Swiss Post’s result for the first quarter of 2020 down as expected
Swiss Post posted a lower result in the first quarter of 2020 than in 2019. In particular, the lower result is attributable to the low-interest situation and negative interest income at PostFinance as well as the continued decline in volumes in letter business. The first financial effects of the coronavirus crisis are already apparent in the first quarter. Swiss Post also anticipates significant effects on the annual result.
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At 84 million francs, Group profit in the first quarter of 2020 is also down on the previous year, coming in at 46 million francs below the previous year’s figure. At 115 million francs, operating profit (EBIT) is also 57 million francs lower than in the previous year. This does not come as a surprise. Swiss Post continues to operate in a challenging environment. The decline in the result is primarily attributable to previously identified factors. Firstly, the continued low-interest situation with a decline in interest income of –18 million francs had a major impact. Secondly, the continued decrease in volumes in the letter business (–5.6% for addressed letters) resulted in lower income. In addition, the first financial effects of the coronavirus crisis were apparent. In contrast to letter volumes, parcel volumes rose by 10 percent year-on-year. A significant increase in orders on online retail sites due to the coronavirus outbreak was evident in March in particular. Swiss Post transported almost 17 percent more parcels compared to March 2019.
“Recent weeks have shown just how important Swiss Post is to Switzerland”
The result for the first quarter of 2020 highlights the challenging situation in the core markets. This is why it’s important that Swiss Post continues to develop. The coronavirus crisis has also shown that Swiss Post is vitally important to Swiss people and a successful Swiss economy. In an interview, Alex Glanzmann, Head of Finance at Swiss Post, provides an insight into the effects of the coronavirus crisis on Swiss Post, the financial situation and the new “Swiss Post of tomorrow” strategy.
Mr Glanzmann, coronavirus is also having an impact on work at Swiss Post. What has been your greatest challenge over recent weeks?
The past few weeks have been an extraordinary and challenging time for us all, both privately and professionally. My greatest challenge over recent months has been managing the balancing act between maintaining the universal service, while also ensuring maximum protection for our employees at work. In spite of the tragedy of recent weeks, I’m extremely proud of what we as Swiss Post are doing for the Swiss public as a whole and the economy. The coronavirus pandemic shows just what Swiss Post is capable of – providing a high-quality universal service for Switzerland, for young and old, for urban and rural areas, for everyone and the economy in Switzerland – in good times and bad.
You announced the result for the first quarter today. Is Swiss Post in a financially sound position?
Swiss Post has a stable financial basis and a healthy equity and liquidity situation. In the past, we have completely funded all investment ourselves. We aim to ensure that Swiss Post’s balance sheet will remain sound over the coming years. To secure Swiss Post’s position and the business model long-term – in other words until 2030 – requires new sources of growth and optimization measures for the new strategy period to provide the financial resources needed.
What financial effects is the coronavirus outbreak having on Swiss Post in specific terms?
The coronavirus crisis is intensifying the effects on volumes in letter business and parcel business. We expect the volumes at PostMail to fall significantly, especially in the advertising market. Based on current forecasts, the parcel volume will continue to increase at PostLogistics. We anticipate a decline in revenue at PostBus due to the fall in transport income. PostFinance is also experiencing a decline in cash withdrawals in Switzerland and abroad. This development is due to less travel and reduced spending over recent weeks. As digitization is being driven forward by the coronavirus crisis, PostalNetwork has recorded a decline in visits to branches, which is having an impact on stamp sales and over-the-counter payment transactions. We at Swiss Post have also incurred costs for the protection of our employees at work due to COVID-19, such as on the procurement of disinfectant, plexiglass screens and protective masks.
Several days ago you unveiled Swiss Post’s new strategy for the next four years. Does Swiss Post have sufficient financial resources to implement the transformation over the coming years?
Swiss Post has been a private limited company since 2013. Since then it has generated free cash flow of 2.3 billion francs, paid out 1 billion in dividends and built up reserves of 1.3 billion. We now need this money for the future transformation of Swiss Post. The new strategy is the starting point. In specific terms, we require investment for the two growth areas of logistics and communication services. However, the pressure on Swiss Post’s income and result is increasing significantly. This means we must focus very clearly on where we want to invest, and where we no longer wish to invest. We want a healthy and competitive Swiss Post. We need a solid business model which will allow us to generate profit so that we can continue financing the universal service ourselves in future without state support.