Profits fall sharply at SingPost

Net profits at Singapore Post (SingPost) were down by 13.6% in Q1 to S$31 million even while revenues increased by 6.2% to S354.1 million. The growth in revenues were driven by the postal and logistics segments.

SingPost have released a statement that say that the drop in profits were “due mainly to lower domestic mail volumes, costs from planned investments, increased competition in the logistics segment, and associates that are investing for growth”.

Paul Coutts, Group Chief Executive Officer, said: “Our transformation into a leader in postal and eCommerce logistics is in progress to secure new revenues for SingPost. The investments we have made will take a number of years to contribute to profitability, but are necessary as our core domestic mail business faces structural decline.

“The priority is to integrate what we have acquired into a true network across markets, products and geographies, with a focus on driving synergy benefits.

“The transition is not without challenge but we have the right people, the right infrastructure and the right technology to succeed.”

The results follow industry patterns of today: letter volumes are down while e-commerce has boosted the parcel delivery sector. For SingPost there is an additional issue – the competitiveness of the parcel delivery market.

According to SingPost: “Strong international mail growth drove postal revenue to a 9.3 per cent increase, even as domestic mail revenue decreased with more organisations moving to electronic statements.

“Cross-border eCommerce-related deliveries rose, especially with increasing volumes from the Alibaba Group. But even as profits from such transhipment activities increased, they were insufficient to offset the decline in domestic mail earnings, resulting in postal operating profit decreasing 13.7%.

“Logistics revenue increased 6.1 per cent as SP Parcels and CouriersPlease made more eCommerce-related deliveries, and as Famous Holdings saw higher contributions from its overseas operations.”

Referring to the competition issues, SingPost said that Quantium Solutions was “impacted by intense competitive pressures in North Asia”, which “negated improvements in the utilisation of the Regional eCommerce Logistics Hub in Singapore”.

SingPost continued: “The challenges in North Asia, along with costs from planned investments to build out SingPost’s eCommerce logistics network, caused logistics operating profit to fall 39.3%. Moving forward, the focus will be to increase volumes and utilisation of the network to improve economies of scale and operating leverage.

“eCommerce revenue declined and operating losses rose from a year ago, due mainly to TradeGlobal, which has lost two of its largest customers as announced previously.
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