Interim Report April-June 2014: Continued focus on customized solutions and cost efficiency

Message from Håkan Ericsson, President and CEO

PostNord reported a moderate year-on-year improvement in operating income in the quarter, while still posting a minor loss mainly due to restructuring costs. PostNord’s markets are still experiencing sharp reductions in mail volumes and continued heavy competition within the logistics business.

On April 1st, PostNord implemented a new organizational structure. The change process is progressing well including efficiency improvements and cost savings as well as development of customized end-to-end solutions, primarily within the logistics business.

Net sales totaled SEK 9,816m, a year-on-year increase of 1%. The increase was mainly due to acquisitions within the logistics business. The mail market continued to decline due to the competition from the digitization. Total mail volumes for the Group declined by 3% year-on-year: 10% in Denmark and 1% in Sweden. Mail volumes were positively impacted during the quarter by mailings related to the EU election in May. Corresponding mail volumes for the first six months declined by 5% in total, of which 11% in Denmark and 3% in Sweden.

Group operating income totaled SEK -30m (-90) during the second quarter. The result is explained by the dramatic drop in mail volumes and continued heavy competition within the logistics business, as well as to restructuring costs. Cost savings from the reorganization during the spring will have full impact at the beginning of the second half 2014. Cash flow from operating activities totaled SEK 120m (-50) and was positively impacted by improved working capital.

Profitability remains at an unsatisfactory level, and additional cost savings are required to improve earnings and create greater financial value. To succeed in this, it is essential to adapt postal-specific regulations to changes in customer demand. We welcomed the new Postal Act in Denmark, enacted early this year, and we are engaged in an active dialogue in Sweden to achieve the necessary adaptations to Swedish postal regulations that will ensure the ability to maintain good universal postal service in the long term under reasonable economic conditions, despite continued reductions in mail volumes. This is also essential for the achievement of our ambitious environmental goals.

Our new organizational structure provides the basis for integrated production activities in each country, which will improve our customized range of services offerings. Together with the improved brand structure, focused on one common brand, we are increasing clarity towards our customers positioning PostNord as a leading Nordic logistics operator with a geographically competitive end-to-end offer.

PostNord AB (publ) is required to disclose the above information under the provisions of the Securities Market Act and/or the Financial Instruments Trading Act. The information was submitted for publication at 08.30 AM CET on August 26, 2014.