Profits fall 5.6% at Poste Italiane as mail volumes sink 10%

A difficult economy and increased competition have hit profits at Poste Italiane in the first half of 2011, but operating costs have also fallen. Italy’s state-owned postal operator saw a 6.8% drop in revenues in the six months to June 2011, to EUR 11.5bn, while profits dipped 5.6% to EUR 488m for the period.

Along with the continuing “natural decline” of postal volumes, results were affected by a marked reduction in earnings at Poste Vita, the insurance arm of Poste Italiane, along with a cut in government subsidies.

Among its divisions, Poste Italiane saw an 8.8% drop in sales for its postal services, to EUR 2.4bn, an 8.2% drop in insurance revenues to EUR 2.4bn, and a 1.9% dip in its EUR 6.4bn financial services revenues.

Mail volumes fell 10.3% in the first half of 2011 compared to the same period in 2010, with Italians sending 308m fewer items during the six months. This included an 8.5% drop in direct marketing volumes, although a quarter of this was due to the reduction in election-related mailings.

Express delivery volumes were up 1.4%, thanks particularly to work by domestic delivery subsidiary SDA Express Courier SpA with online retailers and other major shippers. Poste Italiane also reported positive movement in international shipments, with volumes and revenues up hanks to a 2.1% increase in items handled for UPS and FedEx.

To some extent, Poste Italiane managed to counter lower overall revenues with a “significant” 8.3% cut in staff costs thanks to the 3,400 fewer staff on payroll, as well as efforts to contain the cost of goods and services during a period of rising inflation. This has included the leasing of 16,000 new vehicles during the period, replacing older vehicles to allow for a cut in maintenance costs along with improvements in fuel consumption and environmental performance.

Overall, operating costs declined 6.9% at Poste Italiane, to EUR 10.7bn.

Pressure

The board said major economies had seen a further downturn in the first half of 2011 with the civil unrest in the Middle East, tsunami and nuclear disaster in Japan and various debt crises.

Inflation rose from 1.7% to 2.3% in the first half, reflecting “big rises” in commodity, energy and food prices.

The situation has meant a negative impact on demand for products and services from retail, business and public sector customers, Poste Italiane said.

With new market liberalisation legislation adopted in March, Poste Italiane is now facing new competition, particularly for high-value customers and the most profitable areas of the market.

“This has occurred at the same time as a natural decline in the use of traditional forms of communication,” as a result of its progressive replacement by information technology and the economic downturn.”

Poste Italiane is now facing pressure on its provision of universal service coverage across “an enormous geographical area”, it warned.

New services

Seeking to foster new growth in its mail services, Poste Italiane said it has been piloting new pre-paid and pre-packaged postal services in the last few months, which offers standardised packaging and a single postal price, aiming to provide a more convenient mailing of documents and goods.

Poste Italiane has also developed a reverse logistics offering, allowing businesses to provide a returns service for their customers.

The Post has also worked to provide a new simplified price system for its commercial package and express pick-up service, allowing SMEs to secure discounts by purchasing batches of prepaid consignment notes.

Tracking services have been improved, with a new Home Box service allowing customers to print shipping labels via the internet and also receive reports on their shipments. Poste Italiane’s SDA Express Courier subsidiary, which is having its tracking systems consolidated with those of its parent company to create a single integrated network, launched a new Smart Alert system that can send email and text message alerts about the status of shipments to express customers.

For e-commerce, Poste Italiane has set up a new division specifically to support online retailers and develop new ecommerce services. It has also launched a new PostelOffice portal, selling printing services and office products while allowing users to personalise their mailings and stationary.

Poste Italiane is set to launch a package of online services later this year called PosteMailBox, which will include a digital mailbox for the sending and receiving of messages as well as a digital signature system.