After a very difficult 2017, the U.S. Postal Service (USPS) managed to grow revenues by 1.5% to $70.6bn is fiscal 2018, surpassing sales of $70.3bn two years ago. However, market conditions remain incredibly challenging.
After losses of $2.7bn and $5.6bn in fiscal 2017 and 2016, respectively, in the year ended September 30, 2018 USPS was in the red to the tune of $3.9bn, due to growing operating costs that outpaced revenues growth by 150 basis points, heavily weighing on the group’s bottom line.
Compensation, benefits and transportation costs have all risen above revenue growth, leading to a controllable loss for the year of $1.95bn, up from $814m in fiscal 2017, its results released on 14 November show. (This is a non-GAAP financial measure defined as net income/loss adjusted for items outside of management’s control and non-recurring items.)
The troubled mail company talked of a “volume decline of 3.2 bn pieces”, adding there is an “urgent need to advance legislative and regulatory reforms, along with continued aggressive postal management actions to generate new revenue and control costs.”
The fall in core mail volumes seems unstoppable, although latest trends are mildly encouraging is some areas.
First class mail revenues fell 2.8% to $24.9bn (-6.9% in 2017), with volumes down 3.6% to 56.7bn (2017: -4% to 58.7bn), while marketing mail revenues were flattish at $16.6bn, although volumes were down 1.4% to 77.2bn.
Postmaster General and chief executive Megan J. Brennan said, “the secular mail volume trends continue largely due to electronic diversion and transaction alternatives.”
He added the company competes for business in every product line, “every day from the first mile to last mile”, aggressively managing its various business lines while continuing to focus on serving its customers.
However, “the flawed business model imposed by law continues to be the root cause of our financial instability. We are seeking reforms that would allow the organisation to reduce costs, grow revenue, compete more effectively, and function with greater flexibility to adapt to the marketplace and to invest in our future.”
As in the previous year, combined revenues for first class and marketing mail totaled just less than 60% of group’s revenues. The remainder of its portfolio of assets include shipping and packages activities, which bucked the trend, with revenues rising 10.1% to $21.5bn, on surging volumes (6.1bn versus 5.7bn one year earlier). Meanwhile, international sales were flat at $2.6bn, while growth was an uphill struggle elsewhere (“others” plus “periodicals”).
Cash and equivalents were lower at about $10bn at the end of September (2017: $10.5bn), while its debt position remained significant at $13.2bn.
Finally, its positive annual free cash flow – as gauged by core operating cash flow minus capital expenditures – stood at $1.4bn, but it was fully offset by $1.8bn of negative cash flows from financing, given cash inflows from the issuance of notes payable ($69bn) and cash outflows from payments on notes payable ($70.8bn).
Source: Transport Intelligence, November 15, 2018
Author: Alessandro Pasetti
