Itella Corporation’s Financial Statements and Board of Directors’ Report 2011

October–December 2011

• Itella Group’s net sales grew by 1.8% in October–December to EUR 518.1 (508.9) million. Net sales developed positively in all business groups.
• Operative result improved: operating profit (non-IFRS) before non-recurring items amounted to EUR 23.5 million (EUR 17.7 million), 4.5% (3.5%) of net sales. Operating profit before non-recurring items grew to EUR 32.8 (20.6) million in Itella Mail Communications and fell to EUR -0.9 (3.5) million in Itella Information and to EUR -1.3 (0.9) million in Itella Logistics.
• Operating profit in the fourth quarter grew by 24.6% from the previous year, representing a profit of EUR 19.8 (15.9) million, or 3.8% (3.1%) of net sales. The period’s performance was weighed down by non-recurring items to the amount of EUR 3.8 (1.8) million. 

Year 2011

• Itella Group’s net sales grew by 3.2%, to EUR 1,900.1 million (EUR 1,841.6 million). In local currencies, the increase in net sales was 2.9%. International operations accounted for 33% (32%).
• Operating profit (non-IFRS) before non-recurring items amounted to EUR 30.5 million (operating profit EUR 49.6 million), or 1.6% (2.7%) of net sales. Solvency remained on a good level.
• Operating loss, non-recurring items included, was EUR 5.9 million (operating profit 32.4), representing -0.3% of net sales (1.8%). The result was burdened by non-recurring items to the amount of EUR 36.4 (17.3) million, of which EUR 27.0 million related to personnel and the cost cutting program initiated by Itella in August 2011, EUR 16.6 million to a write-down of goodwill, and EUR -7.2 million to other items.
• Profit before taxes showed a loss of EUR 16.4 million (operating profit EUR 25.3 million).
• Net sales in Itella Mail Communications grew modestly (0.9%) and profitability decreased clearly.
• Itella Information’s net sales grew by 5.4%, but the business group’s operating result before non-recurring items decreased clearly.
• Itella Logistics’ net sales grew by 8.0%, and operating loss before non-recurring items decreased from the year before. 
• The Board of Directors will not propose the distribution of a dividend for 2011.
• The Finnish Parliament enacted the new Postal Services Act, and the law entered into force on June 1, 2011. Itella’s subsidiary Itella Posti Oy has the license for universal service. 

Jukka Alho, President and CEO:

”Itella now faces a new era. The impact of electronic communications shows especially in the decline of the print media’s delivery volumes. For a long time now, we have prepared ourselves for the new competitive situation brought about by the Postal Services Act. The development has required Itella a continuous adaptation. The vital question of how to secure future funding for the universal service obligation remains unsettled. Itella’s answer to this question is to develop its practices in accordance with customer needs and the income derived from customers. This involves an increase in the number of modern service outlets, particularly for the needs of e-commerce. However, it is also possible that the government will define service obligations, which need funding from the state.

Traditional postal operations are showing many positive signs as well, such as robust growth in Itella's parcel volumes, arising from the growth of online commerce. Itella’s operating result grew during the final quarter of the year. The global financial crisis a couple of years ago still reflects the market, however, and our parcel volumes continue to remain below the levels of peak years. Itella will continue to invest heavily in the promotion and development of electronic services. The latest advancement on this front was the banking license, which, among other advantages, enables the development of solutions for the receiving and payment of e-invoices within Itella’s online services.

Itella’s profitability weakened and the result was burdened particularly by various non-recurring items regarding for example reduction in the workforce. In addition to that, in Itella Mail Communications the result was negatively affected by a clear reduction in the magazine and letter volumes. All of our business groups are in the process of focusing on their respective core areas of business. During the past few years, the company has been engaged in an active – at times even risky – search for growth. It is now time to review such ventures further and decide which investments show future promise and which ones to abandon. In Finland, for example, we have disposed of a part of Mail Communications’ Customer Relationship Marketing activities. Regarding the Information business group, we are in the process of reviewing the operations in Germany. In respect of Itella Logistics, Swedish and Danish operations, in particular, face major challenges related to profitability, which demand systematic improvement measures. While Russian operations are still in need of further improvement, both our market position and operative development is on positive trend. All in all, Itella’s current performance is not at a satisfactory level.

Itella’s position, however, is sound. Thanks to active investment, we are considered an interesting alternative or, in some cases, the market leader in our chosen business segments in Finland and neighboring areas. The postal and logistics sectors are in the midst of a transition towards a multi-channel service model, one aspect of which involves the growth of online commerce. The standing and competitiveness of Logistics’ service warehouses in the Nordic and the Baltic countries, and particularly Russia, is strong. Russia’s WTO membership is expected to promote the growth of the logistics market in our operating area. Our Information business group has positioned itself as a unique global provider in demanding outsourcing projects involving financial management.

Even after this period of heavy investment, Itella’s solvency remains good and we have been satisfied to note that, despite a difficult year, the operative cash flow of both the entire Group and all of our business groups is clearly in the black. On the basis of this perspective, the company’s future outlook is not only challenging, but inspiring.”

APPENDICES
Itella’s Financial Statements Release and the Board of Directors’ Report 2011 (PDF) 
Corporate Governance Statement 2011 (PDF)

FURTHER INFORMATION
Sari Helander, CFO, tel. +358 50 3791 819, firstname.lastname@itella.com

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

FINANCIAL CALENDER 2012
Interim Report Q1/2012 May 3
Interim Report Q2/2012 July 25
Interim Report Q3/2012 October 31

PHOTOGRAPS AND LOGOS
www.itella.com/media

Itella Group provides solutions for managing information and product flows. Itella operates in the fields of mail communications, logistics, and financial management in Europe and Russia. Net sales in 2011 amounted to EUR 1,900 million. The number of staff is approximately 27 500. Corporate services are delivered under the Itella brand, while the Posti brand is used for services targeted at consumers in Finland. More information is available online at www.itella.com/about.