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Swiss Post’s profit declines in difficult market environment

Communication dated 25.08.2016

In the first half of 2016, Swiss Post generated Group profit of 313 million francs (previous year: 391 million francs). The market environment in which Swiss Post operates continues to be difficult: operating profit (EBIT) fell to 383 million francs (previous year: 504 million francs) due to lower contributions to the results from the financial services, communication and logistics markets.

In the first six months of 2016, Swiss Post generated Group profit of 313 million francs, 78 million francs less than in the prior-year period. At 383 million francs, operating profit was 121 million francs down year-on-year. The company’s business performance is characterized by an ongoing decline in the volume of letters, growing pressure on parcel margins and low interest rates in the financial services market. Operating income rose slightly by 1.2 percent to 4,150 million francs (previous year: 4,100 million francs).

Communication and logistics market: lower contributions to results

In the communication market, Swiss Post recorded an operating profit of 94 million francs (previous year: 137 million francs). The sharper decline in profit generated by Post Offices & Sales is principally due to the Group unit’s new internal performance mandate. PostMail maintained its contribution to operating profit, while Swiss Post Solutions recorded an increased contribution. The decline in the volume of letters was more pronounced year-on-year, with the number of addressed letters falling by 3.5 percent. The operating profit posted by Swiss Post Solutions totalled 10 million francs, 4 million francs higher than the previous year’s figure.

In the logistics market, PostLogistics recorded an operating profit of 52 million francs (previous year: 65 million francs). The logistics market continues to be characterized by increasing competition and price pressure, both nationally and internationally. Despite additional income from the 6.5 percent rise in parcel volumes and increased demand for value logistics solutions, operating profit fell. This decline is due to the Group unit’s adapted internal performance mandate.

In the passenger transport market, PostBus increased its operating profit by two million francs to 21 million francs. The main factor responsible for this positive trend was the ongoing low price of fuel. As the budgets of the public entities which act as contracting bodies for transport services are squeezed, the pressure on prices is rising even more.

PostFinance’s competitive disadvantage widens

Active in the financial services market, PostFinance recorded an operating profit (EBIT) of 237 million francs (prior-year figure: 280 million francs). The 43 million franc decline is mainly due to higher portfolio value adjustments on financial assets (–79 million francs), whereas portfolio reversals of impairment had been recognized in the first half of the previous year (+30 million francs). Net income from the interest differential business was down 17 million francs due to a lack of profitable investment opportunities. This trend will continue in the current year. Gains realized from the sale of equity holdings partially offset the decline in profit. The Brexit referendum in the United Kingdom temporarily caused a slight increase in customer foreign exchange trading volumes. Customer assets increased in both the private and business customer segments, with PostFinance’s sight deposit balance at the Swiss National Bank exceeding the exemption limit. PostFinance’s disadvantage of being unable to issue its own loans and mortgages will become increasingly pronounced. In the current low interest rate environment, it is clear that the lending prohibition is economically damaging and a threat to PostFinance’s long-term profitability.

Consistently adapting to customer requirements

Swiss Post wants to continue to provide its customers with first-class services in the future and therefore relies on solid profits which it can reinvest. In addition, Swiss Post must further develop its access points and services, continuing to provide customers with easy and versatile access, while at the same time creating an affordable infrastructure. Swiss Post expects to meet the Confederation’s financial goals again in 2016.

Group key figures

Key figures Unit Full year 2015 First half 2015 First half 2016
Operating income CHF million 8,224 4,100 4,150
Operating profit (EBIT)[1] CHF million 823[2] 504[2] 383
as % of operating income % 10.0[2] 12.3[2] 9.2
Group profit CHF million 645[2] 391[2] 313
Total assets CHF million 120,327 121,662 127,889
Equity CHF million 4,385 5,227 4,276
Cash flow from investing activities CHF million -325 -404 -289
Headcount at Swiss Post Group FTEs[3] 44,130 44,018 43,732
1 The operating profit corresponds to the result before net non-operating financial income and taxes (EBIT).
2 Normalized figures.
3 FTEs = Full-time equivalents. Average expressed in terms of full-time equivalents, excluding trainees.

PostFinance Ltd key figures

Key figures Unit[1] Full year 2015 First half 2015 First half 2016
Number of customers In thousands 2,951 2,946 2,944
Number of customer accounts In thousands 4,835 4,810 4,770
Customer assets CHF million 114,866 113,115 117,630
Funds, securities, life insurance CHF million 7,772 7,614 7,488
Mortgages[2] CHF million 5,089 4,904 5,174
Loans to business customers taken up CHF million 9,063 8,742 8,215
E-finance users In thousands 1,683 1,657 1,717
Headcount FTEs[3] 3,571 3,527 3,622
Transactions processed In millions cumulative 1,020 499 516
1 At end of period (unless otherwise stated).
2 In cooperation with partner banks.
3 FTEs = Full-time equivalents. Average expressed in terms of full-time equivalents. Headcount at PostFinance parent company.

Selected key figures per segment (Group units)

30 June 2016 Group units Operating income (CHF million)[1] Operating profit (CHF million)[1] [2]
Communication market PostMail 1,485 183
Communication market Swiss Post Solutions 285 10
Communication market Post Offices & Sales 576 -99
Logistics market PostLogistics 772 52
Financial services market PostFinance[3] 1,126 237
Passenger transport market PostBus[4] 457 21
Other[5] - 457 -21
30 June 2015 Group units Operating income (CHF million)[1] Operating profit (CHF million)[1] [2] [6]
Communication market PostMail 1,389 184
Communication market Swiss Post Solutions 300 6
Communication market Post Offices & Sales 776 -53
Logistics market PostLogistics 757 65
Financial services market PostFinance[3] 1,114 280
Passenger transport market PostBus[4] 416 19
Other[5] - 465 3
1 Operating income and operating profit (EBIT) by segment are reported before management, licence fees and net cost compensation.
2 The operating profit corresponds to the result before net non-operating financial income and taxes (EBIT). The further decline in Post Offices & Sales profit (EBIT) compared with the prior-year period is principally due to the new internal performance mandate of the Group unit or the transfer of responsibility for postal private customer products from Post Offices & Sales to PostMail and PostLogistics.
3 PostFinance Ltd also applies the accounting rules for banks, securities dealers, financial groups and conglomerates (ARB). There are differences between the ARB and the IFRS results.
4 Within regional public transport, PostBus Switzerland Ltd is subject to the DETEC ordinance on the accounting of licensed businesses (RKV). There are differences between the RKV and the IFRS results.
5 Includes service units (Real Estate and Information Technology) and management units (e.g. Human Resources, Finance and Communication).
6 Normalized figures.