PostNord – Q1 4% drop in net sales

Scandinavian postal operator PostNord has reported net sales of SEK9438 million for the first quarter (Q1) of 2017, down from SEK9638 million.

Håkan Ericsson, PostNord’s President and CEO, said in a statement: “The decrease was attributable to a further major downturn of 8% overall in the Group’s mail volumes of which 7% in Sweden and 17% in Denmark. Calendar-adjusted, the volume decrease was 10% in Sweden and 22% in Denmark. To a certain degree, this is being offset by continuingly buoyant growth in e-commerce, with a volume increase of 10% in B2C parcels for the Group during the quarter.”

The postal operator’s adjusted operating income for the quarter was down from SEK300 million last year to SEK191 million. According to the CEO, “Items affecting comparability, SEK -97m (0), are attributable to the transformation to a new production model in Denmark.”

In today’s statement about the quarterly results, Ericsson said that: “The wide-ranging transformation of our Danish business is continuing and at the same time further actions are being taken to adapt the Group’s administrative costs.”

The PostNord CEO added: “The powerful impact of digitization, above all in Denmark but gradually also in Sweden, has fundamentally challenged the business model. PostNord’s strategic direction requires the business to be transformed into a competitive, Nordic logistics and communications group with a strong focus on the growing e-commerce sector. We are currently implementing a new production model in Denmark, making further reductions of more than SEK 1 billion in the Group’s administrative costs, and preparing for rapid implementation of the new system of postal regulation in Sweden when it enters into force.The introduction of a new, financially sustainable production model in Denmark will affect around 3,500-4,000 employees over two to three years. It is estimated that the transformation will lead to costs of around SEK 3 billion, mainly in connection with the phasing-out of employees benefiting from “special employment conditions”. A dialogue is in progress with PostNord’s owners regarding how these costs are to be handled.”

Ericsson also reported that: “As a consequence of the accelerating digitization a new postal legislation is now absolutely essential in Sweden, since the opportunities for further cost adjustments within the current framework are limited.”

But it appears that this issue could be resolved. According to Ericsson: “Our expectations are that the government bill announced for May this year will create a more flexible and more modern regulatory system that takes account of the need for postal services and creates the right conditions to enable a good postal service to be provided on reasonable financial terms throughout Sweden.”  
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