Annual report 2016

President and CEO’s review

Posti has played a central role in the daily life of Finnish society for nearly 400 years. The postal service began to take its current form in the 1800s. At its peak, Posti delivered more than three billion items per year. Today, however, Posti finds itself at a turning point, facing a new beginning.

What does the Posti of today look like? Posti is the largest private-sector employer in Finland. Posti has more than 20,000 employees and operations in 10 countries. In Finland, Posti has over 1,400 service points and delivers more than two billion items per year.

Improved economy reflected in Posti’s freight and parcel volumes

The Finnish economy began to improve towards the end of the year. The confidence indicators in all main sectors showed a rising trend. Consumer confidence also rose, particularly towards to end of the year, to a level above the long-term average. According to the Finnish Transport Agency, transport volumes in heavy traffic in Finland turned to an increase in April 2016 after a long period of decline, and they continued to increase through the latter part of the year.

The improved situation was reflected in Posti’s freight and parcel volumes, which showed favorable development. Development during the year was particularly positive in the cross-border parcel trade and the B2C segment.

Posti strengthened its position in international e-commerce by establishing a network of more than 1,200 pickup points in the Baltic countries and joining DHL’s European partner network, which gives Posti’s customers access to pickup points in 16 European countries.

Ownership expansion would support renewal

By the Parliament’s decision in June, the Finnish State can decrease its ownership in Posti Group Corporation. In accordance with the Government Resolution on Ownership Steering Policy, 49.9 percent of the ownership of Posti Group Corporation will be transferred to a new state-owned development company, Vake Oy, which was established in August. The Finnish State’s direct holding will be 50.1 percent.

The potential expansion of the ownership base would significantly support renewal in this time of transformative changes in the postal industry. It would also boost the company’s pursuit of new growth.

Change requires courage

We are faced with major challenges. We must cut down and build at the same time. Over the past few years, we have been forced to reduce thousands of jobs due to production-related and economic reasons and eliminate unprofitable operations. It has been a very hard period for everyone at Posti.

Change requires courage, open-mindedness and perseverance, as well as new thinking and competence. Fortunately, Posti is full of very innovative people.

We see the care industry as an attractive area of growth. We have introduced home services to our range of services. In addition to our lawn mowing service, which received a lot of media attention, our home services help public and private home care providers be more efficient and flexible in producing their services. Posti’s trump card is the fact that we visit every address on every weekday. This gives us the opportunity to efficiently deliver other services that support living at home. We are already delivering meals on a daily basis to consumers, institutions and schools in 100 municipalities.

We have made a number of acquisitions in the past few years. Most recently, we acquired Veine, a company specializing in temperature-regulated logistics, and Kuljetus Kovalainen, the leading transport company in Northern Finland. Both acquisitions increase our economies of scale and open up new opportunities related to, for example, the delivery of food, beverages and medicines. In OpusCapita, we acquired a German software company jCatalog to strengthen our buyer-supplier ecosystem offering.

Developing Posti’s competitiveness and profitability will continue to require substantial investments in areas such as delivery automation, digitization, infrastructure maintenance and acquisitions.

The Postal Act must be made more flexible

The Postal Act amendments drafted by the Ministry of Transport and Communications in 2016 were submitted to the Parliament in early 2017. This second phase of Postal Act reforms is intended to eliminate outdated legislative provisions in the spirit of deregulation and to adjust Posti’s universal service obligation in response to digitization and current customer needs. This is absolutely essential as digitization is moving ahead irreversibly. In the coming years, the Finnish State plans to reduce the use of paper mail by moving official services online, making the need for postal reform even more urgent.

It is important for Posti to be able to flexibly adjust its capacity to the declining letter delivery volumes.
Amendments made to the Postal Act last year allow Posti’s competitors to deliver letters anywhere at any time, with no delivery obligations. In spite of these amendments, the existing legislation requires that Posti fulfill its five-day universal service obligation despite the fact that the average Finn receives only 11 letters covered by the obligation per year. Combined with declining delivery volumes, these regulations and free competition are bound to lead to very expensive and cost-ineffective delivery.

Finally, I would like to thank our personnel, customers and business partners for their excellent cooperation during the year.

Heikki Malinen
President and CEO