Swiss Post reports lower profit after third quarter

The Swiss Post reports a significantly lower profit after three quarters of 2020 compared to the previous year. However, there is hope for a slight recovery towards the end of the period. Increased volumes in parcels have not compensated for losses in other areas. The annual result now depends on the further course of the coronavirus pandemic.

(Bern/Switzerland) The result of the Swiss Post in the first three quarters of 2020 is lower than in the previous year. At the same time, a slight stabilization is noticeable. Therefore, the financial impact of the coronavirus pandemic on the Post’s finances may be less severe by the end of the year than feared at the end of the second quarter. The annual result now heavily relies on the further course of the pandemic and on passenger traffic.

127 million francs lower profit

As of the end of September 2020, the Swiss Post generated a group profit of 136 million francs. This is 127 million francs less than the previous year. The operating result (EBIT) in the first three quarters amounted to 176 million francs, 195 million less than in the same period of 2019. The operating revenue is also lower. At 5,113 million francs, it is 187 million francs lower than the previous year.

The consequences of the coronavirus pandemic further burden the Post’s results. The significantly lower nine-month result reflects the ongoing pressure on relevant value drivers of the Post – letter volumes, counter transactions, and interest rates. The volumes in the letter business decreased by 6.8 percent for addressed letters compared to 2019, while there were 14.9 percent fewer payments at the counter in the payment transactions, and the interest income from PostFinance fell by 25 million francs compared to the previous year. These three key figures have been declining for some time. However, the negative trend has been exacerbated by the coronavirus crisis. At the same time, the growing parcel volumes cannot compensate for the negative effects in other business areas (see box).

Certain recovery is emerging

“The definitive annual result depends on the further course of the pandemic and on the very important passenger traffic for our business,” says Alex Glanzmann, Head of Finance at Post. The forecasts are reviewed monthly and could change rapidly depending on the development of the Covid-19 situation, the Post’s finance chief adds, emphasizing: “Thanks to the solid foundation that the Post has built over the past years, we can tackle the current financial challenges on our own.” Since August, a slight stabilization has also been noticeable. In particular, there is a certain recovery and a catch-up effect in letter volumes. For example, the volume of advertising mail or priority letters increased again in certain months of the past quarter.

Currently, the Post assumes that the financial impacts will be less severe by the end of the year than feared at the end of the second quarter. However, the Post expects an overall negative result effect in the three-digit million range. The largest share of this is due to market effects arising from the coronavirus pandemic. Examples include the already mentioned accelerated decline in letter volumes at PostMail and the missing traffic revenues at PostAuto. A smaller part of the negative EBIT impact is due to one-time effects related to the coronavirus. This includes, for example, the thank-you bonus for employees in operations (10.5 million francs) as well as the procurement of protective materials such as disinfectants, plexiglass panels, and hygiene masks, and the hiring of temporary staff (21 million francs).

Living solidarity and supporting the economy

The coronavirus crisis is affecting not only the Post but the entire Swiss economy. Therefore, the Post has taken solidarity measures to further support or relieve the economy. It has paid its outstanding invoices earlier than required by payment terms. This allowed suppliers to receive urgently needed funds in a timely manner, which they could invest and use for their obligations. Additionally, the Post reduced or completely waived rent for its tenants who were heavily affected by the lockdown. PostFinance, in turn, participated in the federal government’s aid program and provided bridging loans to its SME customers. A total of 17,350 credit limits amounting to over 850 million francs were granted. Last but not least, the Post will refrain from general price adjustments in the mass business of parcels and letters next year and will postpone these to subsequent years. Post Finance Chief Alex Glanzmann emphasizes: “With all the measures taken, the Post is fulfilling its responsibility as a reliable partner of the Swiss economy.” Furthermore, it has advocated for social cohesion with the “COVID-19 Solidarity” stamp. The proceeds, currently around 2.7 million francs, go to the Glückskette and the Swiss Red Cross.

Parcels do not compensate for negative effects

Parcels are also an important growth and earnings driver for the Post. The coronavirus effect has positively influenced online business, and the volume increase compared to the previous year is significant: The volume of parcels transported increased by a total of 21.5 percent by the end of September 2020 compared to 2019. At the same time, price pressure in the parcel business is high. The growing parcel volumes cannot compensate for the negative effects in the Post’s other business areas. Additionally, investments in parcel logistics are high. In recent years, the Post has expanded its three major parcel centers for around 60 million francs and invested 190 million francs in new regional parcel centers.

Key figures Group

¹ ↑ The values have been adjusted. The Post made a neutral adjustment in the cash flow statement from operating activities in the third quarter of 2020.
² ↑ The operating result corresponds to the result before non-operating financial income and taxes (EBIT).
³ ↑ PE = Personnel unit. Average count converted to full-time positions, excluding trainees.

Key figures PostFinance AG

¹ ↑ In cooperation with partner banks.
² ↑ PE = Personnel unit. Average count converted to full-time positions. Count PostFinance headquarters.

Selected key figures segments

¹ ↑ The operating result corresponds to the result before non-operating financial income and taxes (EBIT).
² ↑ The values have been adjusted. The Post made a neutral adjustment in the cash flow statement from operating activities in the third quarter of 2020.

Photo: © Swiss Post

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