PostNord: Interim report third quarter 2020

Overview

The result improved significantly also in the third quarter of the year. The efficiency programs continued to perform well and combined with the high parcel volumes contributed to the improvement in income. Growth in e-commerce led to very high parcel volumes, while mail volumes continued to decline as a result to the ongoing trend of digitalization. Delivery quality in the parcels business was adversely affected by the corona pandemic, whereas delivery quality in the mail business remained high.

Comment from Annemarie Gardshol, President and Group CEO

The current pandemic is affecting us all in different ways. For PostNord’s part, growth in e-commerce has had great impact on our parcels business. As a result, we find today that we have reached levels that we had not expected to see for a couple of years. Even so, the sharply higher volume of parcels has also brought challenges, but by working with our customers we have maintained our important mission: to deliver parcels and letters. With that, we help to make everyday life easier for everyone who lives and works in the Nordic region. I am proud of how well we have handled the transformation.

Like-for-like net sales increased slightly over the quarter, to SEK 8,919m for the Group as a whole. The relative shares of our various businesses continued to shift. Parcel volumes increased by ten percent. In all, we handled 46 million parcels, with an ever-increasing share being delivered to the home. The mail business accounts for a declining share of our business. In the quarter, mail volumes fell by ten percent. Operating income improved considerably, to SEK 747 (57) m. Changes in customer behavior and the uncertainty arising from the pandemic also mean challenges. During the quarter, we recorded parcel quality of 96 percent, which falls short of our level of ambition. We focus intensively at all times on ensuring that all parcels reach their recipient on time. Over the quarter, delivery quality for mail in Sweden was high (nearly 99 percent), exceeding the legal requirement in Sweden by a wide margin. In Denmark, we faced challenges with mail quality (approximately 94 percent). However, the result for the quarter was above the legal requirement in Denmark. The extra costs incurred through the pandemic for sickness compensation were offset by government compensation to mitigate the effects of the pandemic, as well as by high efficiency in handling the sharply higher volume of parcels. This, combined with progress in our internal efficiency programs, helped to bring about the improved result.

As mail volumes fall, we face an increasing need to adapt the mail business. In late September, we started off a pilot project in every other day letter deliveries in the Swedish market. The results of the trial have been encouraging, which bodes well for the future. On October 1, the Swedish government set out the terms of reference for an inquiry into how the universal postal service is to be financed. This is a complex subject, and I understand that the inquiry needs to take time.  At the same time, the situation in society is moving fast, and if the Swedish mail business is not to start operating at a loss, regulatory relaxations need to be put into place in parallel.

In Denmark, dialogue with politicians concerning a long-term financially sustainable letter business continues. The DKK 112m approved by the Danish government to compensate for the extra costs associated with the universal postal service in the second half of 2020 is now up for approval by the EU Commission. In parallel with that decision, we are also looking forward to a new long-term agreement with the Danish government from the turn of the year.

As far as our ambition to reduce carbon dioxide emissions is concerned, I am proud to confirm that during the quarter we achieved our target of reducing the Group’s total emissions by 40 percent, from the 2009 level. This is a good starting-point for the work that we are now embarking on to achieve our ambition of operating fossil-free by 2030.

The future is still a great deal more uncertain than normal, but my view is that – with a clear strategy, high commitment and highly-skilled employees – we have good conditions for continuing our transformation into the favorite carrier of the Nordic region.

For further information, please contact:

Contact person: Magnus Larsson. This information is such that PostNord AB (publ) is obliged to make public pursuant to the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 8 a.m. CET on October 23, 2020.