Year-end report 2012: Satisfactory annual results - maintaining fast paced conversion efforts

October - December 2012

• Net sales totaled SEK 10,481m (10,528).
• Operating profit totaled SEK 122m (645).
• Adjusted operating profit, excluding restructuring costs and non-recurring effects, totaled SEK 549m (666).
• Net profit totaled SEK 72m (441).
• Operating margin was 1.2 (6.1) % and adjusted operating margin was 5.2 (6.3) %.
• Cash flows from operating activities totaled SEK 1,256m (1,324).
• Lars Idermark announced that he will step down as President and CEO.

January - December 2012

• Net sales totaled SEK 38,920m (39,466).
• Operating profit totaled SEK 364m (1, 571).
• Adjusted operating profit, excluding restructuring costs and non-recurring effects, totaled SEK 1,550m (1,884).
• Net profit totaled SEK 257m (1,225).
• Operating margin was 0.9 (4.0) % and adjusted operating margin was 4.0 (4.7) %.
• Cash flows from operating activities totaled SEK 1,625m (1,634).
• The Board proposes a dividend of SEK 103m (368).

Message from the CEO, Lars Idermark:

PostNord’s net sales were unchanged during the fourth quarter but fell 1 percent in 2012, representing a stabilization relative to recent years. Group operating profit was impacted by significant restructuring costs. Extraordinary write-downs were also taken. Together, these items burdened operating profit by approximately SEK 600m during the quarter and almost SEK 1,400m for the full year. The adjusted operating margin was 5.2 percent for the quarter and 4.0 for the full year. Three of our four business areas are reporting improved adjusted operating profits for the year, and cash flows from operating activities are stable. The group’s capital structure was further optimized while financial stability was maintained.

In view of the market development, this should be regarded as a satisfactory result. We can safely say that the implementation of our strategy, the Roadmap PostNord 2015, is starting to produce results.

The extensive changes made by PostNord in 2012 have created favorable conditions for improving profitability already in 2013. The group made major cost cuts in the form of continuous adjustments of the operations to lower mail volumes. Another key cost-reduction measure was our program to streamline the group’s central administration, which was concluded during the year. We reduced the group’s underlying cost base by nearly SEK 1.7 billion in 2012.

Due to continued digitization and the macroeconomic trend, demand for mail distribution continues to fall. Mail volumes were down in line with our expectations. The drop in volumes continues to put pressure on profitability, although we were able to mitigate impact on profit in the Mail businesses with streamlining and cost-cutting measures. The Swedish mail business is reporting good results for the quarter and the full year. Our Danish mail business has carried out extensive streamlining efforts in 2012 and has created conditions for generating new profitability. The efficiency improvements were made possible in particular by the new legislation that came into effect in 2011. We expect that regulatory provisions will be further adjusted to prevailing market conditions in Denmark.

We have continued to implement our strategy of creating end-to-end solutions and cross-border logistics capacity in the Nordic region. We also strengthened our existing logistics business with complementary businesses. One of Scandinavia’s leading players in the growing 3PL market was acquired during the year. We also acquired logistics businesses in Norway, a market where we currently hold a strong position. The logistics acquisitions contributed SEK 720m to net sales for the year and made a positive contribution to operating profit.

The Mail and Logistics businesses both continue to benefit from the growth of e-commerce. Parcel volumes rose, particularly during the fourth quarter, as did the number of light parcels in the mail flows. We also saw increased volumes at our distribution points. We expect continued positive effects from the e-commerce trend in 2013.

During 2012 we turned around the previous negative trend for Strålfors. Strålfors has reported positive operating profit in the second quarter and is now set to generate growth and further improve profitability.

Our conversion efforts continued at a high pace during the year and we will maintain this tempo in 2013. Our investments in production facilities and systems in the Mail businesses to improve scalability, efficiency and profitability are proceeding according to plan. The group will continue to develop the Logistics businesses under profitability and expand our offer and market presence in the Nordic region. We are maintaining our focus on reducing costs. As reported previously, 2013 results will also be charged with restructuring costs as a result of the conversions.

These are changes that PostNord needs to make. They create opportunities for growth and improved profitability. They also improve PostNord’s capacity to continue to deliver high levels of service and quality in tomorrow’s communication and logistics markets and to meet universal postal service demands.