PostNL Q1 profits up 400% thanks to TNT share price gains
PostNL has received a big windfall from the UPS offer for its 30% stake in TNT Express even though the sale is not expected to go through until the third quarter of this year. The Dutch postal service issued its results for the first quarter of calendar year 2012 showing that its profits are up more than 400% thanks to the considerable increase in the TNT share price that UPS’s offer has caused.
Excluding the TNT shares, PostNL said its profits for the quarter increased 1.4% to EUR 70m for the quarter, on a revenue of EUR 1.07bn that was 4.6% down on the same period in 2011.
The increase in value for TNT shares, from EUR 5.77 at the start of the year to EUR 9.26 at the end of the first quarter meant PostNL could reverse an impairment charge of EUR 570m paid when TNT shares saw their values plummeting last year.
UPS had a EUR 9.50 per share offer accepted by the TNT board back in March, and the deal is now awaiting clearance by European antitrust authorities.
PostNL is expecting to receive EUR 1.5bn for its 29.8% stake in the global integrator, from which it demerged last May.
Aside from the turnaround in the TNT Express share price and a relatively stable profitability, it has not been an easy quarter for PostNL, which lost its chief executive Harry Koorstra last month after a row with the board over the company’s restructuring plans.
Today the company said it had enjoyed lower pension expenses this quarter, but otherwise was suffering a continuing drop in mail volumes and higher costs, with savings from its restructuring efforts not enough to counter increases in the cost of implementing those efforts.
Commenting on the quarter, the new CEO Herna Verhagen said the start of 2012 had been “slightly weaker than anticipated”, although she said declines in addressed mail volumes were at expected levels.
Verhagen said there had been difficulties in restructuring domestic mail operations, but parcel volumes were up and the company was building on its “strong position” in that market.
“Stability and clarity are very important in these challenging times. The priority for the coming period therefore is to focus on continuing the existing strategy and its implementation,” said the new PostNL CEO.
Domestic
“Improvements are being worked on together with the Works Council”
In the mail segment, addressed volumes declined by 7.9% as more customers move to Internet-based communications, driving underlying revenues for the domestic mail business to fall 5.4% as a result, to EUR 579m for the quarter.
During the quarter, PostNL was hit by various difficulties in its plan to centralise delivery operations into nine main sorting offices, using part-time staff to cut labour costs. Dutch regulators wrote to ministers in February urging them to fine PostNL for failing to meet delivery targets.
Today the company accepted it was having “a number of challenges with respect to processes, quality and staffing” regarding the first areas in which delivery operations were consolidated.
“We experienced difficulties adapting to the peak/off-peak model and the implementation of the new processes at the central preparation locations, resulting in a temporary delay in the further roll-outs,” Verhagen explained.
“This has its impact on both our clients and our employees. Improvements are being worked on together with the Works Council and we remain focused on our quality.”
PostNL said it was a “complex” process, but said it was reviewing and adjusting plans with union representatives.
Parcel volumes have been growing 4.6% this quarter, with underlying revenues up 5.2% to EUR 161m, though pricing pressures have partly offset improvements in operational efficiency, the company said.
Expectations are of building on growth in parcel shipping with the acquisition of Austrian Post’s Belgian and Dutch Trans-o-Flex businesses, which should start to contribute to results in the second quarter.
International
International revenues increased by 5.4% to EUR 391m for the quarter, with operations particularly helped by a restructuring of German activities including the discontinuation of non-core business like the Regioservice unit, and improvements in efficiency.
PostNL’s TNT Post Germany is now eyeing growth opportunities with Deutsche Telekom’s newly-launched De-Mail digital mail service, which is firing up this summer.
In the UK, the company’s TNT Post UK unit has benefited from a 20% increase in Royal Mail postal rates to see its revenue growing 11% to EUR 166m, and has now started a second end-to-end delivery pilot, this time in West London, although it still faces difficulty competing with Royal Mail because of various remaining VAT exemptions for the universal service operator.
In Italy, revenues were stable at EUR 52m, with success in the company’s new certified mail service, Formula Certa, countered by costs from some disposals and the termination of a contract with Poste Italiane.
