Interim Report January-September 2017: Uncertainty dispelled – financing for the Danish transformation and Swedish postal legislation in place

JULY–SEPTEMBER 2017

• Net sales SEK 8,565m (8,895).
• Operating income SEK -199m (-101).
• Adjusted operating income SEK -123m (-41).
• Items affecting comparability, net, SEK -77m (-60).
• Net income for the period SEK -224m (-145).
• Earnings per share, SEK -0.11 (-0.07).
• Cash flow from operating activities SEK -370m (-656).

JANUARY-SEPTEMBER 2017

• Net sales SEK 26,996m (28,123).
• Operating income SEK -396m (-71).
• Adjusted operating income SEK 66m (258).
• Items affecting comparability, net, SEK -462m (-329).
• Net income for the period SEK -544m (-208).
• Earnings per share, SEK -0.27 (-0.10).
• Cash flow from operating activities SEK 1,542m (-103). 

Message from Håkan Ericsson, President and CEO
On Friday, October 20, PostNord’s owners – the Swedish and Danish States – presented an agreement concerning the financing for the transformation of the Danish business to a new production model. The agreement, which is conditional on approval by the EU Commission and by the Danish and Swedish Parliaments, sends a clear signal that the owners support the PostNord Group and its operations. In conjunction with Sweden’s new Postal Services Act and proposed amendments of the Postal Ordinance, this will create favorable conditions for PostNord’s operations going forward. During the quarter, PostNord is intensifying its focus on service development and quality improvement in order to enhance the overall customer experience.  

PostNord's like-for-like net sales decreased by around 3% in the third quarter to SEK 8,565m (8,895). The decrease was attributable to a further major decline – of 10% overall – in the Group's mail volumes, 7% in Sweden and 21% in Denmark. In the first nine months of the year, like-for-like net sales decreased by around 4%. Total mail volumes were down 10%, 7% in Sweden and 20% in Denmark. At the same time as digitization is causing mail volumes to shrink, we are seeing strong growth in e-commerce-driven logistics and digital services. The increase in the Group’s e-commerce-related B2C volumes was 17% in the third quarter and 14% in the first nine months of the year. This indicates that the growing e-commerce business is in part offsetting lower revenue from the traditional mail business. Due to seasonal factors, the third quarter is a weak one for PostNord and adjusted operating income for the quarter was SEK -123m (-41). The lower income compared with the preceding year resulted from the sharp decline in sales for the mail business. Adjusted operating income for the first nine months totaled SEK 66m (258). Items affecting comparability amounted to SEK -77m (-60) in the quarter and SEK -462m (-329) for the first nine months. These items consisted entirely of costs relating to termination of employment for personnel benefiting from “special employment conditions” in the Danish business.

A new Swedish Postal Ordinance enters into force on January 1, 2018. The details have not yet been settled, but PostNord welcomes the current overnight-delivery requirement being changed to two-day delivery. At the same time, the quality requirement will be raised from 85% to 95%. On the transition to two-day delivery, a new price level will be set for the new product. Unfortunately, the possibilities for more flexible pricing and distribution that we would have wished for are not recommended. Furthermore, we do not consider that the changes in regulations take into account further volume losses through digitization. Under the changes proposed in the new postal legislation, Sweden’s Post and Telecommunications Authority (PTS) is to be given certain additional mandates in requirement-setting and supervision. 

Work on further honing quality and the customer experience continues to be treated as very high priority, and as a result we have allocated additional resources to ensure a high level of quality in Sweden. One of the challenges arises from the fact that, given the strength of the Swedish economy, the demand for personnel is high. The reverse of this, in itself positive, growth is the fierce competition for the individuals with the expertise and experience that PostNord is seeking.

As e-commerce continues to grow, consumers want faster and more flexible deliveries. In order to strengthen the offerings of the e-commerce companies, PostNord has upped the pace of service development. Starting in the biggest cities, evening home deliveries are being introduced as a new standard in the Nordic region. At the same time, Saturday deliveries to service points in Sweden are being introduced, which already been introduced in Denmark, enabling consumers to buy online on Friday and collect their purchase on Saturday, provided that the e-retailers pack the goods in time. We are delighted to see that PostNord’s parcels app now shows more than a million downloads in the Nordic region. Above all, it is positive development that frequency of use is high. Active listening and the ability to act fast on our customers’, and their recipients’, wishes continues to provide the platform for the development of our customer-led offering.

For further information, please contact: 
PostNord Media Relations, tel: 46 10 436 10 10, e-mail: press@postnord.com 

Contact person: Emma Riblom.This information is such that PostNord AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 1.00 p.m. CET on October 27, 2017.

We deliver! PostNord is the leading supplier of communication and logistics solutions to, from and within the Nordic region. We ensure postal service to households and businesses in Sweden and Denmark. With our expertise and strong distribution network, we develop options for tomorrow’s communication, e-commerce, distribution and logistics in the Nordic region. In 2016, the Group had around 33,000 employees and sales of just over SEK 38 billion. The parent company, PostNord AB, is a Swedish public limited company headquartered in Solna, Sweden. Visit us at www.postnord.com