Interim Report January – June 2011: Challenging market reinforces need for additional changes
April – June 2011
- Net sales totaled SEK 9,711m (10,231), down 2% excluding currency changes
- Operating profit (EBIT) totaled SEK 211m (261), down 12% excluding structural and currency changes
- Profit before tax totaled SEK 246m (254)
- Net profit totaled SEK 154m (185)
- Operating margin (EBIT) was 2.2 (2.5) %
- Return on equity, rolling 12-month, was 8 (19) %
- The equity-assets ratio was 46 (43) % at the end of the period
- Signing of agreements to acquire logistics companies Eek Transport and Nils Hansson Logistics
- Cost savings program to reduce administrative costs by approximately SEK 1 bn, and adjustments to group management structure
Message from the CEO, Lars Idermark:
PostNord’s development during the second quarter of 2011 is generally in line with the previous quarter. However, quarterly results were characterized by the challenging situation with a dramatic drop in volumes in Denmark and a more stable trend inSweden.
All in all, the group’s logistics business continued to develop according to plan. Agreements were signed during the second quarter for the acquisitions of Eek Transport in Norway and Nils Hansson Logistics in Sweden, in line with our strategy to make acquisitions to broaden and further strengthen our logistics offer to our customers.
Business area Meddelande Sverige improved its operating profit, despite reduced revenues from traditional mail operations, while development for Information Logistics was weaker than expected. A significant drop in sales for business area Breve Danmark was unable to be countered with corresponding cost reductions. The group therefore reports a decline in year-on-year operating profit for the second quarter. The operating margin was 2.2 percent.
Following a strong year start, the Swedish economy weakened slightly, although the full-year economic development is expected to be among the strongest inEurope. The Danish economy is weak and is expected to remain so for the remainder of 2011. Global economic uncertainty increased significantly during the second quarter and the beginning of the third quarter. The financial markets are deeply concerned about plunging stock markets. Demand for our services is strongly linked to macroeconomic development. Increased economic instability therefore involves an increased level of uncertainty in demand regarding PostNord’s markets within communication and logistics.
Our Danish mail operation is characterized by an accelerated drop in mail volumes and reduced volumes for unaddressed direct mail (UDM). The volume trend reflects both the weak Danish economy and the strong competition from digital alternatives and other postal operators that currently prevails in the market, and which is exacerbated in turn by the economic situation. Our Swedish mail operation is also experiencing a drop in mail volumes, chiefly due to competition from rising levels of digitalization.
Most postal operators throughout the world are facing challenges similar to ours. There are ongoing discussions in many countries regarding ways in which the postal services of the future will be regulated and financed. Global mail volumes are expected to fall over 40 percent in coming years, due to competition from digital alternatives. Our assessment is that Sweden and particularly Denmark are ahead of this trend, but we are nevertheless facing continued, significant reductions in volume.
Our goal is to be the leading communication and logistics operator in Northern Europe. PostNord is in a new conversion phase. Two years after the merger of Post Danmark and Posten and the establishment of the new group, we will take the next step to strengthen our efficiency, competitiveness and profitability. With an unstable global economy and structural market changes that, essentially, impact demand for our services, we need to make comprehensive changes to further reduce costs.
We are now implementing a special cost savings program to reduce the group’s administrative costs by approximately SEK 1 bn from 2013. We are also making adjustments to the group’s management structure, effective as of today, in order to increase manoeuvrability and focus on profitability.
We also need to step up our service development, intensify our marketing efforts and leverage growth opportunities in the logistics area.
Changes to PostNord´s Group Management
Changes are being made to PostNord´s group management, effective immediately, as a result of adjustments being made to the group management structure.
Johanna Allert will join group management as head of the newly established Shared Services unit, which will include production development, environment/TQM, fleet management, real estate, procurement, shared services accounting and HR. Recruitment is underway for a new CFO and a head of a new Corporate Strategy group function.
Executive Vice President Göran Sällqvist and CFO Bo Friberg are leaving their positions at PostNord.