Russian Post moves into the black with profit in 2008
The company expects a net profit of EUR 11.59 million in 2008.
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DPD Russia continues network expansion with new depot in Siberia
DPD Russia has opened a new depot in Tomsk, an important industrial city in Siberia, as part of its ongoing regional expansion programme.
DPD invested over RUB 1 million (EUR 28,000) in the new depot, which is its tenth location in the Siberian Federal District. Located in the north-eastern part of Tomsk, the 486 sqm facility has the capacity to sort more than 5,000 parcels a day.
The new branch offers a complete range of DPD services in Russia including its popular just-in-time delivery service DPD BizPak and other parcel and freight delivery services such as DPD Avia, DPD Classic and DPD Economy.
With the opening of the new depot in Tomsk, DPD Russia has increased its network to 31 branches in the country. All the depots are linked by a common IT system as well as by a unique high-capacity ground transportation network, DPD Russia said.
Read MoreEuropean parcel volumes resilient against economic adversity
Although the recent credit crunch and resulting economic uncertainty are affecting the growth potential of the European express industry, the main effects will be on the use of different modes of transport and profitability rather than on overall levels of parcel volumes.
Indeed, supply chain rationalization, internationalization and business-to-consumer (B2C) e-commerce are continuing to drive industry growth.
The US sub-prime mortgage fiasco’s impact on the financial sector and wider global economy, combined with a sharply increasing oil price, is having a direct impact on the express industry, with several express companies announcing lower profits and issuing cost cutting measures. However, the credit crunch has hit individual markets and companies differently, leaving those relying on the US and intercontinental routes the most exposed, says Datamonitor logistics & express senior analyst Erik Van Baaren. “In general, its effects are felt to widely varying degrees depending on companies’ exposure to the most affected verticals, country markets and trade lanes.”
However, although the value of the European express and parcels market is forecast to grow at a lower rate than in previous years, it is still expected to record an average annual growth rate of 3.5 pct in the next five years, above GDP growth. The strong demand for international and home delivery services is still contributing to the European express industry’s development, despite rising fuel costs and the global economic slowdown dampening its potential.
A trend that set in before the credit crunch, and was caused by rising fuel surcharges, has been that of a modal shift from air to road express services, as well as, to some extent, a shift to non-express freight such as rail or sea freight. The result of this shift has manifested itself mainly in decreased profitability, as increased transportation costs have not been offset by price increases. In Europe, volumes remained strong in the first half of this year and although a decline was observed in June, operators are still expecting only marginally lower volume growth in the coming years, Mr. Van Baaren says. “The next quarter will be critical and will reveal whether the lower growth in recent months was incidental or more structural.”
Retailers’ e-commerce investments, the rising use of broadband, favorable demographics and faster websites are extending the scope of products that are available online, which in turn is stimulating demand for home deliveries even as consumers’ disposable income comes under pressure. The rationalization of supply chains and the relocation of manufacturing and distribution activities are the other main growth drivers still fueling the express and parcels market, with Eastern Europe and the Far East acting as the catalysts for this development.
The outlook for the next five years remains uncertain as the full impact of the financial crisis has not yet become entirely visible. The outlook for the European parcels and express market remains cautiously optimistic, while emerging markets (Brazil, Russia, India and China (BRIC), Middle East and Eastern Europe) are still recording strong growth levels. The significance of the financial services vertical to the express industry has already been diluted in recent years by lower document volumes as a result of electronic substitution, Mr. Van Baaren says. “The economic crisis is likely to further restrict the importance of financial services for the express industry, negatively impacting those countries and companies which rely on it.
Read MoreRussian Post and Microsoft Rus sign cooperation deal
Russian Post and Microsoft Rus, the Russian subsidiary of the global Microsoft Corporation, have signed a cooperation agreement to modernise the outdated IT infrastructure of the Russian public postal operator.
The deal is part of Russian Post’s three-year programme to reduce losses and to modernise infrastructure and services. The modernisation programme was announced by Russian Post CEO Andrej Kazmin in April this year.
Under the agreement, the two companies will implement several projects in key areas that include among others developing IT solutions for monitoring electronic resources, establishing a unified e-mail service as well as exchanging technological and marketing information. The important steps include creation of software for information telecommunications infrastructure that comprises components designed for carrying out applied software operations.
Russian Post, with a network of 42,000 post offices and 415,000 employees, handles more than 1.5 billion letters and 48 million parcels every year.
Read MoreIndex of Postal Freedom Russia
The market for Russian postal services is growing rapidly and was valued at about $1 billion in 2003, with Pochta Rossii accounting for 80 percent of that number. Today, delivering letters makes up only 20 percent of the post office’s income.
Technically speaking, the Russian postal market was opened to competition in 1996 when the Ministry of Communications removed the state monopoly on postal services.
The Russian government is now a major source of business for Russian Post. Certain large streams of mail from other government agencies, like the delivery of 60 million pension checks annually, are routed through Russian Post.
Most of its revenue, however, comes from delivering goods. There are some local delivery services in Moscow and St. Petersburg.
Competition with international carriers for lucrative and strategically important package delivery and logistics services is concentrated in the western hub regions of Russia. This is a booming market, and DHL Worldwide, TNT, FedEx, UPS and others are all involved.
In 2004, Russian Post launched its own national express mail operator (EMS — Russian Post) with prices that are 20% lower than competitors on average. EMS relies on its connections with the regular postal network and touts deliveries made “door-to-door.” More than 42,000 post offices throughout Russia make EMS deliveries, and 5,500 post offices in Russia accept EMS items.
It is unclear whether Russian Post subsidizes EMS with proceeds from traditional mail. Even though the Russian government eliminated the state postal monopoly in 1996, PR still controls 80 percent of the postal market and so has sufficient market dominance to build EMS on the backs of ordinary stamp-buying consumers.
EMS claims annual revenues in the area of $300 million and an annual growth rate of 30-40 percent.
Firms like Western Union compete in the money transfer business against PR’s Cybermoney system. PR rates are set to undercut the competition by as much as 35 percent.
Privatization
In 2002, Minister of Communications and Information Technology Leonid Reiman told Prime-TASS in an interview that “There are no plans for privatizing Russia’s postal service in the near future,” although he added that there remained a possibility that it might be reformed into a 100-percent government-owned company.
Current law does not allow for the privatization of postal service companies. In 2006 Reiman told a Cabinet session that of the many countries that tried to privatize their postal services, few succeeded. “For example, the U.S. Postal Service is a government corporation and is subsidized from the budget to perform socially important functions.”
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