Itella sees sales slide in Finland’s recession

Finland’s national postal service Itella has been struggling in the first half of the year with the economy in recession. The company’s revenue fell 6.7% year-on-year in the three months up to the end of June, to EUR 461.9m. Itella made a EUR 3.8m loss in the quarter, but this was an improvement on the EUR 10.9m loss seen in the same quarter last year.

In the first half of the year, revenues fell by 6% compared to the first half of 2013, to EUR 931.9m.

Profitability improved in the first half, with the company generating a small profit of EUR 200,000 compared to the EUR 6.2m loss made in the first half of 2013.

Itella has been struggling with a 9% annual drop in letter volumes, but it has also been hit by a slowdown in the important e-commerce business with Finnish consumers cautious in their spending.

The company said it has also been hit by the indirect effects of the conflict between Ukraine and Russia, in that the dampening of the Russian ruble has hit Itella’s Russian parcel business.

Heikki Malinen, the Itella president and CEO, said the second half of this year is expected to be equally “bleak” as the first half.

He said the company was making progress in its cost-cutting programme which is seeking to improve results by EUR 100m, and he said he was satisfied with the performance of the logistics business and its move towards profitability.

But he said as delivery volumes continue their steep decline, Itella must continue to find ways to improve its efficiency.

“Drastic”

“In January-June, delivery volumes decreased by 9% for letters, 8% for newspapers and 10% for magazines. Late in the second quarter, the volume of delivered letters fell by a record 15%,” said Malinen.

“In light of such drastic decreases in volume, it is clear that we must seek new solutions for the delivery models of traditional mail to ensure profitability and competitiveness, particularly as society as a whole is simultaneously investing strongly in digitisation.”

Itella said its transformational efforts will continue, including a streamlining of the corporate structure and the improvement of internal processes. Labour costs have fallen 7.1% year-on-year, with Itella shedding 407 jobs back in January, leaving the company with a work force of 25,311.

Since the beginning of the year, Itella’s Russian business has been organised as a separate unit in a new overall corporate structure of four divisions — Mail Communications, Itella Logistics, Itella Russia and OpusCapita.

At the end of April, Itella decided to merge its logistics division with its postal business as part of efforts to improve efficiency. The merger will take effect from the start of 2015.

“This will clarify our corporate structure and improve the efficiency of internal processes. After the merger, Itella will appear to its customers as one company,” explained Malinen.