Itella’s net sales increased – operating result declined in a challenging market situation

Itella Corporation Interim Report Q1/2013

  • Itella Group’s net sales in January–March amounted to EUR 496.0 (485.3) million, representing growth of 2.2 percent. The growth was generated particularly by the integration of VR Transpoint’s groupage logistics business and Itella Logistics.
  • Net sales in Itella Mail Communications decreased by 1.2 percent and increased by 12.9 percent in Itella Logistics. Comparable net sales in Itella Information grew by 5.6 percent when accounting for the sale of the printing services business in Germany in 2012.
  • Operating result before non-recurring items declined to EUR 12.4 (22.8) million, or 2.5 percent (4.7 percent) of net sales. The operating result before non-recurring items declined to EUR 21.4 (25.3) million in Itella Mail Communications and to EUR -10.3 (-1.7) million in Itella Logistics, and improved to EUR 6.4 (3.2) million in Itella Information.
  • The first-quarter operating result declined and amounted to EUR 10.8 (21.0) million, representing 2.2 percent (4.3 percent) of net sales. Non-recurring items recognized during the period totaled EUR 1.6 (1.8) million.
  • Cash flow from operating activities increased and totaled EUR 23.4 (20.3) million.
  • The rate of decline in letter and delivery volumes is accelerating and the overall market situation is weaker. Itella launched a new performance improvement program and started cooperation negotiations on April 10. The goal of the updated program is to achieve cost savings of EUR 100 million during 2013–2014.
  • In March, Itella announced its intention to sell the entire share capital of Itella Bank Ltd to Savings Banks. The corporate transaction was brought to conclusion on April 18, 2013.
  • Itella is also renewing its ICT operating model and, to that end, signed an extensive partnership agreement with IBM. As part of this agreement, Itella will outsource some of its ICT operations to IBM. As of June 1, 2013, a total of 123 employees from seven countries of operation will transfer to the employment of IBM.

Key figures of Itella Group 1-3/2013 1-3/2012 2012
Net sales, MEUR 496.0 485.3 1,946.7
Operating result (Non-IFRS), MEUR *) 12.4 22.8 53.2
EBIT margin (Non-IFRS), % *) 2.5 4.7 2.7
Operating result (EBIT), MEUR 10.8 21.0 39.0
EBIT margin, % 2.2 4.3 2.0
Result before income tax 7.7 19.3 30.8
Result for the financial period, MEUR 4.7 11.6 14.1
Return on equity (12 months), % 1.0 -1.9 2.1
Return on invested capital (12 months), % 3.5 2.0 4.6
Equity ratio, % 46.7 46.7 46.2
Gearing, % 21.7 20.6 23.6
Gross capital expenditure, MEUR 11.0 21.7 134.7
Personnel on average 27,561 27,202 27,460
Dividends, MEUR - - 6.8
*) Non-IFRS = excluding non-recurring items

Return on equity and return on invested capital is disclosed in the table as a rolling 12-month figure.

President and CEO Heikki Malinen:

”The net sales of Itella as a whole grew during the first quarter, largely due to VR Transpoint’s groupage logistics business being integrated into Itella Logistics. Still, the company’s operating result declined to nearly half of what is was during the corresponding period in 2012. This was attributable to the declining letter and magazine volumes of Itella Mail Communications as well as the logistics market, in which competition has become increasingly fierce.

The postal sector is undergoing a transition on the global scale and there are clear indications that digitization will have a substantial impact on volumes during the current decade. Consumer confidence in terms of personal finances seems to have deteriorated during early 2013. This is reflected indirectly in freight volumes and the turnover rates in the logistics of consumables. Competition in the logistics sector has furthermore increased. The growth in internet sales continued, having a positive effect on Itella’s business. We continued our investment in the expansion of the network of automatic parcel terminals.

Itella’s financial performance must be improved for the company to be able to carry out its long-term change processes, to finance investments that are essential in terms of its competitiveness, and to maintain the level of its services. With these needs and the challenges of the economic environment in mind, Itella’s Board of Directors has specified the Group’s long-term financial goals. The main focus of operations is shifting from growth to the improvement of profitability and maintenance of Group’s good solvency.

As a related measure, we started a new performance improvement program aiming to increase efficiency in 2013 and 2014. The goal of the updated program is to achieve cost savings in the amount of EUR 100 million. A part of this program involves measures with which we strive to streamline our operations within, for instance, administration and other support functions. In addition, we are in the process of renewing our ICT operating model, in relation to which some ICT operations are being outsourced to IBM. In March, we made the decision to sell the entire share capital of Itella Bank Ltd to Savings Banks. This transaction was completed recently.”

APPENDICES
Itella’s full Interim Report


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


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

FINANCIAL CALENDAR 2013
Interim Report Q2/2013, July 24
Interim Report Q3/2013, October 30

PHOTOGRAPHS AND LOGOS
www.itella.com/media

Itella Group provides solutions for managing information and product flows. Itella operates in the fields of mail communications, logistics, and financial management in Europe and Russia. Net sales in 2012 amounted to EUR 1,947 million. The number of staff is approximately 27,500. Corporate services are delivered under the Itella brand, while the Posti brand is used for services targeted at consumers in Finland. Further information is available online at www.itella.com.

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