SAPO Reports R488m Pre Tax Profit For The Year - September 29, 2009 [Business Day.]The South African Post Office (SAPO) today reported a pre tax profit of R488.2 million for the year ended March 2009 compared with a profit of R565.0 million in 2008. The 14% decline was a result of higher input costs, especially fuel and salary costs.
This is despite an extremely challenging financial year, which saw turmoil in international financial markets reduce postal revenues and hike input costs, it said.
SAPO has spent R422 million and committed a further R227 million on capital expenditure to lay a solid foundation for improved delivery. This investment brings the company closer to consistently meeting delivery standards and providing excellent customer experience, it said in a statement.
The strong results strengthen the case for improved delivery, it said.
Although profits declined slightly as a consequence of the depressed economy and the drop in postal volumes, SAPO has continued to deliver steadily improving trading profits since its turnaround in 2004.
The year saw a 5.8% decline in mail volumes - the first in seven years. However, to counter the adverse conditions in the trading environment during the past financial year, the Post Office embarked on a strategy of tighter cost controls and improving efficiencies across all its operations as well as exploring potential new revenue streams.
Revenues for the 2009 financial year were up 8% on the previous year to R5.7bn. Operating expenses were up 10% - higher than last year's 7% - reflecting SAPO's higher cost operating environment. As a result, the profit margin declined from 10.1% in 2008 to 8.1%.
In spite of this, SAPO's total assets increased 13% to R8.7bn.
New Zealand Post Delivers $71.8M Profit In Challenging Year - September 23, 2009 [Press Release.]New Zealand Post has delivered a net profit of $71.8 million in a year of mixed results across its diversified group of companies.
Announcing the financial results for the year ended 30 June 2009, the Chairman, Rt Hon Jim Bolger ONZ, said that while parts of the Group, particularly Kiwibank, continued to thrive, others including Postal Services, Datamail and the courier joint ventures had been affected to varying degrees by the economic downturn.
The current year’s profit compares with the $110.2 million net profit delivered in the 2007/08 financial year, however the two results are not directly comparable because of the unprecedented economic situation during 2008/09 and one-off gains in 2007/08, he said.
Normalised earnings, after adjusting for various one-off items, amounted to $77.2 million 2008/09, a 16 per cent decline on a normalised 2007/08 result of $91.9 million.
The adjustments include restructuring costs, mainly within Postal Services, of $11.0 million compared to $3.8 million last year, a $5.2 million adjustment for proceeds from the partial sale of the Australian courier business associated with the creation of the new Australian courier joint venture with DHL, compared to $24.8 million last year, and various accounting adjustments of $4.2 million compared to $5.5 million last year.
In addition to its financial performance, the New Zealand Post Group would maintain a strong focus on its award-winning corporate responsibility programmes in support of its business vision to be ambitious for New Zealand and to help the country grow in a sustainable way.
Austrian Post in the First Half-Year 2009: Revenue down by 3.6%, EBIT decline of 8.0% - September 17, 2009 [Press Release.],br.Highlights:
- Difficult market environment: economic forecasts predict decline in Austria’s GDP of about 4%;
companies strive to reduce volume and weight of mail items and intensify electronic communication
- Group revenue down 3.6%, or EUR 42.8m
o Mail (-4.5%): Decrease of daily letter mail and direct mail items
o Parcel & Logistics (-3.0%): Recession-related volume decline and price pressure;
growth on the Austrian market supported by the new customer Hermes
o Branch Network (+1.3%): Positive development of telecommunications products; stable revenue from financial services
- Earnings before interest and tax (EBIT) decrease 8.0%, to EUR 75.4m
- Initial successes of efficiency-enhancing and cost-reduction measures, which continue to be the top priority
Austrian Post at a glance
The tendencies shown in the first half of the 2009 financial year confirm the expectation that the international economic crisis will also pose a major challenge to Austrian Post. This is primarily related to the fact that letter mail and parcel volumes are dependent on overall market developments, consumption patterns of the population and advertising expenditures of companies. In addition, in the current business environment, many companies are trying to counteract declining revenues by cutting costs. The result of this development, as well as the structural change related to the increasing substitution of letters by electronic media, negatively affects daily business letter mail and parcel delivery volumes. Accordingly, the total revenue of Austrian Post fell by 3.6% or EUR 42.8m to EUR 1,156.0m in the first half of 2009 compared to the preceding year. Group revenue declined in the second quarter by 4.8%, to EUR 560.8m.
