Itella Oyj - Interim report (Q1 and Q3)

Itella’s result weakened by declining delivery volumes

ITELLA CORPORATION INTERIM REPORT OCTOBER 30, 2013, AT 9:00 A.M. (EET)

Itella Corporation Interim Report January-September 2013

July-September 2013

  -- Itella Group's net sales grew by 2.6 percent in July-September, totaling
     EUR 457.0 (445.6) million. Net sales in Itella Mail Communications declined
     to EUR 257.0 (264.4) million. However, net sales increased to EUR 210.1
     (188.1) million in Itella Logistics and to EUR 61.3 (60.3) million in
     Itella Information.
  -- Operating result before non-recurring items decreased, amounting to EUR 8.0
     (11.7) million, or 1.7 (2.6) percent of net sales. Operating result before
     non-recurring items in Itella Mail Communications declined to EUR 2.5
     (12.5) million. Operating result before non-recurring items improved to EUR
     0.2 (-2.9) million in Itella Logistics, and increased to EUR 7.2 (5.7)
     million in Itella Information.
  -- The operating result for the third quarter was impaired by non-recurring
     items totaling EUR 11.1 (0.0) million.
  -- The operating result for the period showed a loss of EUR -3.1 (11.7)
     million, or -0.7 (2.6) percent of net sales.
  -- Itella Information sold its printing business in Poland to PostNord. Itella
     sold its subsidiary Logia Software to the company's management.

January-September 2013

  -- Itella Group's net sales grew by 3.1 percent, totaling EUR 1,448.0
     (1,404.1) million in January-September. The growth was due to the
     integration of VR Transpoint's groupage logistics business into Itella
     Logistics.
  -- Net sales in Itella Mail Communications declined to EUR 832.7 (843.8)
     million, increased to EUR 632.6 (558.7) million in Itella Logistics and
     decreased to EUR 198.0 (202.5) million in Itella Information. Itella
     Information's comparable net sales grew by 4.5 percent.
  -- Operating result decreased, totaling EUR 24.1 (40.4) million, or 1.7 (2.9)
     percent of net sales, before non-recurring items. Operating result before
     non-recurring items in Itella Mail Communications declined to EUR 32.4
     (48.5) million and to EUR -12.2 (-6.4) million in Itella Logistics. In
     Itella Information, the operating result before non-recurring items
     improved to EUR 18.1 (11.5) million.
  -- The operating result declined year-on-year and amounted to EUR -2.4 (29.9)
     million, representing -0.2 (2.1) percent of net sales. The operating result
     was impaired by non-recurring items totaling EUR 26.5 (10.5) million.
  -- Cash flow from operating activities was EUR 9.8 (55.8) million and capital
     expenditure amounted to EUR 28.5 (52.0) million.
  -- In April, Itella announced the start of a EUR 100 million performance
     improvement program for 2013-2014. As part of the performance improvement
     program, Itella started cooperation negotiations in centralized and
     decentralized group functions and signed an extensive partnership agreement
     with IBM, according to which some of Itella's ICT operations were
     outsourced to IBM as of June 1, 2013. In addition, Itella sold Itella Bank
     to the Savings Banks on April 18, 2013.



Itella key figures                   7-9/201  7-9/201  1-9/201  1-9/201     2012
                                           3        2        3        2         
--------------------------------------------------------------------------------
Net sales, MEUR                        457.0    445.6  1,448.0  1,404.1  1,946.7
--------------------------------------------------------------------------------
Operating result (non-IFRS), MEUR*)      8.0     11.7     24.1     40.4     53.2
--------------------------------------------------------------------------------
Operating result (non-IFRS), %*)         1.7      2.7      1.7      2.9      2.7
--------------------------------------------------------------------------------
Operating result, MEUR                  -3.1     11.9     -2.4     29.9     39.0
--------------------------------------------------------------------------------
Operating result, %                     -0.7      2.7     -0.2      2.1      2.0
--------------------------------------------------------------------------------
Result before taxes, MEUR               -5.2     10.3    -12.0     23.8     30.8
--------------------------------------------------------------------------------
Result for the financial period,        -3.7      4.9     -9.9      9.1     14.1
 MEUR                                                                           
--------------------------------------------------------------------------------
Return on equity, %, 12 months                            -0.7      2.3      2.1
--------------------------------------------------------------------------------
Return on invested capital (12                             1.1      5.8      4.7
 months), %                                                                     
--------------------------------------------------------------------------------
Equity ratio, %                                           47.6     48.0     46.2
--------------------------------------------------------------------------------
Gearing, %                                                30.3     22.3     23.5
--------------------------------------------------------------------------------
Gross capital expenditure, MEUR                  19.6     41.3     64.8    134.7
--------------------------------------------------------------------------------
Employees on average                                    27,669   27,391   27,460
--------------------------------------------------------------------------------
Dividends, MEUR                            -        -        -        -      6.8
--------------------------------------------------------------------------------
*) Non-IFRS = excluding                                                         
 non-recurring items                                                            

 President and CEO Heikki Malinen:

”The structural transformation in the postal industry is beginning to have an
increasingly significant impact on Itella's business. The delivery volume of
traditional letters declined by 5 percent in January-September, while newspaper
delivery volume fell by 6 percent and magazines by 7 percent. In addition to
the decline in volume, the economic recession had a negative effect on the
Group's result. 

The positive development of Itella Information's result continued. In Itella
Logistics, the operating result improved compared to the previous quarters and
the operative result of Russian operations, which are included in the Itella
Logistics business group, were quite satisfactory. 

According to the new vision published today, Itella will refocus its business
and seek further growth and profitability in rapidly growing e-commerce and the
Russian market. The delivery volume for parcels and goods is rising
substantially as e-commerce grows, while electronic communications threaten to
halve the delivery volumes of traditional letters, newspapers and magazines by
2020. Itella's new vision is “Your first choice for postal, logistics and
e-commerce services” and its mission statement is “Our main mission is to
manage the flow of commerce and everyday life”. 

We also see growth potential in Russia, which, going forward, will be Itella's
second primary market alongside Finland. Our aim is to double our net sales in
Russia by 2020.  From January 1, 2014 onwards, the Russian operations will be
organized into a separate business group and its resources will be
strengthened. 

Maintaining effective mail delivery operations while achieving growth and
making new investments requires an improvement in profitability. Faced with the
accelerating decline in delivery volumes, we must take action to ensure our
continued profitability. The EUR 100 million performance improvement program
initiated in spring 2013 is intended to support this objective by achieving
savings in sourcing costs and eliminating unprofitable operations. 

As part of Itella's new strategy, Itella Information will be renamed OpusCapita
and operate as a subgroup of Itella Group. The restructuring supports
OpusCapita's aim of achieving strong growth and boosting its market position in
Europe. 

We anticipate Itella's net sales for 2013 to show growth in comparison to the
previous year. The full-year operating result before non-recurring items is
expected to be decrease than in 2012. The operating result for the full year is
expected to be impacted by substantial non-recurring items."

APPENDICES
Itella's full Interim Report

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

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

FINANCIAL CALENDAR IN 2014:
Financial Statements Bulletin 2013 to be published on February 14, 2014

PHOTOGRAPHS AND LOGOS
www.itella.fi/media



Itella is your first choice for postal, logistics and e-commerce services. We
manage the flow of commerce and everyday life in 11 countries. Net sales in
2012 amounted to EUR 1,947 million. The number of staff is approximately
27,500. We deliver corporate services under the Itella brand, while the Posti
brand is used for services targeted at consumers in Finland. www.itella.com

Attachments:

Itella_Q3-2013_Interim_Report.pdf