Despite stagnation in its core business, the yellow giant manages to turn around. The future of Swiss Post is in the hands of politicians.
In order to be able to cope with the booming volume of parcels, Swiss Post has to invest in infrastructure.
Swiss Post’s core business is under pressure. The reasons for this are well known: fewer and fewer letters are being sent in Switzerland, and counter business in post offices is declining. Digitization is taking its toll. The booming online trade only provides limited relief. He is not able to compensate for the drop in profits in the mail business.
The increasing number of packages not only generates additional revenue, but also costs. In the logistics sector, which includes both the letter and the parcel business, these two effects roughly neutralized each other last year: it was possible to increase earnings by 127 million francs. But because expenses increased even more, the segment’s operating profit fell by 5 million francs.
Postfinance successfully loses customers
However, the annual figures published on Thursday also contain some bright spots. As a group as a whole, Swiss Post was able to almost double its operating profit compared to the first year of the pandemic, 2020. The operating result of 515 million francs was even 65 million francs higher than that of the pre-Corona year 2019. Group profit in 2021 was 457 million francs.
Three segments in particular contributed to the better result:
- Post Finance: The bank continues to suffer from the negative interest rates. But she apparently succeeds in scaring away unprofitable customers. In 2021, assets of almost 13 billion francs were withdrawn from Postfinance. At the same time, the Post subsidiary increased its commission and service income. It was able to improve its result by CHF 110 million and generated more than half of the Group’s operating profit. This shows once again how important the bank is for the yellow giant – and why the company management is not enthusiastic about the privatization plans of the Federal Council.
- Mobility: In 2020, the mobility segment, which essentially consists of Postbuses, reported an operating loss of 63 million francs. In addition to the reimbursement of the compensation as a result of the “Postbus scandal” – the subsidiary had systematically concealed profits and thus received excessive subsidies – the pandemic was responsible for this. Because the federal government and the cantons will compensate for the loss of earnings from Postbus caused by Corona, the area returned to the black in 2021.
- postal network: The over-the-counter business in the post offices also declined last year. However, the decline in earnings was more than compensated for by converting post offices into agencies and other cost-cutting measures. This reduced the operating loss by CHF 33 million.
The area of communication services has caused a stir in recent months. Some of the most controversial Swiss Post takeovers fall into this category. In the future, it will provide SMEs, authorities and the healthcare sector with digital services. Companies from the affected sectors and politicians criticize the expansion of the state-owned company into new business areas.
The discussion is not always based on facts, as the CEO Roberto Cirillo is quoted as saying in a media release. For years, Swiss Post has been generating well over 80 percent of its earnings in competition with other companies. The new strategy is the only way to ensure the public service in the future without tax money. However, the division created in 2021 is currently making deficits. The operating loss was 80 million francs on sales of 38 million francs. According to the Post, this is in line with expectations. The area is under construction and should be in the black towards the end of 2024.
A thankless task for the Post Minister
Two weeks ago, a commission of experts set up by the federal government presented its proposals for the future of Swiss Post. She proposes that basic services be slimmed down by 2030. In the future, Swiss Post will only have to deliver letters on three days of the week. A Mail should no longer be part of the basic service. In the case of the post office network, the Commission advocates technology-neutral specifications from the federal government. The consequence: Swiss Post could convert other branches it operates into agencies or offer door-to-door services. In the eyes of the Commission, the cuts are necessary so that the group can continue to provide basic services in the future without state compensation.
Post boss Roberto Cirillo’s reaction to the proposals was lukewarm. He is convinced that there is a way without cutbacks and subsidies, he said: namely the “Swiss Post of tomorrow” strategy, including the push into digital business areas. Politicians play a key role in deciding which route Swiss Post is allowed to take. Simonetta Sommaruga has the thankless task of submitting concrete proposals to the Federal Council for the further development of basic services. The social democrat will hardly go as far as the expert commission. A radical cut in the public service should have no chance in Parliament anyway. Nevertheless, Sommaruga will probably have to represent a bill that should not cause a storm of enthusiasm in her party.