Both the Mail and Parcel & Logistics Divisions were subject to major changes. The Mail Division posted a 4.5% drop in revenue caused by the reduction in daily business mail and direct mail items, whereas the Parcel & Logistics Division recorded a 3.0% contraction in revenue based on a recession-related price pressure on premium parcels. In contrast, business with standard parcels developed positively, supported by the volume growth of the new customer Hermes.
In 2008, Austrian Post already began to implement measures to improve efficiency and reduce costs as a means of counteracting the consequences of the economic downturn. The result has been perceptible successes in cutting operating expenses and adjusting personnel capacities. On balance, Austrian Post has realised cost savings of about EUR 36m. However, the decline in earnings was primarily shaped by the drop in revenue of EUR 42.8m, and salary increases amounting to EUR 22m in the first half of 2009. Earnings before interest and tax (EBIT) were down 8.0%, to EUR 75.4m.
As a result, Austrian Post will intensify implementation of the measures being taken to counteract the economic crisis. This relates both to initiatives designed to increase sales as well as further cost reductions. The company should manage to compensate for salary increases in 2009 on the basis of socially acceptable changes, such as taking advantage of the process of employee fluctuation and not filling job vacancies. The collective wage agreement valid for new employees as of August 1, 2009 will also positively support these efforts. Further savings in operating expenses are also planned. Austrian Post aims to cut the total costs of raw materials, consumables and services used and other operating expenses by at least EUR 30m below the comparable level for 2008.
“The economic situation and structural changes require systematic cost reductions at all levels,” says Rudolf Jettmar, Chairman of the Management Board and Chief Executive Officer of Austrian Post.
Business development – earnings in detail
The recession in 2009 has clearly left its mark on many companies. Declining revenues and increased cost pressure have led to an intensified decline in business mail volumes for letters and parcels. Austrian Post’s business development was not only negatively affected by the severe downturn, but also by the fewer working days in the first half of the year compared to H1 2008. Accordingly, total revenue of Austrian Post fell by 3.6%, or EUR 42.8m in a year-on-year comparison, to EUR 1,156.0m. Group revenue declined in the second quarter of 2009 by 4.8%, to EUR 560.8m.
Revenue of the Mail Division in the first half-year 2009 decreased by 4.5%, primarily due to declining business in the Letter Mail and Infomail (addressed and unaddressed direct mail items) business areas. The economic downturn and the resulting reduction in daily business mail volumes, the substitution of letter mail by electronic media and delays in advertising expenditures for direct marketing had a perceptibly negative impact on earnings.
The recession-related decline in parcel volumes and international price pressure combined to negatively affect the revenue development of the Parcel & Logistics Division (-3.0%), in particular in the premium parcel segment. In contrast, business with standard parcels in Austria expanded, supported by the volume growth of the new customer Hermes.
The 1.3% revenue growth generated by the Branch Network Division can be attributed to the good development in sales of mobile telephony and fixed line products. The development of the financial services business was stable.
Austrian Post’s priorities are increasingly focused on a sales offensive as well as activities designed to improve efficiency and reduce costs. These measures have achieved initial successes. The decline in revenue of EUR 42.8m and the salary increase of about EUR 22m could be partially compensated by operational cost savings of approximately EUR 36m. Although initial savings have been achieved in respect to material costs and other operating expenses, additional positive effects based on the initiated measures will be primarily expected in the second half of the financial year.
Staff costs of Austrian Post, the largest operating expense item, amounted to EUR 560.9m in H1 2009 and comprising close to 50% of total revenue. The wage agreements concluded at the end of 2008, stipulating salary increases of 3.7% as of January 1, 2009 on the basis of the high inflation rate prevailing in 2008, pushed up staff costs. The salary increases accounted for about EUR 22m in additional costs throughout the Group, which could only be counteracted by socially acceptable measures such as taking advantage of employee fluctuation. The total average number of employees fell by 889 people from the preceding year, to 25,900 employees.
