Posti Group Corporation - Interim report (Q1 and Q3)

Posti Group’s parcel and freight volumes continued to grow

POSTI GROUP CORPORATION INTERIM REPORT, OCTOBER 31, 2016 AT 10:00 A.M. (EET)

Posti Group Corporation Interim Report January–September 2016

July–September 2016

Financial highlights

  -- Group’s net sales decreased by 0.5% to EUR 371.5 (373.5) million.
     Comparable net sales decreased by 2.9% in July–September.
  -- Adjusted operating result declined and was EUR 7.5 (9.6) million, 2.0%
     (2.6%) of net sales.
  -- Operating result improved and amounted to EUR 14.5 (-2.2) million,
     representing 3.9% (-0.6%) of net sales.



Operational highlights

  -- Measured in waybills, Posti’s domestic freight grew by 8%. Parcel volumes
     grew by 2%. The number of addressed letters declined by 9%.
  -- In August, Posti acquired Veine, a company that specializes in
     temperature-regulated logistics. The acquisition supports Posti’s strategy
     to grow in food logistics. Posti and Veine can together offer competitive
     and nationwide food logistics solutions.
  -- In September, Posti Kiinteistöt sold a 74,000 square metre logistics
     warehouse property, Pennala, located in Orimattila.
  -- Mail items covered by the universal service obligation accounted for 3.9%
     of all of Posti’s mail items in July–September.



January–September 2016

Financial highlights

  -- Group’s net sales decreased by 5.6% in January–September and amounted to
     EUR 1,148.0 (1,215.6) million. Comparable net sales decreased by 3.9%.
  -- Adjusted operating result declined and was EUR 21.5 (23.3) million, 1.9%
     (1.9%) of net sales.
  -- Operating result declined and was EUR 13.6 (46.2) million, or 1.2% (3.8%)
     of net sales. Special items include a EUR 9.3 (44.4) million gain from
     sales of real estates. Other special items are described in connection with
     business group results.



Operational highlights

  -- Measured in waybills, Posti’s domestic freight grew by 6% year-on-year.
     Parcel volumes grew by 1%. The number of addressed letters declined by 8%.
  -- OpusCapita sold its businesses serving the local markets in the Baltic
     countries to BaltCap in January.
  -- Itella Russia acquired the Russian courier company MaxiPost in March.
  -- By parliament’s decision in June, The finnish State can decrease its
     ownership at Posti Group Corporation. In accordance with Government
     Resolution on Ownership Steering Policy, 49.9% of the ownership of Posti
     Group Corporation will be transferred to a new state-owned development
     company, Vake Oy, which was established in August. The Finnish State’s
     direct holding will remain at 50.1%.
  -- OpusCapita acquired the Germany-based software company jCatalog Software in
     April. The acquisition supports OpusCapita’s strategy to build a global
     buyer-supplier ecosystem offering and expands its geographical reach.
  -- Mail items covered by the universal service obligation accounted for 4.4%
     of all of Posti’s mail items in January–September.



Posti changed its terminology for Alternative Performance Measures in
accordance with the new guidelines issued by the European Securities and
Markets Authority (ESMA) as of the interim report for the second quarter of
2016. “Non-recurring items” was replaced by “special items”. “Operating result
before non-recurring items” was replaced by “adjusted operating result”. The
definitions for these performance measures and for items affecting the
comparability of reported figures are provided in the section “Calculation of
key figures” of this interim report and at www.posti.com/financials. 

Figures in brackets refer to the comparison period, i.e. the same period last
year, unless otherwise stated. 





Key figures of Posti Group                 7–9    7–9      1–9      1–9     1–12
--------------------------------------------------------------------------------
EUR million                               2016   2015     2016     2015     2015
--------------------------------------------------------------------------------
                                                                                
--------------------------------------------------------------------------------
Net sales                                371.5  373.5  1,148.0  1,215.6  1,650.3
--------------------------------------------------------------------------------
Adjusted operating result                  7.5    9.6     21.5     23.3     48.7
--------------------------------------------------------------------------------
Adjusted operating result             %    2.0    2.6      1.9      1.9      2.9
--------------------------------------------------------------------------------
Operating result                          14.5   -2.2     13.6     46.2     55.9
--------------------------------------------------------------------------------
Operating result                      %    3.9   -0.6      1.2      3.8      3.4
--------------------------------------------------------------------------------
Result before taxes                       12.6   -7.0     11.9     37.2     43.3
--------------------------------------------------------------------------------
Result for the period                     10.2   -1.1     10.5     31.7     36.0
--------------------------------------------------------------------------------
Cash flow from operating activities                        9.0     29.2     81.9
--------------------------------------------------------------------------------
Return on equity (12 months)          %                    2.4      5.9      6.1
--------------------------------------------------------------------------------
Return on invested capital (12        %                    3.4      6.3      6.3
 months)                                                                        
--------------------------------------------------------------------------------
Equity ratio                          %                   49.2     48.8     47.8
--------------------------------------------------------------------------------
Gearing                               %                   -7.7      8.1    -10.5
--------------------------------------------------------------------------------
Gross capital expenditure                 17.3   11.8     77.2     43.7     60.6
--------------------------------------------------------------------------------
Average number of employees                             20,759   22,482   22,219
--------------------------------------------------------------------------------
Dividend                                                                    18.0
--------------------------------------------------------------------------------



