PostNL, the Dutch postal service, has faced significant financial challenges, reporting its net profit fell by two-thirds to just €18 million last year, as the current operating model proved to be increasingly unsustainable. With the latest results reflecting market pressures impacting both its mail and package divisions, the company is now actively seeking government financial support to mitigate losses and operational inefficiencies.
CEO Herna Verhagen characterized 2024 as “a disappointing year,” underscoring the gravity of the situation as she prepares to step down after 13 years with the firm. The persistent decline of mail volumes, now experiencing an 8% drop, has exacerbated PostNL’s profitability issues, leading the company to declare its business model for traditional mail services is not viable without intervention.
“The financial results confirm once again the current business model is no longer sustainable,” Verhagen stated. PostNL anticipates the downward trend will continue, prompting its recent petition for €68 million in government subsidies to address loss-making letter delivery services, which has so far met with resistance from the ministry of economic affairs.
Despite these challenges, PostNL experienced growth within its parcel delivery segment, with volumes slightly increasing by 7%. This growth, nonetheless, came with diminishing margins, attributed to rising costs related to customer concentration and unpredictable e-commerce demand patterns. “The uneven distribution of parcel deliveries across peak periods made forecasting revenue challenging,” CFO Pim Berendsen explained.
To adapt to changing market dynamics, PostNL plans to transition its operations by enhancing parcel delivery through automated pick-up points, hoping to alleviate some financial pressure. Currently, around 1,100 such automated locations exist across the Netherlands, with intentions to significantly expand this network. Competition is heating up; DHL also announced plans to double the number of its parcel lockers.
PostNL's pivot is partly characterized by changes to its customer engagement strategies. Verhagen hinted at re-evaluations of delivery promises made to larger clients, questioning the necessity of expedited shipping options. “Is next-day delivery really necessary?” she posed, highlighting the broader need for operational efficiencies.
These strategic shifts come as PostNL struggles to meet its legal obligations for postal delivery. The company has already begun extending delivery times from 24 to 48 hours for business mail, indicating the strain on traditional postal services.
The company has also committed to sustain dividends, announcing plans to pay out €0.07 per share, amounting to €38 million, even as it seeks public funds to maintain its operations. This decision raised eyebrows among stakeholders and experts, as the juxtaposition of fulfilling shareholder expectations amid financial distress highlights the delicate balance PostNL must maintain.
With the anticipated decline of the postal volumes continuing, Verhagen remarked, “We are doing what we can ourselves and have put forward clear proposals for a future-proof postal service.” She called for urgent government examination of the postal service’s sustainability and future viability, emphasizing the importance of government intervention to prevent undue pressures on PostNL.
Looking forward, Berendsen remains optimistic about 2025, expecting overall earnings to align closely with the results from prior years, provided adjustments are effectively implemented. These adjustments will focus on capitalizing on the expected growth of parcel delivery and improving operational efficiency across the board.
“We recognize the changing market dynamics and the effect on our results indicate the necessity to adapt elements of our strategy,” Berendsen asserted. Enhancements across the service offerings, increased investment toward international network growth, and commitment to sustainability form the backbone of PostNL’s recovery strategy.
While the outlook remains complex, PostNL’s leadership clearly acknowledges the need for change as it seeks to navigate the turbulence of maintaining efficient postal services and preserving market relevance.