All operating divisions suffered from recession-related reductions in earnings. The Mail Division generated a positive EBIT of EUR 114.5m (EUR -21.2m from H1 2008), whereas EBIT at the Parcel & Logistics Division was negative, at EUR -3.4m (EUR -10.5m change), and the Branch Network Division posted an EBIT of EUR -4.0m (EUR -10.7m change).
In contrast, an earnings improvement was achieved in the Other/Consolidation segment, which encompasses non-allocated costs for central departments, expenses in connection with unused properties, income from rents and leases, gains on the disposal of property, plant and equipment, expenses in connection with the employee social plan and the change in the provision for employee under-utilisation. In the first half of 2009, the necessity for new allocations to the provision for employee underutilisation was low. In fact, an increasing number of employees for whom provisions had been previously allocated could be reintegrated into the company’s operations. On balance, the provision for employee under-utilisation could be reduced by EUR 22.3m. In contrast, a total of EUR 15.1m was allocated as a provision for employees who voluntarily accepted the employee social plan stipulating temporary leave until they reach retirement age. As a result, EBIT of the Other/Consolidation segment improved to EUR -31.8m.
The financial result of Austrian Post declined to EUR -0.1m in the first half of 2009, which is related, amongst other reasons, to lower interest rates and a positive one-off effect in the previous year.
Earnings before tax fell by 15.5%, to EUR 75.2m. After deducting income taxes totalling EUR 19.1m, net profit for the period (earnings after tax) amounted to EUR 56.2m, corresponding to EUR 0.83 per share in the first half-year 2009, compared to EUR 1.00 per share in the previous year, and EUR 0.33 per share in the second quarter of 2009 after EUR 0.40 per share in Q2 2008.
Solid balance sheet structure
Austrian Post pursues a risk-adverse business approach. This is demonstrated by the high equity ratio, the relatively low level of financial liabilities and the high amount of cash and cash equivalents.
On balance, the analysis of the balance sheet of Austrian Post shows a considerable level of current and non-current financial resources on the assets side. Austrian Post had cash and cash equivalents of EUR 144.6m as at June 30, 2009, and financial investments in securities amounting to EUR 118.0m. Accordingly, total liquid financial resources at the disposal of Austrian Post decreased from EUR 340.6m as at December 31, 2008 to EUR 262.6m as at June 30, 2009, which includes the second-quarter 2009 payment of the dividend for the 2008 financial year. As opposed to total liquid financial resources, the financial liabilities only amount to EUR 132.5m.
Cash flow
Total operating cash flow before changes in working capital amounted to EUR 82.7m, which includes ascertainable recession-related effects as well as the lower number of working days. The decline in letter mail and parcel volumes was reflected in a drop in total revenue.
The cash flow from changes in working capital amounted to EUR -23.8m in H1 2009, including increased receivables and a reduction in liabilities and provisions. On balance, the cash flow from operating activities totalled EUR 58.9m in the first six months of 2009.
The cash flow from investing activities at EUR -48.3m includes the purchase of property, plant and equipment (CAPEX) amounting to EUR 37.6m, as well as financial investments in securities, at EUR 24.7m. All in all, the free cash flow generated before financial investments in securities totaled EUR 35.3m.
Employees
During the period under review, the average number of full-time employees at Austrian Post fell by 3.3%, or 889 people, to 25,900. This decline can be mainly attributed to the lower number of employees working for the Mail Division. Most of Austrian Post‘s labour force (21,591 full-time equivalent employees) is employed by the parent company, Österreichische Post AG. The remaining staff of more than 4,300 employees is employed at subsidiaries.
