PostNL has released key financial highlights for the fourth quarter and full financial year in 2023, with parcel volumes up 0.9% in Q4 but down 0.2% year-on-year and mail volumes falling by 1.9% in the last three months of 2023 and -7.4% year-on-year.
The postal operator reported a 0% further improvement in average carbon efficiency and strong free cash flow performance both Q4 and FY 2023 of €143m (US$155m) and €52m (US$56.4m) respectively.
In a statement released alongside the highlights, PostNL CEO Herna Verhagen said the operator was committed to keeping the mail accessible but that reforms were needed: “In many respects 2023 was a challenging year. Uncertain geopolitical and economic conditions had an impact on our operating environment. We implemented several measures to reduce costs and improve our cash position and have also been able to increase prices. But this was not sufficient to mitigate the severe cost pressures in a tight labor market with rising wages and the impact from the development in our customer and product mix.
“We expect the external environment to remain difficult in 2024 and continue to take all necessary steps, both at Mail in the Netherlands and at Parcels, to help to mitigate these challenges and support our aim to structurally deliver a return that exceeds the cost of capital.
“As the proud operator of the postal network in the Netherlands, we are committed to keeping mail accessible, reliable and affordable. After many years of adjusting our mail network, which is 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.
“At the same time, costs have increased significantly, resulting in a step-down in EBIT level year-over-year. And demand is changing. Surveys show that the need for next-day delivery has reduced significantly, visible in a strong decline of 24hr mail. We strongly believe the time has come to transform the delivery framework to better fit the needs of our customers and consumers and the current labor market. We intend to transition toward a service level for standard mail to be delivered within two days, moving toward within three days over time.
“We keep offering priority delivery, at a higher price. All this is already common in many other European countries. To achieve this, adjustment in regulation is necessary, comparable with changes already implemented in regulation in other European countries. So that a financially viable postal service in the Netherlands, that provides job security to thousands of people, can be secured, now and going forward.
“For parcels, we remain confident in the future growth in the e-commerce market, underpinned by the positive trend in online penetration, while acknowledging the ongoing uncertainty in the economic environment. Concrete actions have been designed to better balance volume and value and will contribute to our results already as of 2024. We will further implement targeted yield management measures and focus on specific customer segments.
“We are rationalizing our products and services portfolio and further encouraging out-of-home delivery options. To improve efficiency in our networks, we will optimize our collection and transportation services. Our digital transformation is crucial to solidify customer satisfaction and market position and we continue to make further progress on our clear roadmap to become more sustainable.
“Looking forward, for 2024 we expect to deliver normalized EBIT between €80m (US$86.7m) and €110m (US$119.3m), resulting in a free cash flow of between €0 and €40m (US$43.3m).”