Itella’s result for 2013 weakened by declining volumes

ITELLA CORPORATION’S FINANCIAL STATEMENTS RELEASE, FEBRUARY 14, 2014 AT 10 A.M. (EET)

October–December 2013

• Itella Group’s net sales decreased by 2.5% to EUR 528.8 (542.6) million in the fourth quarter of 2013.
• Net sales increased by 1.2% in Itella Mail Communications, but decreased by 5.9% in Itella Logistics and by 3.2% in OpusCapita.
• The Itella Group’s operating result before non-recurring items was EUR 26.3 (12.8) million, representing 5.0% (2.4%) of net sales. The operating result before non-recurring items improved to EUR 34.3 (25.5) million in Itella Mail Communications and to EUR 4.3 (4.0) million in OpusCapita, but decreased to EUR -7.2 (-5.6) million in Itella Logistics.
• The Itella Group’s operating result for the fourth quarter was EUR 12.3 (9.1) million, or 2.3% (1.7%) of net sales. Non-recurring items recognized during the period totaled EUR 14.1 (3.6) million. 
• Itella Information changed its name to OpusCapita on November 1, 2013.

Year 2013

• The Itella Group’s net sales grew by 1.5% to EUR 1,976.8 (1,946.7) million. In local currencies, the increase in net sales was 2.3%. International operations constituted 24% (27%) of net sales.
• Net sales decreased by 0.6% in Itella Mail Communications and by 2.5% in OpusCapita, but increased by 7.8% in Itella Logistics.
• The Itella Group’s operating result before non-recurring items was EUR 50.5 (53.2) million, or 2.6% (2.7%) of net sales.
• The operating result decreased to EUR 9.9 (39.0) million, or 0.5% (2.0%) percent of net sales. The operating result was affected by EUR 40.5 (14.2) million in non-recurring items, of which EUR 17.5 was related to personnel restructuring, with other non-recurring items totaling EUR 23.0 million.
• The operating result before taxes was EUR -2.4 (30.8) million.
• The Group’s operating cash flow before investments decreased, amounting to EUR 81.3 (118.9) million before investments.
• Gearing was 21.1% (23.5%). Equity ratio stood at 47.5% (46.2%).
• In April, Itella launched a EUR 100 million performance improvement program for 2013–2014.
• Itella sold Itella Bank to the Savings Banks Group on April 18, 2013.
• In July, OpusCapita sold its printing services in Poland to PostNord.
• In September, Itella sold its subsidiary Logia Software to its management.
• The Board of Directors proposes that no dividend be distributed for 2013.

* Non-IFRS = before non-recurring items

Heikki Malinen, President and CEO

“The year 2013 was very challenging for Itella. Itella’s result decreased from the previous year and showed a loss before taxes. The result was weakened by the drastic transformation of the postal industry, which was reflected in the strong decline in the delivery volumes of traditional letters, newspapers and magazines in Itella Mail Communications. The volumes of Itella Logistics were impacted by the economic recession and the tight competition in the transport industry. The full-year operating result was affected by significant non-recurring items.

Among Itella’s businesses, Itella Logistics showed a more substantial loss than in the previous year. This was a disappointment. On the other hand, Itella Logistics’ Russian operations recorded a satisfactory result, and we are expecting the Logistics business group to improve its result markedly in 2014.

The excellent performance of OpusCapita, formerly Itella Information, was one of the most positive developments of 2013. The business group was renamed at the beginning of November. OpusCapita improved its operating result significantly in 2013. The full-year result of Itella Mail Communications decreased, but the business group recorded a strong result in the fourth quarter, driven by seasonal sales.

In April, we announced a new performance improvement program for 2013–2014 to ensure our competitiveness and profitability. The program aims at EUR 100 million in cost savings, and we are already halfway there.  The program brings savings through restructuring and enhancing the efficiency of operations and processes, eliminating unprofitable operations, making savings in sourcing and improving productivity.

At the end of October, we announced our new vision and strategy for the company. We worked on this new vision throughout the year. Our operations will be more customer-focused than ever before. We want to be the first choice for postal, logistics and e-commerce services and ensure that trade and everyday life run smoothly.

We have revised our strategy and vision in response to global changes in the postal industry, communications and trade. These developments are strongly affecting Finland, among many other countries, as the rapid and extensive increase in electronic communications is substantially decreasing the volume of letter, newspaper and magazine deliveries. The situation is particularly challenging in early-morning newspaper deliveries, where a significant increase in unit costs creates profitability pressures for Itella and publishers. For this reason, Itella is willing to establish companies specializing in early-morning deliveries in cooperation with publishers. Itella could hold a majority or minority interest in such a regional company.

Our primary goal for the coming years is to ensure a sustainable foundation for profitable operations in order to develop high-quality postal services, secure funding for our universal service obligation and make sufficient investments in growth areas. Instead of expansion, we are investing in and focusing on our core businesses.

We are seeking growth and profitability in the Russian market as well as e-commerce, which is increasing strongly. In the future, Russia will be our main market, alongside Finland. Our Russian strategy also benefits Finnish export companies, as the expanding logistics network enables increased exports.

People’s mobility and use of time are changing, and feedback indicates that our customers value flexibility and a diverse range of services. We want to be even closer to our customers. We increased the number of postal service points by more than 200 in 2013, with the total standing at 1,310 at the end of the year. The goal is to increase the number of service points to 1,700 by 2020.

We had to make some difficult decisions in 2013. The year was particularly challenging for our personnel. As a result of cooperation negotiations, our personnel numbers decreased by a total of 637 person-years in 2013. In January 2014, we started cooperation negotiations at Itella Posti that may lead to a reduction of 1,200 jobs in basic delivery. We will be able to implement part of the reduction through voluntary arrangements and attrition.”

APPENDICES

Itella's Financial Statements Release and the Board of Directors Report 2013

Corporate Governance Statement 2013

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

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

FINANCIAL CALENDAR IN 2014
Interim Report Q1/2013, April 30
Interim Report Q2/2013, July 18
Interim Report Q3/2013, November 3

IMAGES AND LOGOS
www.itella.com/media

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