Posti Group 1-9/2023: Operatively good third quarter resulted in improved adjusted EBITDA compared to previous year, despite decreased net sales.

Posti Group Corporation Interim Report January–September 2023

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

July-September

Financial highlights

• Net sales decreased by 5.9% to EUR 372.3 (395.6) million.
• Adjusted EBITDA increased to EUR 52.9 (44.3) million, or 14.2% (11.2%) of net sales.
• EBITDA increased to EUR 46.5 (43.7) million, or 12.5% (11.0%) of net sales.
• Adjusted operating result increased to EUR 19.9 (13.0) million, representing 5.4% (3.3%) of net sales.
• Operating result decreased to EUR -50.2 (12.4) million, representing -13.5% (3.1%) of net sales, mainly due to impairments and other special items.

January-September

Financial highlights

• Net sales decreased by 3.5% to EUR 1,156.4 (1,198.0) million.
• Adjusted EBITDA increased to EUR 133.4 (120.3) million, or 11.5% (10.0%) of net sales.
• EBITDA increased to EUR 124.4 (117.0) million, or 10.8% (9.8%) of net sales.
• Adjusted operating result increased to EUR 34.8 (28.1) million, representing 3.0% (2.3%) of net sales.
• Operating result decreased to EUR -38.0 (24.7) million, representing -3.3% (2.1%) of net sales, mainly due to impairments and other special items.
• Net debt to adjusted EBITDA was 1.3x (1.5x).

Operational highlights in Q3

• Continuous improvements in operational efficiency across all segments increased Group’s adjusted EBITDA substantially, despite the lower net sales which was affected by the low consumer spending.
• Low consumer and customer demand decreased the volumes in freight and slowed down the circulation of goods in Posti’s warehouses.
• In the eCommerce and Delivery Services segment, the total parcel volume grew by total 3% (decreased by 6%) driven by the growth in the Baltic countries.
• The declining trend in addressed letter volumes continued, and the addressed letter volumes at Posti decreased by 18% (increased 5%). The comparison period was affected positively by the acquisition of Mediatalo Keskisuomalainen early-morning delivery operations.
  • The share of mail items covered by the universal service obligation accounted for 2.6% (2.3%) of all Posti’s mail items delivered.
• Posti made an investment decision on a new Transval warehouse in Järvenpää. The first phase of the construction will total around EUR 60 million.

Outlook for 2023

Posti is adjusting its outlook for 2023. The Group’s adjusted EBITDA is expected to be on the previous year’s level (previously it was communicated that adjusted EBITDA is expected to decrease). The new outlook states as follows:

In 2023, Posti is expecting its net sales to decrease from the previous year. The Group’s adjusted EBITDA in 2023 is expected to be on the previous year’s level. In 2022, Posti’s net sales from continuing operations were EUR 1,651.6 million and adjusted EBITDA was EUR 183.8 million. 

The continuing inflation and the increase in interest rates are impacting consumer demand. The changes in consumer behavior affect Posti's business and may further impact 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.

Turkka Kuusisto, President and CEO

I am very satisfied that we succeeded to further improve our operational efficiency and showed resilient cost management in the third quarter, especially since the market continued demanding. This resulted in a significant improvement in profitability during the reporting period. I want to thank all Posti employees for their hard work in making Posti more agile and responsive company.

Our adjusted EBITDA increased by 10.9% to EUR 133.4 million (EUR 120.3 million) during January-September, and by an impressive 19.5% to EUR 52.9 million (EUR 44.3 million) during the third quarter. Group net sales decreased by 3.5% to EUR 1,156.4 (EUR 1,198.0 million) in January-September and by 5.9% to EUR 372.3 million (EUR 395.6) in the third quarter. The Group's operating result was EUR -50.2 million (EUR 12.4 million) in the third quarter. Operating result was charged with impairments on goodwill and purchase price allocations of EUR 57.4 million (total impairments EUR 64.5 million). The impairments were primarily result of challenges in Swedish economy, and especially rapidly reduced e-commerce demand, combined with higher interest rates and heavily weakened Swedish Krona.

Looking at the third quarter on the segment level: the eCommerce and Delivery Segment’s profitability increased year-on-year, whereas net sales decreased. The segments’ net sales were adversely affected by the current economic situation which kept purchasing power low and impacted volumes negatively. Also, the Fulfillment and Logistics Segment profitability increased, whereas net sales decreased due to declined volumes and demanding market in Sweden. Profitability in Postal Services increased year-on-year, while net sales decreased. We have successfully taken actions to improve our operational efficiency from the beginning of the year. It is rewarding to see that it is now bearing fruit. 

We are approaching the peak season. The macroeconomic uncertainty is expected to continue for the remainder of the year, especially in Sweden. Consumer purchasing power rests weak, which has a negative impact on industry wide volumes. However, we continue to seek growth according to our strategy, and see the long-term market potential of e-commerce to remain positive in the Nordics. I am pleased that during the quarter we made an investment decision on a new Transval warehouse in Järvenpää. Once operational, the warehouse which will use modern technology and automation with geothermal heating and solar power will be the largest warehouse in Finland.

Sustainability has long been at the core of Posti’s strategy, and I have many times stated that sustainability is a choice. This choice is even more important in times of macroeconomic and geopolitical uncertainty. I was honored that we had an opportunity to engage in discussion on the 2030 Agenda for Sustainable Development with other leaders in the UN General Assembly in September as part of Finland’s official delegation. At the half-way point toward 2030 many of SDGs are still off track. I believe that companies like Posti have great potential to create a significant impact by tackling the lagging SDGs, and our ambitious climate targets are one great example of this commitment. We are proud to continue to pave the way towards zero-emission logistics as I believe that the transition to fossil-free logistics is not only possible but inevitable.

Looking ahead, we are now focusing on delivering a successful season, while ensuring operational efficiency in everything we do. I want to thank every Christmas maker in advance for your work and help in spreading the Christmas joy to our customers.

APPENDICES
Posti Group Corporation Interim Report January-September 2023 in full (PDF)