PostNL, the leading postal company in the Netherlands, is grappling with declining mail volumes and increasing operational costs, which have led to substantial financial losses. The firm's net profit dropped by two-thirds last year, ending at just €18 million, prompting calls for government support to stabilize its operations. On Monday, Herna Verhagen, the departing CEO, emphasized the urgent need for assistance, stating, "The urgency has only grown," as the company’s profits diminish amid shrinking letter delivery volumes.
The decline is particularly alarming as PostNL projects structural losses starting this year, according to new comments from financial director Pim Berendsen. He indicated during the year-end financial results presentation, "From this year, mail delivery will be structurally loss-making." A decrease of 8 to 10 percent is expected in postal services over the next year, reflecting shifting consumption habits and the competitive environment.
Despite these challenges, there are silver linings for PostNL. While the letter delivery segment struggles, the parcel division showed resilience with a 7 percent rise in volumes. PostNL reported achieving €65 million gross profit from parcel distribution. The company sees its financial health as somewhat mixed, indicating strong cash generation, yet it remains deeply concerned about maintaining its mail services. Verhagen noted the necessity for legislative changes, proposing amendments to the Postal Law to extend delivery times for postal services to 48 hours, which could alleviate some financial pressures.
PostNL’s recent request for €68 million from the government aims to cover the costs associated with its universal postal service, ensuring timely delivery of urgent mail. Verhagen reiterated the existing legal framework supporting their need for compensation, pressing for constructive dialogue with the government.
The government response, led by Minister of Economic Affairs Dirk Beljaarts, has been cautious, labeling PostNL’s request as "not very constructive" and noting it was somewhat premature. Nevertheless, the ministry plans to present future strategies to improve mail delivery, raising questions about how PostNL will adapt to remain viable amid such uncertainty.
Even amid financial woes, PostNL continues to pay dividends to shareholders, totaling €30 million, sparking criticism from some quarters about its priorities. Berendsen defended this decision by asserting their responsibility to maintain shareholder value, even as they seek external assistance from the state. He remarked, "We have managed for a long time on our own, but now it's time for the government to pick up the tab." This strategy of balancing public relations with shareholder demands highlights the complex dynamics PostNL faces.
Looking toward the future, PostNL anticipates losses due to unchanged legislative obligations requiring mail delivery within tight timeframes, compounded by increasing competition from international players who do not bear the same stringent costs. Berendsen noted, "If the government maintains the 24-hour delivery obligation without compensation, our mail delivery will slip deep red from this year forward."
Market analysts are cautiously hopeful about governmental support, as reflected by the slight increase of 2.2% observed on PostNL’s shares following the announcement of their financial performance. There is recognition across the investor community of the pressures PostNL faces but also optimism about potential governmental backing to support their operations. Ethical concerns around the company's long-term strategy will likely affect investor confidence and operational confidence, particularly as the competitive space continues to evolve.
PostNL has also proposed reassessing its client relationships, indicating the potential abandonment of low-margin contracts with certain e-commerce giants to focus on healthier revenue streams. Berendsen commented on these necessary adjustments, highlighting the importance of sustainable growth: "Sometimes, you’re actually off worse with certain volumes from clients." This strategic pivot is seen as necessary to improve profitability in the competitive parcel market.
The looming question remains whether governmental support will manifest and how alterations to the Postal Law might reshape PostNL’s operational outlook. Without significant changes, the company warns of dire consequences for the future of mail delivery services across the Netherlands.