Annual Report 2014

President and CEO’s review

 

 

The year 2014 has been a time of major changes for us. We were involved in implementing our new strategy, which aims to adapt our business operations to the profound transformation in the postal and logistics industry, renew the company so that it becomes more agile, ensure the company’s profitability and improve customer experience while seeking new growth areas.

One of the changes most visible to our customers was the change of the company’s name from Itella to Posti. I believe that this will further improve the customer experience and clarify the company’s identity as a Finnish postal, logistics and e-commerce service provider. Posti’s main mission is to make customers’ everyday life smoother.

A respected Finnish brand

Posti is a traditional and respected Finnish brand with which Finns have a very strong emotional and trusting relationship. At the beginning of this year, Posti adopted a new visual outlook that was inspired by logistics services and parcels. With the changes, we want to signal that Posti has the desire to renew its services.

As part of our new strategy, we renewed our organization significantly and streamlined the corporate structure. By merging our subsidiaries Itella Logistics and Itella Posti into one business company, Posti Ltd, we make our services easier for our customers to use. Since the beginning of the year, our customers have been served by four business groups: Postal Services, Parcel and Logistics Services, Itella Russia and OpusCapita.

Customer service is also facilitated by the new Operations unit in which we combined the production operations of the entire Postal Services and Parcel and Logistics Services business groups. Operations employs approximately 17,000 professionals and operates 24 hours a day – someone is always on the move in transport, sorting, delivery or early-morning delivery. Thanks to these professionals, Posti reaches 2.8 million homes and companies each weekday.

A challenging economic situation

The business environment continued to be very difficult in 2014. The decline in the volume of mail accelerated as digital communications became more common, and transport volumes in heavy traffic continued to decrease in Finland for third year in a row. Nevertheless, the operating result before non-recurring items improved to EUR 50.8 million. The result was impaired by structural arrangements and non-recurring items related to personnel restructuring.

In Finland, we reformed domestic line haul production and continued the extensive groupage logistics integration which generated significant benefits and flexibility in operations. In Scandinavia, business has been unprofitable and consequently, we had to trim our operations in these countries drastically. In the Baltic countries, the logistics business developed favorably during the year.

The Itella Russia business group achieved a profitable result even though the Russian crisis has influenced business indirectly through the weakening of the ruble and consumer purchasing power. During the year, the Russian ruble weakened by over 59%. It is extremely difficult to forecast the development of the Russian market accurately due to significant exchange rate fluctuations and the duration and scope of sanctions. We are preparing for a very difficult market situation in 2015.

OpusCapita aims at internationalization

The Group’s cornerstones include OpusCapita that offers financial accounting outsourcing services and automation solutions and has a strong growth strategy that aims at internationalization. The digitization of services was clearly evident in 2014. OpusCapita delivers nearly 200 million electronic messages per year. The growth of cloud services continued strongly, reaching the level of 150%.

Aiming to improve profitability

Due to the difficult economic situation and the transformation of the industry, we have had to make changes that have, unfortunately, also entailed extensive personnel reductions. Every effort has been made to carry out the reductions in as responsible and controlled manner as possible.

In addition, savings have been sought with a EUR 100 million performance improvement program, the targets of which were achieved on schedule. This year, the improvement of operational efficiency will be continued with a new EUR 75 million program. In order to safeguard employment and services, it is of critical importance to ensure the profitability of business operations and, in line with our strategy, seek growth for the Group in new services, such as e-commerce and local logistics.

During the year, the Finnish Government issued a postal delivery license to three of Posti’s competitors. As competition is part of a healthy economy, we welcome any competitors in the field. However, it is important that the regulatory terms and conditions are fair and equal for all players. The new competitors were assigned a one-day delivery obligation, whereas we are subject to a five-day delivery obligation. As a result, the companies are competing on an unequal footing.

The service point network is expanding

As e-commerce grows, our customers expect Posti’s service point network to provide an even wider range of alternatives for sending and picking up parcels, substantially longer opening hours and more flexible services. During the year, we opened 152 new parcel points, and the number of service points had increased to nearly 1,450 by the end of the year. We respond to our customers’ evolving needs by developing our service network and increasing digital services. More than 200,000 Finns are already using our Posti mobile application.

Stakeholders’ demands for transparent and responsible business grow continuously. In terms of financial responsibility, the company should be profitable. In terms of the environment, it should reduce emissions. In terms of society, it should provide high-quality services. We must also see to the personnel’s well-being at work and ensure that the sourcing chain is ethically sound. Throughout the year, we increased interaction with our stakeholders significantly and we intend to continue this work this year, too.

Finally, I would like to take this opportunity to thank our personnel, customers and partners for their excellent cooperation during the year.

Heikki Malinen
President and CEO