Outlook 2009
The first six months of 2009 have already demonstrated that a more difficult economic environment is to be expected for the year as a whole than originally forecasted at the beginning of the year. Economic forecasts for the markets in which Austrian Post operates have been continually revised downwards. In December 2008, the Austrian Institute of Economic Studies (WIFO) and Institute for Advanced Studies (IHS) predicted negative growth rates in Austria of -0.5% and -0.1% Austria respectively. In the meantime, the most recent forecasts expect a contraction of -3.4% or -4.3%. Austrian Post is also affected by the consequences of this economic downturn. We expect that the deteriorating economic situation will continue to have a negative effect on letter mail, parcel delivery and direct mail volumes.
Negative growth influences letter mail and parcel delivery volumes of Austrian Post late in the business cycle. This was demonstrated by the 2.4% drop in revenue in the first quarter of 2009 and the 4.8% decline in the second quarter. Compared to the previous year also in the second half of 2009, mail volumes are expected to continue declining. It is anticipated that the current state of affairs will persist and that the current downward trend has probably not yet bottomed out.
For this reason, the efficiency enhancement and cost reduction programme will remain the top priority for Austrian Post. The measures which have already been initiated to counteract the economic crisis will continue to be implemented and intensified.
The company should succeed in compensating for salary increases in 2009 and correspondingly reducing staff costs by exploiting the process of employee fluctuation and not filling job vacancies. The collective wage agreement valid for new employees as of August 1, 2009 will also positively support these efforts. Further savings in operating costs (excluding staff costs) are also planned. Austrian Post aims to cut the total costs of raw materials, consumables and services used and other operating expenses by at least EUR 30m below the comparable level for 2008. In addition, as already announced, planned capital expenditure (CAPEX) will be cut back by 20% in 2009 as a whole, to EUR 80m.
Improved results for Norway Post - September 3, 2009 [Press Release.]Norway Post's earnings before non-recurring items and write-downs for the first half-year 2009 were higher than those for the same period in 2008 and ended at NOK 381 million. Electronic substitution and the economic downturn had a negative effect on revenues, however extensive efficiency measures and cost cuts led to an improvement in earnings.
Operating revenues for the first half-year came to NOK 13.8 billion, compared to NOK 14.1 billion for the same period in 2008. Less activity in the market and the transition to electronic alternatives to letters and banking services had a negative effect on the Group's revenues. Compared with last year, revenues were positively affected by an income of NOK 259 million for government purchases of unprofitable services.
Spinnaker produced results?
Norway Post's earnings before non-recurring items and write-downs increased by NOK 70 million. The effects of the Spinnaker programme more than compensated for the decline in income due to the fall in volumes.
«It's good to see that the efficiency programme is delivering as expected and has produced increased earnings in a year of economic downturn,» says Dag Mejdell, the CEO of Posten Norge AS.
Sensitive to economic conditions?
It is not only the economic downturn that is challenging Norway Post's development. Physical mail is structurally affected by the technological developments involving a transition to electronic solutions such as e-mail, e-invoices and online banking. These are permanent changes in customer needs. In order to compensate for declining volumes, Norway Post implemented the Spinnaker profitability programme in 2008.
To further compensate for the financial crisis and weak economic developments, Norway Post has implemented several measures to cut costs and adapt its resources to the activity level in the market.
«Logistics, Mail and IT are sensitive to the economic conditions and a good measure of the temperature of the economy. After a sharp fall in volume during the first half-year, the level of activity has now stabilised at a lower level,» says Mr Mejdell.
Improvement in quality
The efficiency measures are also having a positive effect on quality. In the second quarter of this year, 89.6 per cent of A mail was delivered overnight. This is the best result ever and well above the licence requirement of 85 per cent.
«It is particularly gratifying to register that the improvement measures are producing good results for our customers. We've managed to improve the delivery quality while also improving the efficiency of our operations,» says Mr Mejdell.
The other five licence requirements were also met by a good margin in the first and second quarters.
De Post-La Poste ½ Yearly Figures Released - August 31, 2009 [IPC.]The Board of Directors of De Post-La Poste has taken note of the company's half-year figures.
The economic crisis has had a clear impact on De Post-La Poste's results in the first six months of 2009, but operating costs have been reduced further to limit the damage. As a result of these savings, normalised EBIT of H1 2009 was maintained at the H1 2008 level.
