Itella’s net sales decreased – profitable operating result in Russia

ITELLA CORPORATION INTERIM REPORT, JANUARY–SEPTEMBER 2014, NOVEMBER 3, 2014 AT 10:00 (EET)   

Itella Corporation Interim Report Q3/2014

July–September 2014

• Itella Group’s net sales in July–September decreased by 4.8% compared to the previous year and was EUR 435.1 (457.0) million. The decrease was due to the weakening and intense competition of the logistics market as well as currency depreciation. Mail delivery volumes continued to decline substantially. Parcel traffic increased slightly.
• Net sales remained largely unchanged from the previous year in Itella Mail Communications, totaling EUR 254.5 (255.8) million, but decreased to EUR 145.9 (158.4) million in Itella Logistics, to EUR 47.2 (52.9) million in Itella Russia and to EUR 60.4 (61.3) million in OpusCapita. Itella Russia’s net sales decreased by 1.2% measured in rubles.
• The operating result before non-recurring items decreased, amounting to EUR 6.8 (8.0) million, or 1.6% (1.7%) of net sales. The operating result before non-recurring items improved to EUR 3.6 (2.4) million in Itella Mail Communications and was EUR -2.8 (-2.7) million in Itella Logistics and EUR 2.7 (3.0) million in Itella Russia. The operating result before non-recurring items declined to EUR 5.1 (7.2) million in OpusCapita.
• The third-quarter operating result was weighed down by non-recurring items in the amount of EUR 14.1 (11.1) million. The operating result was EUR -7.4 (-3.1) million, or -1.7% (-0.7%) of net sales. 
• Itella will renew its logistics services in Scandinavia and plans to give up air and sea freight as well as its service warehouses in Sweden, Norway and Denmark. In the future, Itella’s focus in Scandinavia will be on road transport between its countries of operation.
• On September 11, 2014, OpusCapita announced its acquisition of Norian Group, a Norwegian financial accounting outsourcing company.
• Itella Corporation will change its name to Posti Group Corporation as of January 1, 2015. Itella Logistics Oy will merge with Itella Posti Oy on January 1, 2015, and Itella Posti Oy will change its name to Posti Oy (Posti Ltd).
• As of January 1, 2015, the business groups will be: Postal Services, Parcel and Logistics Services, Itella Russia and OpusCapita.

January–September 2014

• Itella Group’s net sales decreased in January–September by 5.6% to EUR 1,367.0 (1,448.0) million compared to the previous year. The decrease was due to the decline and intense competition of the logistics market, currency depreciation as well as lower volumes in mail delivery. At comparable exchange rates, the decline in net sales was 3.8%.
• Net sales decreased by 1.6% in Itella Mail Communications, by 8.5% in Itella Logistics, by 12.5% in Itella Russia, and by 2.8% in OpusCapita. Itella Russia’s net sales grew by 0.8% measured in rubles.
• The operating result before non-recurring items improved and amounted to EUR 27.3 (24.1) million, or 2.0% (1.7%) of net sales.
• The operating result before non-recurring items improved to EUR -11.7 (-15.6) million in Itella Logistics and decreased to EUR 31.6 (32.8) million in Itella Mail Communications, to EUR 0.4 (2.8) million in Itella Russia and to EUR 16.6 (18.1) million in OpusCapita.
• The operating result decreased to EUR -5.1 (-2.4) million, or -0.4% (-0.2%) of net sales. Non-recurring items recognized during the period totaled EUR 32.4 (26.5) million, of which EUR 22.0 (15.3) million was related to personnel restructuring and EUR 10.4 (11.2) million to other items.
• Cash flow from operating activities was EUR 50.7 (9.8) million. Gearing remained at a good level and was 19.9% (30.3%).

Heikki Malinen, President and CEO:

“This year has been a time of major changes for Itella. Itella is implementing a new strategy, which aims to adapt business operations to the profound transformation in the industry, to renew the company so that it becomes more agile, to ensure the company’s profitability, to improve customer experience and to seek new growth areas. The first change visible to our customers is that Itella will change its name to Posti from the beginning of next year.

Unfortunately, the overall economic situation has not helped in driving growth. On the contrary, the economy in Finland and neighboring regions, including Russia, has declined further. The logistics market and retail have suffered from the economic recession. Transport volumes in heavy traffic have decreased in Finland for nearly 30 consecutive months. Particularly alarming is the decrease in the delivery volumes of postal items, which continued very strongly as digital communications are becoming more common.

Itella has responded to the impact of the transformation of the postal and logistics industry with structural changes that have, unfortunately, entailed personnel reductions. In addition, savings have been sought with a EUR 100 million performance improvement program, the target of which was achieved in the third quarter. The improvement of operational efficiency will be continued with a new EUR 75 million program. The new, more dynamic company structure will take effect on January 1, 2015.

Furthermore, Itella has decided to renew its logistics services in Scandinavia where the profitability of operations has not been sufficient. In the future, we will focus on road transport between Itella’s countries of operation. The key strategy is to ensure the profitability of business operations.

A positive development is that Itella Group’s operating result before non-recurring items in January–September improved by more than 13% to EUR 27.3 million. However, the Group’s net sales and operating result took a downward turn in the difficult market situation. In Russia, we achieved a profitable result and the third quarter was good there. The Ukrainian crisis has influenced Itella’s business in Russia indirectly through the weakening of the ruble and consumer purchasing power. The market situation in Russia is expected to decline in 2015.

The Group’s cornerstones include OpusCapita that offers financial accounting outsourcing services and automation solutions and has a strong growth strategy aiming at internationalization. OpusCapita’s position as a leading Nordic service provider was strengthened by the business transaction carried out in October in which OpusCapita acquired Norian Group, a Norwegian financial accounting outsourcing company.  

As the amount of traditional mail decreases, it is important to seek growth in other logistics services, such as the delivery of parcels. We have invested significantly in our service network that already consists of more than 1,400 service points. One of the fastest growing sectors for Itella is meal services the net sales of which has grown by approximately 45% since 2012. Itella delivers meals to schools, day-care centers and home care meal service customers in some 80 locations. The service is well suited to Itella whose strengths in logistics are reliability, professional skills of the personnel and a nationwide network.”

APPENDICES
Itella’s full Interim Report

FURTHER INFORMATION
Heikki Malinen, President and CEO, and Sari Helander, CFO, Tel. +358 20 452 3366 (MediaDesk, Mon–Fri 9:00 a.m. to 4:30 p.m.)

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FINANCIAL CALENDAR IN 2015 
Financial Statements for 2014: February 13, 2015

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Itella is your first choice for postal, logistics and e-commerce services. We manage the flow of commerce and everyday life in 11 countries. Our net sales in 2013 amounted to EUR 1,977 million. We employ approximately 26,000 professionals. We deliver corporate services under the Itella brand, while the Posti brand is used for services targeted at consumers in Finland. www.itella.com.