Posti Group Oyj — Earnings Release 2015

Feb 12, 2016

Weaker result for Postal Services, Parcel and Logistics business turns to profit

Weaker result for Postal Services, Parcel and Logistics business turns to profit

POSTI GROUP CORPORATION'S FINANCIAL STATEMENTS RELEASE, FEBRUARY 12, 2016 AT
10:00 A.M. (EET)

Posti Group Corporation’s Financial Statements and Board of Directors’ Report
for 2015

October–December 2015

-- The Group’s net sales decreased by 11.6% to EUR 434.7 (491.7) million in
October–December. Comparable net sales, excluding the international freight
business, decreased by 6.4%.
-- Net sales decreased by 3.8% in Postal Services, by 19.4% in Parcel and
Logistics Services, by 24.5% in Itella Russia, and by 6.0% in OpusCapita.
Measured in local currency, Itella Russia’s net sales decreased by 10.0%.
The comparable net sales of Parcel and Logistics Services decreased by
5.3%.
-- Posti Group’s operating result before non-recurring items improved, boosted
particularly by Parcel and Logistics Services, to EUR 25.4 (23.5) million,
or 5.8% (4.8%) of net sales.
-- The operating result before non-recurring items declined to EUR 24.8 (36.9)
million in Postal Services and to EUR -0.9 (2.1) million in Itella Russia.
The operating result before non-recurring items improved to EUR -0.4
(-12.6) million in Parcel and Logistics Services and to EUR 3.5 (3.4)
million in OpusCapita.
-- The operating result was weighed down by non-recurring items amounting to
EUR -15.7 (-12.6) million, which includes provisions related to Itella
Russia’s warehousing business.
-- The operating result was EUR 9.7 (10.9) million, or 2.2% (2.2%) of net
sales.
-- On November 11, 2015, OpusCapita signed an agreement to sell all of its
business operations serving the local markets in the Baltic states to
BaltCap.
-- In November, the postal industry had no agreement in force after the
previous collective agreement expired on October 31, 2015. The strikes
during the negotiations had a negative impact on Posti Group’s result. The
new collective agreement approved on November 30, 2015, eliminated the
previous compensation for termination and restrictions on the use of
outsourcing, which improves Posti’s competitiveness.
-- During the Christmas season, Posti handled more than a million parcels in
one week for the first time. The number of parcels Posti delivered to
consumers in December increased by 7% from the previous year. Posti
recruited 3,350 seasonal assistants for the Christmas season.

Year 2015

-- Posti Group’s net sales decreased by 11.2% to EUR 1,650.3 (1,858.7)
million. Comparable net sales, excluding the international freight
business, decreased by 6.1%.
-- The total number of parcels delivered by Posti during the year exceeded 33
million. Parcel volume grew by 2.3%.
-- Mail delivery volumes continued to decline as expected. The Finnish
logistics market did not see a turn for the better. The situation in Russia
deteriorated significantly. The ruble depreciated by 12% compared to the
previous year.
-- Net sales decreased by 3.5% in Postal Services, by 17.4% in Parcel and
Logistics Services, by 30.9% in Itella Russia, and by 1.2% in OpusCapita.
Measured in local currency, Itella Russia’s net sales decreased by 7.7%.
The comparable net sales of Parcel and Logistics Services decreased by
3.8%.
-- Posti Group achieved 90% of the target of its EUR 75 million performance
improvement program, the Group’s general expenses were reduced with the
help of the ‘Way of Working’ program.
-- Posti Group’s operating result before non-recurring items was EUR 48.7
(50.8) million, representing 2.9% (2.7%) of net sales.
-- The operating result before non-recurring items improved to EUR 0.6 (-21.7)
million in Parcel and Logistics Services. The operating result before
non-recurring items declined to EUR 56.4 (66.0) million in Postal Services,
to EUR -5.1 (2.5) million in Itella Russia and to EUR 14.5 (20.0) million
in OpusCapita.
-- The operating result for 2015 was improved by non-recurring items amounting
to EUR 7.2 (-45.0) million, which includes EUR 44.2 million in gains from
the sale of real estate, EUR 8.4 million in personnel restructuring costs,
and EUR 28.6 million in impairment, provisions and other items.
-- Personnel expenses decreased by EUR 91.3 million, or by 10.8% year-on-year.
The Group conducted several cooperation negotiations during the year, and
the number of employees decreased by 1,691 year-on-year.
-- The operating result was EUR 55.9 (5.8) million, or 3.4% (0.3%) of net
sales.
-- The operating result before taxes was EUR 43.3 (-4.6) million.
-- The Group’s cash flow from operating activities decreased to EUR 81.9
(93.2) million.
-- Gearing was -10.5% (17.2%). Equity ratio stood at 47.8% (45.9%).
-- In June, the Board of Directors of Posti Group approved the company’s
strategic goals for 2015–2017.
-- On April 30, 2015, Posti Group Corporation sold its road freight operations
in Sweden, Norway and Denmark, as well as its international freight
business in Finland, to the Danish company NTG Nordic Transport Group.
-- Posti launched a renewal of its retail network. Going forward, Posti will
operate 21 postal outlets of its own, and services were transferred to
partners at 77 outlets.
-- On April 30, 2015, OpusCapita acquired the Swedish companies
Kredithanterarna and Svenska Fakturaköp.
-- Vice President of the Operations unit Yrjö Eskola was appointed as a member
of the Posti Group Corporation Executive Board as of July 1, 2015.
-- Patrik Sallner was appointed CEO of OpusCapita. Sallner took up his post as
CEO on October 5, 2015.
-- The name of the company was changed to Posti Group Corporation on January
1, 2015. From January 1, 2015, the names of the business groups are: Postal
Services, Parcel and Logistics Services, Itella Russia and OpusCapita.
Since the beginning of 2015, Posti Group Corporation’s result is reported
on the basis of the new business groups.
-- The Board of Directors proposes to the Annual General Meeting that a
dividend of EUR 18.0 million be distributed.

