Swiss Post Annual result in line with expectations

Swiss Post generated Group profit of 255 million francs in 2019, a decline of 149 million francs compared to 2018.

At 450 million francs, operating profit (EBIT) was 55 million francs lower, down 11 percent year-on-year. These results are unsurprising as Swiss Post continues to operate in a challenging environment.

Successful market development and efficiency measures in the individual business units ensured that Swiss Post’s result declined less sharply than the deterioration in the operating framework. The 11 percent fall in operating profit reflects the major challenges facing Swiss Post, decreasing from 505 million francs in the previous year to 450 million. Thanks to the tireless commitment of the company’s 56,000 or so employees, many units of Swiss Post recorded positive results despite the challenging operating environment. They also maintained the delivery services at a very high level, which meant that Swiss Post exceeded the Confederation’s targets again in 2019.

The low interest rate environment, the decline in letter volumes and strong growth in parcels are the main challenges in the core markets. This has led to the continued decline in results over recent years. Swiss Post will require a sufficiently strong financial basis to manage its transformation over the next few years. “Swiss Post aims to remain a robust, competitive and non-subsidized enterprise to continue financing the universal service from its own resources,” says Alex Glanzmann, Swiss Post CFO. “When I look at the development of the financial results and also see how Swiss Post’s key figures are changing, then it’s obvious that action is needed,” adds Glanzmann.

Growing need for action

Income continues to decline at PostFinance owing to the ongoing low interest environment. Interest income fell sharply again compared to the previous year, dropping by 164 million francs. Operating income was down 44 million francs to 1,660 million. “This clearly shows that we cannot compensate for the competitive disadvantage of not being able to issue loans and mortgages ourselves in the current negative interest environment,” says Hansruedi Köng, CEO of PostFinance. Operating profit rose by 20 million francs last year, climbing to 240 million francs. However, this effect is not sustainable as interest income will continue to fall over the coming years.

Using the time available

Swiss Post has for many years invested in infrastructure and service as well as in innovation, staff development and sustainability. CO2 efficiency, for example, has improved by almost 28 percent compared to the base year of 2010. In addition, the Group invested around 470 million francs in 2019 alone. “Until now Swiss Post has financed these investments itself from the cash flow from operating business,” says Glanzmann.  Swiss Post has a window of just a few years to successfully implement the measures required. During this period, Swiss Post, the owner and politicians need to respond to the major challenges and pave the way for solutions. “Maintaining the status quo is not an option. If the political and entrepreneurial framework conditions remain the same, Swiss Post will not have sufficient financial leeway to be able to act within the foreseeable future,” says the CFO.

Countering the trend

PostMail has succeeded in posting consistently good results in recent years, despite a continually declining letter volume. Yet, increasing efficiency each year is proving ever more challenging. In 2019, PostMail posted operating profit of 370 million francs, down 18 million francs year-on-year. Operating income fell by 106 million francs, while the letter volume declined by 4.8 percent.

Swiss Post even more accessible

Swiss Post increased the number of access points by around 450 to 4,753 over the past year. PostalNetwork has achieved a great deal over recent years and has been repositioned. As a result, its chronic deficit has gradually been reduced. However, the deficit rose by 38 million francs in 2019 and its operating result came in at –132 million francs. The decline is due to significant provisions for early staff retirements related to ongoing restructuring measures.

Parcel boom requires investments

The fact that investment is often required before profit can be generated is evident at PostLogistics. The increase in parcel volumes (+7.3 percent) means investment of hundreds of millions is required for new parcel centers. At 128 million francs, operating profit (EBIT) was down 17 million on the previous year. The sale of a group of subsidiaries as well as provisions and the consequential costs of the robbery of a cash transport vehicle had a negative effect on PostLogistics’ result. In contrast, operating income rose by 44 million francs to 1,708 million francs.

Travelling by Postbus is popular

PostBus’s nationwide passenger transport services remained very popular last year. The annual kilometres driven rose by 3.3 percent to 124.1 million kilometres thanks to a further expansion of services, which contributed to a 2 percent increase in operating income. The operating result stood at –24 million francs. This negative figure primarily reflects impairment losses on fixed assets. The planning accuracy in the order processes of licensed transport was very satisfying.

Keeping pace with customers

Swiss Post Solutions also has its finger on the pulse of customers in Switzerland and abroad. State-of-the-art technology is being used to optimize document management. People nevertheless continue to play a key role and trained staff ensure quality. Operating profit (EBIT) of 32 million francs underlines that the strategic focus on people, processes and technology is paying off. It stands at one million francs above the previous year’s figure. Operating income was up 16 million francs to 599 million francs.

Continuing to finance the universal service from its own resources

Swiss Post is facing fundamental decisions about its future. It has overcome similar challenges several times in its long history. “Swiss Post has been shaped by entrepreneurial change throughout its 170-year history. High quality standards, the nationwide universal service and proximity to the Swiss people and businesses have been and remain Swiss Post’s raison d’être,” says Urs Schwaller, Chairman of the Board of Directors at Swiss Post.

Swiss Post wants to remain a robust, non-subsidized company. Over the past ten years, Swiss Post has contributed around 2 billion francs in dividends to the Confederation. It also paid 240 million francs in taxes and duties in 2019. The aim is to continue Swiss Post’s success story, which has a rich tradition, and to carry on financing the universal service from its own resources. “We want to continue providing a valuable public service in future and are proud of the fact that we are self-financing,” says Roberto Cirillo, CEO of Swiss Post. “A valuable public service for citizens and companies is the actual dividend from Swiss Post’s business activities,” he underlines.

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Source: Swiss Post

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