Year-end report 2016: New production model to be introduced in Denmark. Closer group-wide focus on the customer experience delivering results.

October-December 2016

• Net sales SEK 10,355m (10,434).
• Operating income SEK -1,012m (-284).
• Adjusted operating income SEK 242m (501).
• Items affecting comparability, net, SEK -1,254m (-785).
• Net income for the period SEK -1,375m (-337).
• Earnings per share SEK -0.69 (-0.17).
• Cash flow from operating activities SEK 1,424m (900).

January-December 2016

• Net sales SEK 38,478m (39,351).
• Operating income SEK -1,083m (564).
• Adjusted operating income SEK 500 (927).
• Items affecting comparability, net, SEK -1,583m (-363).
• Net income for the period SEK -1,583m (278).
• Earnings per share SEK -0.79 (0.14).
• Cash flow from operating activities SEK1,321m (1,585).

Message from Håkan Ericsson, President and CEO

PostNord’s results continue to be impacted by sharply declining mail volumes, above all in Denmark. The rapid pace of digitization has led to a dramatic downward trend in volume and income in the Danish business. A decision has been taken to introduce a new financially sustainable production model for the future.

In Denmark, where the Danish government’s digitization agenda has made the country into probably the most highly-digitized country in the world, the scale of volume losses in the mail business is continuing to grow. Over 2016, the volume of priority mail fell very sharply and since 2000 has declined by approx. 90 %. Denmark’s new Postal Services Act, passed in 2016, has now put regulatory conditions in place that will enable the Danish business to adapt more effectively to the volumes to be handled. PostNord has therefore decided on additional measures, in the form of a new production model to be introduced. The transformation of PostNord Denmark will take several years to implement in full and is expected to lead to major restructuring costs and losses during the period of adjustment. These costs are for the most part associated with the special agreements entered into with the personnel at Posten Danmark’s corporatization. An impairment loss was applied to goodwill in the fourth quarter with regard to the Danish business and to certain assets relating to the mail business in Denmark.

Delivery of market-leading quality is a high-priority area and during the quarter the level of quality for our main products improved, compared to the same time last year. In addition, the PostNord Group has further sharpened its focus on the customer experience. In part, through implementation of the PostNord Lyssnar (PostNord’s Listening) program in the Swedish organization. The result has been enhanced understanding of how our customer’s customer, the recipient, experiences all contacts with PostNord, and a number of quality-enhancing measures have been taken. Our survey results also indicate an improvement. PostNord Lyssnar is also being introduced in the Group’s other primary markets in the first quarter of 2017.

PostNord’s like-for-like net sales declined by 2% in the fourth quarter, mainly as a result of another major decrease of 10% overall in the Group’s mail volumes 7% in Sweden and 23% in Denmark. To a certain degree, this is being offset by continuingly strong growth in e-commerce. Volumes of B2C parcels increased by around 18%. Like-for-like net sales for the full year fell by 3%.

Adjusted operating income totaled SEK 242m (501) for the quarter and SEK 500m (927) for the full year. The decline mostly arose through the impact of the sharply falling mail volumes in Denmark that could not be offset through sufficient adjustment on the cost side. Of full-year income for 2016, Business area e-Commerce & Logistics accounted for approximately 75%. Items affecting comparability, SEK -1,583m (-363) net, for the full year consisted for the most part of impairment losses applied to goodwill and certain tangible assets in Denmark, and the sale of PostNord Strålfors’ non-Nordic operations.

The downturn in mail business is common to all national postal corporations. The outcome is that business models must be reviewed from the bottom up in order to adjust to the trend we are seeing in Denmark, where letters are gradually becoming a niche product. This trend means that systems of postal regulation will have to be adapted. In Sweden, the decline in mail volumes is accelerating and new government digitization initiatives in communications between government agencies and private individuals and businesses are being rolled out. We are looking forward with confidence to the new postal services bill that the government has announced for May this year. The bill is expected to create better conditions for continuing to deliver a good postal service throughout Sweden under reasonable financial conditions.

We also need to adjust if we are to generate good profitability in our growing and very strategically important logistics business. This will be especially important in the consumer-led segment, which is being driven primarily by the rapid growth in e-commerce. PostNord has long held a strong position as an expert in e-commerce logistics and is a leading supplier in the industry. Our offering is now being expanded on the basis of an even more clearly defined consumer perspective.

The robust measures implemented in 2015 to realign our operations in Sweden and Denmark created certain quality problems. During the summer and autumn 2016, our quality in Sweden in particular came under scrutiny by the government, the media and our owners. In the second half of 2016, we stepped up our quality, which now maintains a generally satisfactory level, even if areas for improvement remain.

With the right priorities, solid experience, greater receptiveness and an ever-increasingly competitive business, we are well equipped to deal with the current paradigm shift that postal corporations worldwide are encountering. Through our decision to build a sustainable production model for the future, PostNord will take the next important steps in its evolution into the leading logistics company for private individuals and businesses in the Nordic region.

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 8:30 a.m. CET on February 10, 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