Based on a comparable scope of consolidation and presentation, De Post-La Poste's turnover fell 1.5% cpared with the first half of 2008. This fall is due to a 4.5% dp in volumes partially compensated by the rise in prices and commercial initiatives taken by De Post-La Poste. The fall in volumes is clearly more pronounced than those recorded in previous years, as a consequence of the recession affecting the Belgian and European economy.
De Post-La Poste has responded to the fall in turnover by driving through decisive cost-cutting measures. As a result of these savings, normalised EBIT (i.e. before non-recurring items) was maintained. Normalised net profit before tax fell slightly (8%) e to a fall in financial income caused by a drop in interest rates.
'De Post-La Poste is feeling the effects of the crisis too,' says Johnny Thijs, CEO of De Post-La Poste. 'Volumes fell in the first two quarters by about 4.5%. rtunately we were able to limit the damage by driving down our operating costs further. Our ambition for 2009 continues to be to achieve the same operating profit as we did in 2008.'
In his internal statement to employees, Johnny Thijs added that 'cost reductions need to be stepped up further, because we also expect volumes to continue to fall in 2010'.
In conclusion, Johnny Thijs pointed out that the crisis puts extra pressure on De Post-La Poste, which is preparing assiduously for full liberalisation in 2011: the market will be completely open within less than 18 months. 'I assume that the government will set the rules soon and that a level playing field will be guaranteed, in line with the government's decision of December 2008.'
In order to correctly assess the operational performance of the company, the normalised financial figures need to be taken into consideration. This is because the company made a non-recurring, exceptional profit of 117 m euro in the period under review. This exceptional item is related to the fact that covering the medical costs of retired employees is now the responsibility of a non-profit organisation managed by the trade unions. The provision of 117 m euro provided for by De Post-La Poste was therefore no longer necessary.
La Poste H1 Profits Slump Due to Mail Volume Decline - August 31, 2009 [Press Release.]The French postal operator’s operating profit declined by 34% to €453 million from January-June 2009 (which was 37% lower on a comparable basis). The H1 net profit fell by 19% to €388 million. Group revenues declined by 2.3% (2.9% on a comparable basis) to €10,274 million in the first half-year, and the operating profit margin dropped to 4.4% from 6.5%.
La Poste’s mail revenues declined by 4.8% to €5,668 million in the first half of 2009 with domestic volumes down 6.2%. The profit margin was halved, the organisation said without releasing more detailed figures. All mail product categories were hit by the downturn. The 1.3% positive revenue effect from higher stamp prices was unable to compensate for the combination of negative factors, the organisation said.
The parcels and express division also had a 4.8% half-year revenue decline to €2,145 million. Revenues of express subsidiary GeoPost dropped 6.3% to €1,480 million. The global downturn affected all of GeoPost’s international markets, with particular sales drops in Germany (€35 million less than in H1, 2008) and Spain (- €22 million).
ColiPoste, the French domestic B2C and C2C operator, limited its fall to 1%, with revenues of €665 million. E-commerce continued to be a strong growth factor with a 22% increase, and the operator improved its D+2 delivery performance to 93.5% from 92.4% one year earlier.
Financial services unit La Banque Postale increased turnover by 3.2% to €2,441 million.
La Poste said that it succeeded in reducing operating costs by 0.6% in the first six months, with measures taken by both ColiPoste and GeoPost having enabled them to stabilise their profitability at levels close to 2008. Overall, La Poste aims to save about €200 million in costs this year.
Looking ahead, La Poste said it expected the structural decline in mail volumes to continue in the coming months but noted that the downturn in parcel and express volumes had slowed since April. In all, 2009 revenues are likely to be about 3% lower than in 2008.
Priorities for the second half of the year include preparations for the legal reform of the organisation and the subsequent capital increase.
Improved ½ Yearly Results for Norway Post - August 28, 2009 [Press Release.]Norway Post's earnings before non-recurring items and write-downs for the first half-year 2009 were higher than those for the same period in 2008 and ended at NOK 381 million. Electronic substitution and the economic downturn had a negative effect on revenues, however extensive efficiency measures and cost cuts led to an improvement in earnings.
