Posti Group 2023: profitability increased as a result of significant improvements in operational excellence. Weak consumer demand in Q4 affected sales.

Posti Group Corporation Financial Statements Bulletin January–December 2023

Unless otherwise stated, the figures in brackets refer to the corresponding period in the previous year.

October-December

Financial highlights

• Net sales decreased by 5.3% to EUR 429.7 (453.6) million.

• Adjusted EBITDA increased to EUR 64.2 (63.5) million, or 14.9% (14.0%) of net sales.

• EBITDA increased to EUR 64.2 (61.2) million, or 14.9% (13.5%) of net sales.

• Adjusted operating result increased to EUR 31.6 (30.9) million, representing 7.4% (6.8%) of net sales.

• Operating result increased to EUR 31.0 (26.3) million, representing 7.2% (5.8%) of net sales.

January-December

Financial highlights

• Net sales decreased by 4.0% to EUR 1,586.1 (1,651.6) million.

• Adjusted EBITDA increased to EUR 197.7 (183.8) million, or 12.5% (11.1%) of net sales.

• EBITDA increased to EUR 188.6 (178.2) million, or 11.9% (10.8%) of net sales.

• Adjusted operating result increased to EUR 66.4 (58.9) million, representing 4.2% (3.6%) of net sales.

• Operating result decreased to EUR -7.0 (51.0) million, representing -0.4% (3.1%) of net sales, mainly due to impairments and other special items in Q3.

• Net debt to adjusted EBITDA was 1.2x (1.1x).

Operational highlights in Q4

• Group net sales decreased which was affected by low consumer and customer demand in all segments.

• Despite declined sales, effective improvements in operational efficiency in all segments increased the Group’s adjusted EBITDA to a good level, especially in the eCommerce and Delivery Services segment.

• In the eCommerce and Delivery Services segment, the total parcel volume grew by 3% (decreased by 4%) driven by the growth in the Baltic countries.

• Posti delivered about 12 million Christmas cards and nearly 7 million parcels during the peak season, from the Black Week until Christmas.

• Posti hired over 1,300 employees for the peak season across Finland.

• The addressed letter volumes continued to decrease by 12% (8%).

  • The share of mail items covered by the universal service obligation accounted for 5.8% (5.3%) of all Posti’s mail items delivered.

Outlook for 2024

In 2024, Posti is expecting its net sales and adjusted EBITDA to be on the previous year’s level. In 2023, Posti’s net sales from continuing operations were EUR 1,586.1 million and adjusted EBITDA was EUR 197.7 million.

Current macroeconomic and market conditions bring uncertainty to economic projection and consumer confidence. Consumer behavior affects Posti's business and may further impact our actual results.

The Group’s business is characterized by seasonality. The net sales and adjusted EBITDA in the segments are not accrued evenly over the year. In consumer parcels and Postal Services, the first and fourth quarters are typically strong, while the second and third quarters are weaker. The postal volume decline is expected to continue.

* Board of Directors' proposal to the Annual General Meeting.

Turkka Kuusisto, President and CEO

Year 2023 ended on a good note. Our profitability increased in the last quarter and developed positively during the year due to operational excellence and the strong implementation of our strategy. Our ability to produce quality remained high and we managed to improve cost-efficiency throughout the year. This is an outstanding result from our teams which steered well in a demanding geopolitical and economic environment. I want to thank every Posti employee for their work, and resilience during the year. I also want to thank our customers for their trust on us.

Our adjusted EBITDA increased to EUR 64.2 million (EUR 63.5 million) during the fourth quarter and to EUR 197.7 million (EUR 183.8 million) during January-December. This can be attributed to operational efficiency that improved remarkably for example in the form of optimized resourcing, successful cost management, and investments in automation in sorting capabilities. During the peak season we delivered nearly 7 million parcels and about 12 million Christmas cards.

Group net sales decreased by 5.3% to EUR 429.7 million (EUR 453.6 million) in the fourth quarter and by 4.0% to EUR 1,586.1 million (EUR 1,651.6 million) in January-December. Consumer purchasing power and trust in the economy stayed low throughout the year, especially in Sweden. This resulted in an overall decrease in volumes and low circulation of goods in our warehouses, and unavoidably had a negative impact on net sales. Despite the strong operational performance, the net profit was affected by the impairments on goodwill and purchase price allocations in Q3. This was mainly related to the challenges in Swedish economy, and especially rapidly reduced e-commerce demand, combined with higher interest rates and heavily weakened Swedish Krona. The Group's operating result decreased to EUR -7.0 (51.0) million in 2023.

For the full reporting year, eCommerce and Delivery Services net sales and profitability decreased due to increased costs driven by inflation and high interest rates, and consequently declined volumes. Fulfillment and Logistics Services profitability increased due to improvements in operational efficiency, whereas the net sales declined. In the Postal Services segment both the net sales and the profitability increased. This was driven by the improvements in operational efficiency as well as the increased letter volumes in the early part of the year. Letter volumes decreased in 2023.

As mentioned, the year presented challenges in our operating market. Inflation remained high and interest rates peaked, which had a negative impact on the economy and kept the demand for logistic services low. While we are mindful that the uncertainties in our operating environment will somewhat continue in 2024, we do see some signs indicating that the market will pick up momentum and that purchasing power will improve. We continue to seek growth according to our strategy and expect the long-term market potential of e-commerce to remain positive in the Nordics. More recently, I’m satisfied that our digital service for letters and parcels, the OmaPosti application was revamped during the fourth quarter, and now offers more intuitive parcel experience for the consumer. The OmaPosti application already has over one million active users and is gaining new users every day.

Notable sustainability highlights from the fourth quarter include our first ever diesel to electric conversion truck and the inauguration of Finland's first heavy-duty charging station, which I am confident will accelerate the clean transition of the industry. COP28, which we participated in as part of the Finnish pavilion, concluded with a historic agreement to transition away from fossil fuels and to try to rein in the accelerating climate change. My hope is that this resolution will help in reducing emissions in the logistics sector also on a global scale. I am especially delighted to report positive developments in our work safety and the metrics in this area are showing favorable progress. Our continuous commitment to a safe working environment is reflected in these results. We have also kicked off our Sustainability Program update. We remain steadfast in our pursuit of sustainable growth within planetary boundaries, strengthening our societal handprint, and ensuring a caring workplace for all our employees.

We are in a good shape to continue the year 2024. Our strategy is solid, and we keep executing it in all fronts. Looking forward, we continue to focus on operational excellence and business development, and we hold our eyes steadily on the future, together as a team.

Financial Statements Bulletin Q4/2023