Pölzl said: “The focus of our strategic activities is on reliability and stability for the owners and other stakeholders of our company, and this approach will be continued in the future.

“Looking ahead to the full year, we confirm the previously communicated outlook for 2015. We expect a Group revenue increase in the range of 1-2%. At the same time, we target an EBITDA margin of around 12% and a further improvement in EBIT.”

Divisions

Austrian Post’s Mail and Branch Network division saw its revenue drop to EUR 377.5m in the first quarter, with letter mail and mail solutions revenue falling slightly to EUR 206.4m thanks to e-substitution. The company raised its postal rates from the beginning of March 2015 to help counter the financial impacts of falling volumes.

Revenue in the Direct Mail business grew 3.3% year-on-year to EUR 109.1m, boosted by pre-Easter advertising campaigns but held back by the pressure being experienced by traditional mail order companies competing against growing e-commerce.

Mail and Branch Network pre-tax earnings (EBIT) came in 1.7% below last year’s first quarter, at EUR 1.3m.

Austrian Post’s Parcel and Logistics division saw its revenue grow to EUR 224.4m in the quarter. Revenue in Germany fell by 2.5%, while revenue in Austria grew by 8.1% thanks to e-commerce growth. About 55% of the division’s business is seen in Germany, compared to 36% in Austria and 9% in south east and eastern Europe, where revenue grew 11% in the quarter.

Parcels and Logistics pre-tax earnings were EUR 1.7m up on last year’s first quarter, to EUR 7.2m.

During the quarter, Austrian Post also saw a 0.4% rise in its labour costs, to EUR 281.7m. Other expenses rose 6.9% to EUR 76.3m.

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