Posti reports sales drop and calls for “easing” of USO

Finland’s Posti has reported that its net sales fell by 7.8% in the first six months of 2016, dropping to €776.5m from €842.2m. In a statement issued yesterday (18 July), Posti added that net sales decreased across all business groups: by 4.5% in Postal Services, by 9.4% in Parcel and Logistics Services, by 21.5% in Itella Russia and by 8.0% in OpusCapita. Comparable net sales decreased by 0.6% in Parcel and Logistics Services and by 5.1% in OpusCapita.

Commenting on the results, Heikki Malinen, Posti’s President and CEO, said: “The first half of the year was a satisfactory one for Posti in a difficult market climate. The Group’s adjusted operating result for April-June improved to EUR -0.9 million and the adjusted operating result for January-June improved to EUR 14.0 million in spite of lower net sales across all business groups.

“The economic climate in Finland and its neighboring areas remains weak but, for the first time in a long while, there are signs of economic recovery. The Russian economy remains in a recession, which has reduced the demand for Itella Russia’s logistics services. Nevertheless, measured in local currency, Itella Russia’s net sales increased by 3.4% in the second quarter. The Russian ruble appreciated in the first half of the year, but the closing rate at the end of the second quarter was still down by almost 15% year-on-year.

“For the Parcel and Logistics Services business group, the second quarter was significant in many ways. Posti signed an agreement with Stockmann on transferring the logistics operations of Hobby Hall to Posti. Posti also announced it is expanding to food logistics by acquiring Veine, a company that specializes in temperature-regulated logistics, and by modernizing online grocery shopping. There were more good news in Parcel Services as the amount of parcels delivered by Posti in April-June increased by 4% in Finland and by 30% in the Baltic countries. The business group’s comparable net sales, excluding the international freight business, grew and the adjusted operating result improved.

“Posti renewed mail delivery with the aim of flexibly combining other services with delivery operations. The goal of the changes is to control the rise of unit costs in delivery operations, which is caused by declining volumes. The amount of addressed letter items fell by 7% and newspaper delivery volumes by 8% in January-June. The net sales and adjusted operating result of the Postal Services business group declined due to the decrease in volume.

“OpusCapita is making a strong investment in new growth businesses. One important step in this strategy was the acquisition of the Germany-based software company jCatalog in April. The acquisition supports OpusCapita’s aim of becoming a leader in the global buyer-supplier ecosystem. The integration of jCatalog with OpusCapita began immediately.”

Malinen then made a plea for “easing” the requirements of the universal service obligation (USO), in the light of the government’s decision to liberalise the postal market.

“Following the amendments to the Postal Act that entered into force in June, the entire postal market is now open to free competition,” said Malinen. “According to the amended Postal Act, Posti’s competitors may freely deliver mail anywhere and at any time without being subject to universal service obligations. This puts Posti on very unequal footing with regard to the competition, as Posti will remain subject to the heavy five-day delivery obligation in spite of the universal service obligation only applying to less than 5% of Posti’s delivered items today. With this in mind, we consider it essential that the universal service obligation is eased in the upcoming renewal of the Postal Act. Easing regulations concerning universal service allows for better control over the changes in unit costs. Renewing the regulations will allow Posti to continue to fulfill its universal service obligation throughout Finland.

“The Finnish Government drew its new ownership steering policies in the spring. Pursuant to the Parliament’s decision, 49.9% of the ownership of Posti Group Corporation will be transferred to a newly established development company tasked with developing the ownership structure of the companies it owns. The Finnish State’s holding in Posti Group Corporation will remain at 50.1% at a minimum. The privatizations of national postal services in Europe have shown that listings have resulted in improved financial performance and service quality.

“In June, Posti updated its strategic goals aimed at Posti’s renewal and profitable growth in new services. Posti wants to be the leading provider of logistics and postal services in Finland. We are making good progress toward achieving this objective.”