Posti Group’s parcel and freight volumes continued to grow

Posti Group Corporation Interim Report January–September 2016

July–September 2016

Financial highlights

• Group’s net sales decreased by 0.5% to EUR 371.5 (373.5) million. Comparable net sales decreased by 2.9% in July–September.
• Adjusted operating result declined and was EUR 7.5 (9.6) million, 2.0% (2.6%) of net sales.
• Operating result improved and amounted to EUR 14.5 (-2.2) million, representing 3.9% (-0.6%) of net sales.

Operational highlights

• Measured in waybills, Posti’s domestic freight grew by 8%. Parcel volumes grew by 2%. The number of addressed letters declined by 9%.
• In August, Posti acquired Veine, a company that specializes in temperature-regulated logistics. The acquisition supports Posti’s strategy to grow in food logistics. Posti and Veine can together offer competitive and nationwide food logistics solutions.
• In September, Posti Kiinteistöt sold a 74,000 square metre logistics warehouse property, Pennala, located in Orimattila.
• Mail items covered by the universal service obligation accounted for 3.9% of all of Posti’s mail items in July–September.

January–September 2016

Financial highlights

• Group’s net sales decreased by 5.6% in January–September and amounted to EUR 1,148.0 (1,215.6) million. Comparable net sales decreased by 3.9%.
• Adjusted operating result declined and was EUR 21.5 (23.3) million, 1.9% (1.9%) of net sales.
• Operating result declined and was EUR 13.6 (46.2) million, or 1.2% (3.8%) of net sales. Special items include a EUR 9.3 (44.4) million gain from sales of real estates. Other special items are described in connection with business group results.

Operational highlights

• Measured in waybills, Posti’s domestic freight grew by 6% year-on-year. Parcel volumes grew by 1%. The number of addressed letters declined by 8%.
• OpusCapita sold its businesses serving the local markets in the Baltic countries to BaltCap in January.
• Itella Russia acquired the Russian courier company MaxiPost in March.
• By parliament’s decision in June, The finnish State can decrease its ownership at Posti Group Corporation. In accordance with Government Resolution on Ownership Steering Policy, 49.9% of the ownership of Posti Group Corporation will be transferred to a new state-owned development company, Vake Oy, which was established in August. The Finnish State’s direct holding will remain at 50.1%.
• OpusCapita acquired the Germany-based software company jCatalog Software in April. The acquisition supports OpusCapita’s strategy to build a global buyer-supplier ecosystem offering and expands its geographical reach.
• Mail items covered by the universal service obligation accounted for 4.4% of all of Posti’s mail items in January–September.

Posti changed its terminology for Alternative Performance Measures in accordance with the new guidelines issued by the European Securities and Markets Authority (ESMA) as of the interim report for the second quarter of 2016. “Non-recurring items” was replaced by “special items”. “Operating result before non-recurring items” was replaced by “adjusted operating result”. The definitions for these performance measures and for items affecting the comparability of reported figures are provided in the section “Calculation of key figures” of this interim report and at www.posti.com/financials.

Figures in brackets refer to the comparison period, i.e. the same period last year, unless otherwise stated.

Heikki Malinen, President and CEO:

Posti will continue to seek new growth in logistics services in accordance with strategy, while mail and newspaper delivery volumes continued to decrease. In August, Posti purchased Veine, specialized in temperature-regulated logistics, and through this acquisition Posti is expanding its service supply into food logistics and temperature-regulated transport. In October, Posti strengthened further its market position in food logistics by acquiring Kuljetus Kovalainen.

Due to the acquisition of Veine and growth in freight, Parcel and Logistics Services’ net sales increased by almost 8%. However, business group’s adjusted operating result declined, but was still positive. Heavy transport volumes have turned to growth since April 2016 after declining for 47 consecutive months. This is a very positive development and gives confidence to the whole logistics market.

In July-September, the number of parcels delivered by Posti continued to grow. The growth was particularly strong in the Baltic countries, a total of 27%. We have strengthened our position in the international e-commerce by establishing of more than 1,200 pick-up points in the Baltic countries and by joining the DHL European partner network. This network offers customers access to pick-up points in 16 European countries. In Finland, the growth in parcel delivery is fastest through parcel points. The digital subscription channels are gaining popularity, as well. The number of parcels paid online has increased five-fold during the third quarter.

During the third quarter, the market situation remained challenging in Finland and its neighboring areas, affecting negatively the Group’s net sales and adjusted operating result. Group’s net sales in July–September decreased by 0.5% and adjusted operating result declined to EUR 7.5 million. Adjusted operating result improved in Postal Services and in Itella Russia.

By parliament’s decision in June, The finnish State can decrease its ownership at Posti Group Corporation. In accordance with Government Resolution on Ownership Steering Policy, 49.9% of the ownership of Posti Group Corporation will be transferred to a new state-owned development company, Vake Oy, which was established in August. The Finnish State’s direct holding will remain at 50.1%. Possible enlargement in the ownership of Posti would support remarkably the renewal of the company in the transformation of the postal industry. It would also strengthen Posti’s viability and boost new growth. Posti’s main strategic goal is to be the leading provider of postal and logistics services in Finland. 

The Russian economy has remained in recession, and the economic recovery continues to have a lot of questions. However, Itella Russia is showing some signs of slow recovery in transport volumes. In July–September, the adjusted operating result of Itella Russia improved to EUR -0.6 million. Although Russia's economy still includes a lot of uncertainty, Itella Russia’s goal is to turn the result profitable.

The Ministry of Transport and Communications is currently finalizing the reform of the Postal Act, aiming to adjust the universal service to the era of digitalization. This is essential as digitalization moves on irrevocably. In January–September, the volume of addressed letters declined by 8% and newspaper delivery volumes by 9% compared to the previous year. In the coming years, the state plans to reduce paper mail from authorities to citizens by transferring the paper mail to digital mailbox, speeding up the need of Postal Act reform.

The first phase of Postal Act entered into force in June and allows Posti’s competitors to deliver mail anywhere and at any time without any delivery obligations. However, current law requires Posti to maintain a five-day delivery obligation in spite of the fact that an average Finn receives only about 11 universal service letters in a year. In the situation of free competition, this regulation with decreasing mail volumes will lead to very expensive and cost-ineffective delivery. We urge that the universal service obligation be renewed to be more flexible, in order to ensure an affordable universal service for citizens and businesses all over Finland.

Posti is ready to maintain 5–7 days delivery for newspapers in sparsely populated areas on a commercial basis also in future. However, this requires that the Postal Act reform will be put into effect financially in a sustainable way. The delivery of newspapers could also be renewed by enabling mail, newspaper and freight distribution, and other home services in sparsely populated areas with support of a Transport Code.

APPENDICES
Posti Group’s Interim Report in full (PDF)

FURTHER INFORMATION
Heikki Malinen, President and CEO, and Sari Helander, CFO
Tel. +358 20 452 3366 (MediaDesk)

DISTRIBUTION
NASDAQ OMX Helsinki 
Key media
www.posti.com/financials

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www.posti.com/newsroom

Posti Group is your first choice in postal, logistics and e-commerce services. We manage the flow of commerce and everyday life in nine countries. Our net sales in 2015 amounted to EUR 1,650 million. We employ approximately 22,000 professionals who serve our customers in Finland under the name Posti and in other countries under the name Itella. All of our services in Finland are carbon neutral. www.posti.com.