bpostgroup: Belgium’s parcels grow, revenues in North America still under pressure

bpostgroup has released its Q2 results revealing growth in parcel activities but E-logistics in  North America taking a hit.

• Group operating income at 988.2 mEUR, in line with last year (-3.8%).
• Group adjusted EBIT at 57.8 mEUR (margin of 5.8%) down by -15.9%. Group reported EBIT at 47.7 mEUR.
• Belgium (including 2.9 mEUR of lower State compensation for press concessions)
  • Total operating income at 563.8 mEUR (up by +1.1%).
  • Underlying mail volume decline of -2.9% (mitigated by elections’ mail) and offset by price/mix impact.
  • Parcels volumes increased by +2.5% and price/mix impact of +2.9%.
  • Nearly stable OPEX (increase of +1.1%) mainly reflecting salary indexations and stable FTEs and higher recoverable VAT.
  • Adjusted EBIT at 56.5 mEUR and reported EBIT at 56.4 mEUR, including -2.6 mEUR impact from strikes.
• E-Logistics Eurasia  
  • Total operating income at 168.8 mEUR (+3.3%) driven by the continued expansion of Radial EU and Active Ants (+11.7%), higher cross-border sales reflecting growth from existing and recent customer wins in Europe, offsetting Asia and UK.
  • Slightly higher OPEX (+2.1%) from higher staff and transport costs in line with volume development and expansion and lower SG&A and material costs.
  • Adjusted EBIT at 10.4mEUR (6.2% margin), up by +1.5 mEUR (+16.4%). Reported EBIT at 9.6 mEUR (5.7% margin).
• E-Logistics North America 
  • Total operating income at 282.7 mEUR down by -47.3 mEUR or -14.3% (-15.2% at constant exchange rate), reflecting lower volumes at Radial and Landmark US..
  • Lower OPEX (-12.7% or -13.6% at constant exchange rate) from lower variable costs including continued labor management and productivity gains, partly offset by bad debt provision.
  • Adjusted EBIT at 1.2 mEUR, down by -10.0 mEUR. Reported EBIT at -1.0 mEUR. Variable contribution margin at its highest level (+4% year over year).

 CEO quote

 Chris Peeters, CEO of bpostgroup: “The second quarter results are in line with the financial trajectory we foresee. While our parcel activities in Belgium continue to grow and mail revenues remain resilient, revenues in North America are still under pressure. We are taking the necessary actions to mitigate these effects and to diversify our customer portfolio to be better positioned for the future.
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​The past weeks, we reached agreements in Belgium with the newspaper editors. We’ve secured most volumes while safeguarding employment and avoiding restructuring costs. Nevertheless, the new contracts come with less favorable conditions, and we continue to work on aligning costs to volumes to mitigate the impact.
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​Also the integration of Staci is one of our main priorities in the near future. With the closing of the acquisition of Staci, bpostgroup is taking a leap in its transformation and we are now ready to implement our strategy.”

2024 group EBIT outlook as communicated 3^rd of July 2024

Pending the operational and financial outcomes of commercial discussions with the involved press stakeholders, bpostgroup was initially not yet in a position to guide on a group EBIT guidance for the year 2024, hence a divisional guidance was provided.

Following the announcements on April 26 and June 19 regarding agreements reached with Dutch and French-speaking newspaper editors, bpost announced on the 3^rd of July 2024 its 2024 group EBIT outlook and provided an update to its initial divisional guidance.

 Belgium

• Slightly lower total operating income including Press revenues (vs. slightly higher total operating income, excluding Press revenues previously), notably driven by:
• Mail (excluding Press): underlying volume decline of 4 to 6% offset by price increase and mix impacts
• c. 50 mEUR lower Press revenues due to less favorable conditions from the extended press concessions at (1H24) and from newly signed contracts with press editors (2H24); besides the structural volume decline impact c. € 35m of these lower revenues translating directly into EBIT
• Parcels: mid-single-digit percentage volume growth and low single-digit percentage price/mix impact
• 5 to 7% adjusted EBIT margin (vs. 6 to 8% previously) reflecting lower margin on new Press contracts and higher costs due to salary indexation and cost inflation, partly offset by continued ambition in productivity gains and cost reduction initiatives – albeit being impacted by one-off indirect Press impacts of c. -12.5 mEUR EBIT from strikes and reorganization delays.

E-Logistics Eurasia

• High single-digit percentage growth in total operating income (vs. low double-digit percentage growth previously), driven by:
• Continued growth of Radial Europe and Active Ants, and
• Continued growth of Cross-Border Commercial activities including development of new lanes
• 6 to 8% adjusted EBIT margin (vs. 5 to 7% previously) reflecting (i) strong productivity gains at Radial Europe and Active Ants and (ii) favorable mix effect at Cross-Border, mitigating higher FTEs and cost inflation.

E-Logistics North America

• Low double-digit percentage decline in total operating income (vs. high single-digit percentage decline previously), reflecting:
• Radial US net volume loss from (i) lagging in-year contribution from new customers and (ii) client churn and client concessions in the context of adverse market conditions
• Amazon’s increased insourcing partially mitigated by new Cross-Border lanes and customer wins at Landmark Global
• 2.5 to 4.5% adjusted EBIT margin (vs. 4 to 6% previously), with topline pressure mitigated by continued Variable Contribution Margin (VCM) rate improvements and reinforced substantial efforts to further reduce SG&A and other costs.

Following Press negotiations, bpostgroup expects the group total operating income for 2024 to decrease by a low single-digit percentage, including further persisting unfavorable market conditions in North America. The group adjusted EBIT is expected to range between 165 mEUR and 185 mEUR, prior to the consolidation impact of Staci. Staci is expected to contribute to the group EBIT as from August onwards, with an average monthly EBIT of 8 to 9 mEUR.

Group adjusted EBIT will include a decline in EBIT at Corporate level from discontinuation of building sales and higher opex from compliance and strategic initiatives.