Heikki Malinen, President and CEO:

Posti will continue to seek new growth in logistics services in accordance with
strategy, while mail and newspaper delivery volumes continued to decrease. In
August, Posti purchased Veine, specialized in temperature-regulated logistics,
and through this acquisition Posti is expanding its service supply into food
logistics and temperature-regulated transport. In October, Posti strengthened
further its market position in food logistics by acquiring Kuljetus Kovalainen. 

Due to the acquisition of Veine and growth in freight, Parcel and Logistics
Services’ net sales increased by almost 8%. However, business group’s adjusted
operating result declined, but was still positive. Heavy transport volumes have
turned to growth since April 2016 after declining for 47 consecutive months.
This is a very positive development and gives confidence to the whole logistics
market. 

In July-September, the number of parcels delivered by Posti continued to grow.
The growth was particularly strong in the Baltic countries, a total of 27%. We
have strengthened our position in the international e-commerce by establishing
of more than 1,200 pick-up points in the Baltic countries and by joining the
DHL European partner network. This network offers customers access to pick-up
points in 16 European countries. In Finland, the growth in parcel delivery is
fastest through parcel points. The digital subscription channels are gaining
popularity, as well. The number of parcels paid online has increased five-fold
during the third quarter. 

During the third quarter, the market situation remained challenging in Finland
and its neighboring areas, affecting negatively the Group’s net sales and
adjusted operating result. Group’s net sales in July–September decreased by
0.5% and adjusted operating result declined to EUR 7.5 million. Adjusted
operating result improved in Postal Services and in Itella Russia. 

By parliament’s decision in June, The finnish State can decrease its ownership
at Posti Group Corporation. In accordance with Government Resolution on
Ownership Steering Policy, 49.9% of the ownership of Posti Group Corporation
will be transferred to a new state-owned development company, Vake Oy, which
was established in August. The Finnish State’s direct holding will remain at
50.1%. Possible enlargement in the ownership of Posti would support remarkably
the renewal of the company in the transformation of the postal industry. It
would also strengthen Posti’s viability and boost new growth. Posti’s main
strategic goal is to be the leading provider of postal and logistics services
in Finland. 

The Russian economy has remained in recession, and the economic recovery
continues to have a lot of questions. However, Itella Russia is showing some
signs of slow recovery in transport volumes. In July–September, the adjusted
operating result of Itella Russia improved to EUR -0.6 million. Although
Russia's economy still includes a lot of uncertainty, Itella Russia’s goal is
to turn the result profitable. 

The Ministry of Transport and Communications is currently finalizing the reform
of the Postal Act, aiming to adjust the universal service to the era of
digitalization. This is essential as digitalization moves on irrevocably. In
January–September, the volume of addressed letters declined by 8% and newspaper
delivery volumes by 9% compared to the previous year. In the coming years, the
state plans to reduce paper mail from authorities to citizens by transferring
the paper mail to digital mailbox, speeding up the need of Postal Act reform. 

The first phase of Postal Act entered into force in June and allows Posti’s
competitors to deliver mail anywhere and at any time without any delivery
obligations. However, current law requires Posti to maintain a five-day
delivery obligation in spite of the fact that an average Finn receives only
about 11 universal service letters in a year. In the situation of free
competition, this regulation with decreasing mail volumes will lead to very
expensive and cost-ineffective delivery. We urge that the universal service
obligation be renewed to be more flexible, in order to ensure an affordable
universal service for citizens and businesses all over Finland. 

Posti is ready to maintain 5–7 days delivery for newspapers in sparsely
populated areas on a commercial basis also in future. However, this requires
that the Postal Act reform will be put into effect financially in a sustainable
way. The delivery of newspapers could also be renewed by enabling mail,
newspaper and freight distribution, and other home services in sparsely
populated areas with support of a Transport Code. 



APPENDICES
Posti Group’s Interim Report in full (PDF)

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

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



IMAGES AND LOGOS
www.posti.com/newsroom



Posti Group is your first choice in postal, logistics and e-commerce services.
We manage the flow of commerce and everyday life in nine countries. Our net
sales in 2015 amounted to EUR 1,650 million. We employ approximately 22,000
professionals who serve our customers in Finland under the name Posti and in
other countries under the name Itella. All of our services in Finland are
carbon neutral. www.posti.com.

Attachments:

Posti-Group-Corporation-Interim-Report-Q3-2016.pdf