Annual Report 2015

President and CEO’s review

Posti faced a very difficult business environment in 2015. Economic growth in Finland has been non-existent, and the development of consumer purchasing power has been subdued. Our net sales decreased across all of the business groups. The declining delivery volumes of letters and publications reduced net sales by 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 the Russian economy is facing.

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 difficult decisions. 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. Going forward, we expect various logistics services to be the engine of Posti’s growth.

Posti’s operating result 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 that involved Posti selling logistics properties located in Finland.

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.

In spite of the difficult situation, our market position in Russia can be considered to be good. We are currently the market leader in warehouse operations in Russia, with operations not only in Moscow but also in six other cities with over a million inhabitants, and we also have a nationwide network of logistics centers in Russia.

Digitization creates opportunities

We announced our new strategy in the summer, with the primary objectives of renewing Posti to make it a customer-oriented first-class service company and pursuing profitable growth in new services. We want to be Finland’s largest postal and logistics company with the broadest service range and network.

Digitization offers opportunities for improving the Group’s services and developing new business operations. Our marketing services make use of Posti’s data and analytics expertise in creating new additional services.

Although letter and publication delivery volumes are declining, the market for home services is growing. The need for meal and home help services is constantly growing as the population is ageing. We hold a key position in the development of new home services, as we visit the door of every Finn five times a week.

In addition to home services, a new growth area is offered by food logistics. During this strategy period, we will expand our operations to temperature-controlled transports, including foodstuffs. Food logistics complements Posti’s logistics service portfolio and in part supports the growth targets of our company.

OpusCapita’s strategy, in turn, is aimed at becoming a strong provider of financial management software and processes in Northern Europe. OpusCapita will adopt new process robotics, continue transformation towards cloud services and develop new solutions in order to improve the management of customers’ working capital.

A strong partner for online retailers

The strategy in parcel services is to act as an enabler of online shopping for Finnish companies and consumers. We want to be the number one choice of consumers and a strong partner for online retailers. New information system solutions bring efficiency to the delivery chain, speed up capital circulation among online retailers and support the growth of online shopping.

Our new robot-assisted hybrid warehouse in Vantaa and the new logistics center and eCommerce hub in Lieto offer eCommerce operators as many as two or three additional days of sales during peak seasons. Customers, in turn, will enjoy fast delivery of their eCommerce orders, even on the day the order is placed.

The first provider of carbon-neutral postal services

As a significant logistics company, Posti takes responsibility for minimizing its environmental impacts. Posti is the world’s first provider of carbon-neutral postal services.

In 2015, we expanded Posti Green to cover the parcel and logistics business in Finland, in addition to postal services. In practice, this means that all of the services we provide are automatically, without an additional charge, Posti Green services. We are undeniably a pioneer of green logistics in Finland.

Renewal measures to ensure competitiveness

Posti has engaged in a significant renewal of its operations in response to tighter competition and declining mail delivery volumes. Restructuring measures implemented in summer 2015 included rearranging the domestic terminal network and launching the renewal of Posti’s retail network.

The new collective agreement for the postal industry, signed in late November, also supports Posti’s renewal and the improvement of Posti’s competitiveness. The past provisions concerning additional change security are no longer included in the new collective agreement. As a responsible employer, we use Posti’s Uusi polku (New Path) support program to train people to help them find new jobs, become self-employed, or pursue a new profession.

The new collective agreement also eliminates previous restrictions on the use of supplementary workforce and subcontracting, for example during times of peak demand.

Significant structural transformation

Posti is currently undergoing a significant multi-year structural transformation of its industry. The decline in letter volumes cannot be halted. The two cornerstones of the company’s strategy are to react to the declining letter volumes in a timely manner and pursue strong growth in new businesses. Posti has a solid financial standing and the capacity to make investments.

I am confident in Posti’s ability to go through this transformation successfully.

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