Amidst falling Mail segment revenues and strongly growing Parcels segment revenues, PostNL is seeking a revision to its universal service obligation (USO). On overall revenue growth of 1% y-o-y to €3,165m for the year ended 31 December 2023, the postal operator saw a 10% normalised EBIT growth to €92m. In its two most significant divisions, this was broken down into:
PostNL’s CEO Herna Verhagen said, “Uncertain geopolitical and economic conditions had an impact on our operating environment.” Several cost reduction measures and efforts to improve their cash position were, she continued, “Not sufficient to mitigate the severe cost pressures in a tight labour market with rising wages and the impact from the development in our customer and product mix.”
USO renegotiation with the government
Indicating a hoped for renegotiation of the USO with the government, Verhagen said, “After many years of adjusting our mail network, which was built to meet the regulatory requirement for countrywide delivery within 24 hours, further options to adapt to declining mail volumes and achieve necessary cost savings are becoming very challenging.” Costs have increased significantly, “Resulting in a step-down in EBIT [for the Mail segment] year over year,” she added.
Demand for PostNL’s products are changing. The postal operator published data that showed for instance, a 65% decline in demand for 24 hour mail delivery between 2014-2023. The CEO explained, “Surveys show that the need for next day delivery has reduced significantly, visible in strong decline of 24-hour mail.”
Regarding the USO itself, Verhagen said “We intend to transition towards a service level for standard mail to be delivered within two days, moving towards three days over time,” keeping priority delivery at a higher price as a separate option to customers. To achieve such changes, the CEO said, “Adjustment in regulation is necessary, comparable with changes already implemented in other European countries,” including Denmark that last year dispensed with much of its USO altogether. She added that this is necessary to keep PostNL in a long-term, financially viable position.
Confidence in future of e-commerce
Over 71% of PostNL’s revenues already stem from parcels, mostly in e-commerce. Verhagen said, “We remain confident in the future growth of the e-commerce market, underpinned by the positive trends” in online shopping.
Moving forward, she concluded “We are rationalising our products and services portfolio and further encouraging out-of-home delivery options,” and “We will optimise our collection and transportation services.”
After surviving the bump in the road experienced by all European logistics operators in 2023, PostNL is confident of a stronger 2024 with increased revenue and profitability. With any successful renegotiation of the USO, this will be especially so.
Author: Richard Shrubb
