Itella Oyj - Company Announcement

Itella to adjust its operations to match decreasing volumes of mail

STOCK EXHANGE RELEASE ON JANUARY 23, 2014 AT 13:00 EET

Itella must adjust its operations to match the strong decline in demand for
traditional mail, as a result of the rapid increase of digital communications.
As part of the adjustment program, Itella will initiate co-operation
negotiations that may lead to a reduction of 1,200 jobs in basic delivery. Some
of this can be executed through voluntary arrangements and employment ending as
planned. 

The change in the postal industry last year was more dramatic than previously
expected. Electronic substitution in postal traffic continued strongly
throughout the year and was accelerated even further during the final quarter.
During the final quarter, the distribution of addressed letters dropped by 7
percent and both newspapers and magazines by 8 percent, compared to the same
period in the previous year. The distribution of addressed letters, newspapers
and magazines fell by more than 36 million items during the final quarter
compared to that of the previous year. 

The volume of addressed letters fell during the year by 6 percent in comparison
to the previous year; during the corresponding period in the previous year,
volume fell by 4 percent. 

For this year, Itella expects the fall in volume to further accelerate and be
up to more than 10 percent. 

- In Finland, we are facing the same structural change that occurred much
earlier in other western countries. The rapid decrease of demand, which has
continued for several years, combined with weakened profitability and the
changed needs of customers, means that Itella must make structural changes and
rationalize our operations. Unfortunately, this also calls for new personnel
arrangements, says Heikki Malinen, CEO of Itella. 

Itella Group's business result has declined quickly, and the result showed a
loss in January-September 2013. Without new rationalization measures, the
Group's profitability will not improve. According to Malinen, in the event of
decreasing volumes, it is necessary to maintain the distribution expenses of
the postal services at a moderate level, take care of Itella's profitability
over the change process, and develop the company so that it can create new jobs
and make necessary investments in the future as well. 

- Rationalization is also needed because the already implemented savings and
price increases are no longer enough to keep the company's result positive. Our
objective is to maintain distribution expenses at a moderate level in the
future. Our consumer and business customers demand it from us. 

Reduction need in basic delivery 1,200 jobs at the most

Due to decreasing delivery volumes and weakened profitability, on January 29,
2014, Itella Posti Oy will launch co-operation negotiations, the sphere of
which covers basic delivery personnel, delivering so-called day mail in
Finland. According to the current estimate, the total reduction need is 1,200
jobs at the most, some of which can be realized through voluntary arrangements
and retirement. The estimated need for dismissals is 800 permanent employees at
the most. A more precise need for dismissals will be determined during the
co-operation negotiations. 

The negotiations cover a total of 8,500 permanent employees. On September 30,
2013, Itella Group's number of personnel was 26,149. 

The statutory labor negotiations commencing at the moment will not involve
other Itella services, such as service in post offices or other Posti service
outlets, customer service, transports, warehousing services or early-morning
newspaper deliveries. Early-morning deliveries may undergo similar regional
negotiations when the ongoing customer negotiations are finished. In the
early-morning delivery, the publisher may dismiss or reclaim a service
previously outsourced to Itella as large delivery area entities. 

At the same time, Itella will give up in-house service business and launch
co-operation negotiations covering 23 people in the in-house services of
Itella's printing houses in Vantaa and Tuusula. The reduction need is 19
people. 

Last year and in 2011, Itella underwent co-operation negotiations to reduce
more than 400 people from expert and supervisory positions in administrative
duties. 

The renewal poses no threat to the basic services supplied by Posti

The CEO emphasizes that the operational reforms will not affect the general
services of Posti. 

- Itella's central goal is to continue to handle basic Posti services in a
high-quality manner all around Finland. Customer behavior has irrevocably
changed, and we must renew Posti to meet the future needs of customers, says
Malinen. 

The starting point is that the personnel reductions will not affect our
services to customers in the transition phase. The need for work decreases as
the volume of delivered mail falls. 

Itella offers good change security and support for employment

As a responsible employer, Itella is actively involved in supporting its
personnel in the current changing situation in the postal industry. Itella has
launched the Uusi Polku support program for its personnel. The program will
last several years and offers training and support for job seeking, retraining
or becoming an entrepreneur. The support program is not related to the
co-operation negotiation situation, but will continue to operate over the next
three to five years. 

Employees that will be given notice are entitled to change security, including
a monetary one-time compensation, proportional to the duration of the
employment relationship, pension solutions and the statutory procedures related
to change security. For instance, a deliverer who has worked for Itella for
more than 12 years will receive their salary during the six-month period of
notice, as well as a sum equivalent to salary for six months. 

Further information:

Heikki Malinen, CEO
Jukka Rosenberg, Senior Vice President, Itella Mail Communications
Itella MediaDesk, tel. +358 20 452 3366

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 personnel 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.