Key figures of Posti Group 10–12 10–12 1–12 1–12

                                               2015   2014     2015     2014

---

Net sales, EUR million 434.7 491.7 1,650.3 1,858.7

Operating result (non-IFRS), EUR million* 25.4 23.5 48.7 50.8

Operating result (non-IFRS), %* 5.8 4.8 2.9 2.7

Operating result (EBIT), EUR million 9.7 10.9 55.9 5.8

Operating result (EBIT), % 2.2 2.2 3.4 0.3

Result before taxes, EUR million 6.1 7.6 43.3 -4.6

Result for the period, EUR million 4.2 4.5 36.0 -4.4

Return on equity (12 months), % 6.1 -0.7

Return on invested capital (12 months), % 6.3 1.0

Equity ratio, % 47.8 45.9

Gearing, % -10.5 17.2

Gross capital expenditure, EUR million 16.8 14.6 60.6 57.5

Average number of employees 22,219 24,617

Dividend 18.0** -

---

*) Non-IFRS = excluding non-recurring items

**) Board of Directors' proposal to the Annual
General Meeting

---

Heikki Malinen, President and CEO:

“The year 2015 was difficult for Posti Group due to the transformation of the
communication sector and the weak market situation in our business environment.
Our net sales decreased across all business groups. Declining volumes in
Posti’s core business of delivering letters and publications reduced net sales
by nearly EUR 75 million. Domestic freight transport volumes decreased as the
total market continued to decline. Itella Russia’s net sales were eroded by the
weak ruble and the problems of the Russian economy.

In spite of the decrease in net sales, the Group’s operating result remained at
the previous year’s level. This has, however, required many substitution
measures and painful decisions. We have had to compensate for the losses
through cost savings, efficiency improvements, price increases, and personnel
reductions.

The most significant source of satisfaction was the strong improvement in the
result of the Parcel and Logistics Services business group. Its operating
result turned to profit on the strength of determined efficiency improvement
measures and restructuring. In the previous year, the logistics business
recorded a significant loss. Going forward, we expect various logistics
services to be the engine of Posti’s growth. Posti delivered over 33 million
parcels last year, which represents an increase of more than 2%. In the latter
part of the year, we unfortunately lost parcel volume to our competitors due to
strikes.

Posti Group’s operating result for 2015 showed a significant improvement from
the previous year. The improved result is attributable to the positive result
of Parcel and Logistics Services as well as a sale and leaseback transaction
worth EUR 120 million, which involved Posti selling logistics properties
located in Finland. The operating result in the comparison period was weighed
down by non-recurring costs of EUR 45 million.

In Russia, the market situation became bleaker during the year. The
substantially weaker national economy, declining consumer purchasing power and
the weak ruble are currently complicating the business operations of foreign
companies operating in Russia, and Itella Russia is no exception.
Unfortunately, the prospects for 2016 involve significant continued
uncertainty.

Posti faces unavoidable structural reforms as the volumes of traditional mail
decline. Digitalization and intensifying competition give Posti no alternative
but to quickly adapt to the changes. At the same time, we will seek new growth,
particularly in logistics, warehousing, e-commerce, and new consumer services.
We also see significant growth potential in OpusCapita’s financial management
software, financial processes and automation services.

Posti must carefully manage its profitability. While Posti’s non-IFRS operating
result improved from 2.7% to 2.9%, profitability is short of the target level
of 5%. It is a concern that the operating result of the company’s cornerstone,
Postal Services, declined by as much as 15% last year, which represents a
decrease of approximately EUR 10 million. The decline in volume has forced
Posti to initiate cooperation negotiations.

Securing profitability is crucial for Posti also because we operate without
public subsidies. In order for us to develop our operations and invest in
growth projects, our operations must have a financially solid foundation.
Increasing digitalization is also forcing us to achieve renewal in our
operations. To accomplish this, we must allocate more resources to the
digitalization of our services and production.Our investments last year
amounted to EUR 61 million, which is 75% of depreciation. We must increase our
level of investment in the medium term. We cannot fall behind in
digitalization.”

APPENDICES
Financial Statements Release and the Board of Directors’ Report (pdf)
Corporate Governance Statement 2015 (pdf)

FURTHER INFORMATION
Heikki Malinen, President and CEO, and Sari Helander, CFO
Tel. +358 20 452 3366 (MediaDesk)

DISTRIBUTION
NASDAQ OMX Helsinki
Key media
www.posti.com/talous

FINANCIAL CALENDAR IN 2016
Interim Report Q1/2016: April 29, 2016
Interim Report Q2/2016: July 18, 2016
Interim Report Q3/2016: October 31, 2016

IMAGES AND LOGOS
www.posti.com/media

Posti Group is your first choice in postal, logistics and e-commerce services.
We manage the flow of commerce and everyday life in nine countries. Our net
sales in 2015 amounted to EUR 1,650 million. We employ approximately 22,000
professionals who serve our customers in Finland under the name Posti and in
other countries under the name Itella. All of our services in Finland are
carbon neutral. www.posti.com.

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