Operating revenues for the first half-year came to NOK 13.8 billion, compared to NOK 14.1 billion for the same period in 2008. Less activity in the market and the transition to electronic alternatives to letters and banking services had a negative effect on the Group's revenues. Compared with last year, revenues were positively affected by an income of NOK 259 million for government purchases of unprofitable services.
Economy Squeezes Swiss Post's Half-Year Profit - August 26, 2009 [Press Release.]In the first half of 2009, Swiss Post generated Group profit of CHF 358 million – 16 percent lower than a year ago. The drop in profit is mainly due to higher wages and the increasing decline in letter volume due to the economic situation. The economic crisis has had a varied effect on the individual units’ contributions to the Group results. Due to the lower prices for letters which came into effect on 1 July 2009, Swiss Post expects additional pressure on profit and significantly lower annual results compared to the previous year.
Between January and June 2009, Swiss Post generated Group profit of CHF 358 million. This is CHF 67 million, or 16 percent less than in the same period of the previous year (CHF 425 million). The main reasons for the decrease are a fall in earnings due to the difficult economic environment, and higher staff cost due to salary increases and increased headcount. In addition, the lower earnings from real estate sales had a noticeable effect on the results. Overall, operating income decreased by CHF 101 million to CHF 4,275 million (previous year: CHF 4,376 million).
Various effects of the crisis
The current economic crisis affects Swiss Post’s individual units differently. The traditional logistics units in particular are experiencing the negative aspects of the current situation, whereas PostFinance and PostBus are growing. While the addressed letter volume has been declining by an average of around 1.5 percent in the past few years - due to substitution –, by the end of June 2009, it was down by 4.8 percent. Thanks to the successful completion of the two-year commissioning phase of the new letter centres, delivery times have returned to their previous high level and savings could be achieved. The operating result of PostMail fell by only CHF 7 million to CHF 127 million. At PostLogistics, the result dropped by CHF 3 million to CHF 15 million because of losses due to the economic situation and increased costs. The unfavourable economy also had a negative effect on the Strategic Customers & Solutions unit, which focuses on markets abroad, contributing significantly to the fall in operating result of CHF 18 million to minus CHF 10 million. Thanks to new accounts and higher sales of non-postal products, the Post Offices & Sales unit was able to compensate for the ongoing decline in letters and parcels handed in at the counter, and at the same time maintain its operating income; however, its result fell by CHF 29 million to minus CHF 67 million due to higher staff cost. PostFinance developed positively and increased its result by CHF 44 million to CHF 198 million, thanks to the continuous inflow of new money. With the operation of several new routes and due to a general rise in demand, PostBus was able to increase its operating income and also lift its result by CHF 11 million to CHF 24 million. Despite the recession, Swiss Post International maintained its sales volume compared to the previous year and generated a result of CHF 29 million (previous year: CHF 16 million ). In the "Other" segment, the lower earnings from the sale of real estate in particular resulted in a fall in operating result by around CHF 65 million to CHF 49 million.
In view of the drop in earnings, which the company will experience as a result of the announced price cuts for letters since 1 July, Swiss Post expects increasing pressure on profit and significantly lower annual results compared to the previous year.
Austrian Post in the First Half-Year 2009: Revenue down by 3.6%, BIT decline of 8.0% - August 14, 2009 [Press Release.] Highlights:
- Difficult market environment: economic forecasts predict decline in Austrias GDP of about 4%; ompanies strive to reduce volume and weight of mail items and intensify electronic communication
- Group revenue down 3.6%, r EUR 42.8m
- Mail (-4.5%):Decrease of daily letter mail and direct mail items
- Parcel & Logistics (-3.0%):Recession-related volume decline and price pressure;
growth on the Austrian market supported by the new customer Hermes
- Branch Network ( 1.3%):Positive development of telecommunications products; stable revenue from financial services
- Earnings before interest and tax (EBIT) decrease 8.0%, o EUR 75.4m
- Initial successes of efficiency-enhancing and cost-reduction measures, which continue to be the top priority
USPS Ends Third Quarter with $2.4 Billion Loss - August 5, 2009 [Press Release.]The U.S. Postal Service ended its third quarter (April 1 – June 30) with a net loss of $2.4 billion, including a non-cash adjustment that increased workers’ compensation expense by $807 million. Ongoing electronic diversion and the widespread economic recession continued to reduce mail volume, resulting in a $1.6 billion decrease in revenue for the quarter.
