Profit plunge puts pressure on Posten

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They tried to put the best possible spin on their results, even claiming that “we had a lot to celebrate in 2018” with some new markets growing. Top management at Norway’s postal service Posten Norge nonetheless had to disclose a painful 68 percent plunge in fourth-quarter profits on Monday, at a time when households all over the country are also suffering major declines in postal service. 

Tone Wille, chief executive of Posten Norge, had to stand up to some heat on Monday when Posten delivered what some called “brutal” results. She’s moving forward with unpopular cuts in postal service that she claims are necessary for Posten’s survival in the digital age. PHOTO: newsinenglish.no

“It’s not that we don’t want to deliver letters anymore,” insisted Posten’s chief executive Tone Wille at her firm’s results presentation in Oslo Monday morning. “It’s that people aren’t sending them.”

Posten, which also saw profits dive 41 percent for the full year, reported a 12.9 percent decline in letter volume last year. That contributed to declines in total revenues as well (4.6 percent on an annual basis) and continued a trend that began more than 20 years ago when email and other forms of digitalization first started digging into Posten’s tradition business.

Wille, who assumed her top post at Posten in 2016, can’t be surprised that Posten’s letter customers are giving up after years of higher postal rates for poorer service. Sverre Myrli, a Member of Parliament for the Labour Party, accused “Posten and the authorities” last week of lacking the will to “find a solution for getting the post out to where folks live.”

Wille and her colleagues insist that’s not true, and that digitalization is to blame for the “dramatic decline in mail volumes and reduce profit despite significant cost measures.” The decline will accelerate in the years to come, she believes, claiming that all the cuts they’re making (closing post offices, eliminating mail delivery on Saturdays and seeking permission to cut it back to just three days a week while phasing it out entirely in some areas) are critical to Posten’s survival in a new form.

Irene Egset, chief financial officer of Posten (left), and CEO Tone Wille. PHOTO: newsinenglish.no

“It has never been more important for Posten Norge to restructure its postal operations,” Wille stated in Posten’s press release Monday, adding that the decline in mail volume is “increasing month by month.”

She says she’s fully aware that Posten’s restructuring is causing problems for many customers, some of whom are losing or already have lost confidence in Posten’s historic declaration that their mail skal fram! (Shall be delivered, the Norwegian equivalent of the US Postal Service’s promise that “neither snow nor rain nor gloom of night” will halt its delivery.)

“I understand that (declines in postal service) are problematic,” Wille told newsinenglish.no. “But the decline in volume is so high that it’s not sustainable to go to all of these mailboxes every day.”

She and her staff claim that customer surveys suggest Posten has satisfied business customers and has “a fairly good reputation” among the public in general. State regulations require that least 85 percent of mail sent through Posten must arrive within two days (as opposed to guaranteed overnight delivery until recently). Posten claims 90 percent met the requirement last year.

Posten’s parcel and freight delivery service “Bring” is doing better than its mail delivery. It’s unclear, though, why this truck was photographed on the wrong side of the road in Norway. PHOTO: Posten

It’s possible that all those complaining about Posten’s decline in service have been especially unlucky. Those who still like to write cards and letters, put them in a stamped envelope and send them off, however, can’t expect much relief. Wille’s management’s zeal to cut pick-up and delivery service even more seems destined to  be carried out, while they also roll out new digital services and emphasize more profitable areas of their “logistics” segment. There was some good news in Monday’s results release, with growth in e-commerce and both revenues and profits rising at Posten’s logistics segment, which involves parcel and freight service under the “Bring” brand.

Wille doesn’t think it’s possible to cut the brev (letter) segment much more. Posten is now hoping its sole owner, Norway’a state government, will approve its request to keep paying it to carry out unprofitable services, but that’s by no means certain. The amount requested this year amounted to NOK 536 million, Wille said, “and that will increase fairly rapidly,” probably to NOK 1 billion in 2025.

She doesn’t like calling the payments “subsidies,” preferring simply “payment” to carry out what’s become an expensive mandate for traditional mail delivery in the digital age. “It’s the only option,” she said, noting how her own mandate as CEO is to keep Posten profitable for its state owner. State politicians, she also noted, opted to deregulate Posten in the 1990s and force it to function in line with commercial competitors. Now they’re seeing the results.

“Changes in traditional postal service must occur steadily quicker,” she says. That’s not easy for Norwegians living in outlying areas to understand, not least those in Nord-Troms who were told last week that delivery to their community that has no roads will soon cease. Now they’ll have to take a ferry themselves to fetch their mail, a round-trip that can take as long as 12 hours.

“Suddenly you stand there and don’t understand anything about your society anymore,” Ruth Sigurdsen of Reinfjorden in Kvænangen told state broadcaster NRK, after learning how difficult it will be for her to get her mail, bills and medicine. “In the old days, it was said that Posten skal fram, but now it won’t anymore.”

newsinenglish.no/Nina Berglund