Despite cost reductions against the fiscal 2009 plan of more than $6 billion and actions to grow revenue, the Postal Service (USPS) projects a net loss of more than $7 billion at fiscal year-end. The organization’s financial situation is compounded by its obligation to pay $5.4 billion to $5.8 billion annually to prefund retiree health benefits. This requirement, established in the Postal Accountability and Enhancement Act of 2006, is an obligation that no other government agency has to pay.
The Postal Service has incurred net losses in 11 of the last 12 fiscal quarters. The fiscal 2009 year-to-date net loss is $4.7 billion, compared to a loss in the same period last year of $1.1 billion, in spite of comprehensive, organization-wide cost reduction initiatives. The organization is working to mitigate a possible Sept. 30 cash shortfall of up to $700 million.
Postmaster General John Potter noted that the Postal Service has maintained a high level of customer service while facing continuing economic challenges. Third quarter service scores for overnight single-piece First-Class Mail remained at 96 percent on-time, while the score for two-day, single-piece First-Class Mail improved 1 percentage point to 94 percent.
“Our commitment to customer service is paramount,” Potter said. “We will continue to provide the dependable service our customers need. We also will keep a balance with our critical focus on reducing costs so that service is not diminished.
“Thanks to extraordinary efforts across the entire organization, we are well on track to achieve our 2009 target of more than $6 billion in total cost reductions,” said Potter. “In the third quarter, we surpassed the targeted amount by $500 million.”
Cost reductions center on initiatives to match work hours to reduced mail volume. Other savings are coming from consolidating excess capacity in mail processing and transportation networks, realigning carrier routes, halting construction of new postal facilities, freezing Postal Service officer and executive salaries at 2008 pay levels, reducing travel budgets and similar measures. Of note is an effort launched this year to reduce the cost of more than 500 existing contracts that will result in short- and long-term savings for the Postal Service in the areas of price, scope and process improvements.
“Securing the fiscal stability of the Postal Service will require continued efforts in all of these areas, as well as further review of retiree health benefit prefunding,” said Potter. “It also will require that the Postal Service gain flexibility within the law to move toward five-day delivery, to adjust our network as needed, to develop new products the market demands, and to work with our unions to meet the challenges ahead.”
Work hours were reduced by 88 million hours in the first three quarters of fiscal 2009, or 8.4 percent compared to the first three quarters of 2008. “We are on pace to meet our goal of reducing work hours by more than 100 million for the entire year,” said Joe Corbett, chief financial officer and executive vice president. “That’s double the rate of last year’s successful work-hour reductions and the equivalent of 57,000 full-time employees, or 8.6 percent of our full-time workforce.”
A significant portion of USPS losses are due to an unprecedented decline in mail volume, which has fallen by nearly 20 billion pieces in 2009 compared to the first three quarters of last year. Third quarter mail volume totaled 41.6 billion pieces, down 7 billion pieces, or 14.3 percent, compared to a year ago — the largest consecutive three-quarter drop in total volume since 1971. The trend of letter mail and business transactions being replaced with electronic alternatives will also cause continued downward pressure on mail volume into coming years.
Third quarter results also show an increase in workers’ compensation expense, which increased $722 million or 198 percent compared to the same period last year. The increase reflects a non-cash adjustment of $807 million to the carrying value of the Postal Service’s workers’ compensation liability, due to a change in discount rates caused by the current low interest rate environment.
Complete USPS third-quarter results include operating revenue of $16.3 billion, a decrease of nearly $1.6 billion, or 9 percent, from the same period last year, and operating expenses of $18.7 billion, a reduction of $294 million, or 1.5 percent, from the third quarter of last year. Details are contained in the Postal Service Form 10-Q report, available at http://www.usps.com/financials/ (click Form 10-Q under Quarter Reports).
