NZ Post scrambling to maintain loss-making letters business

Friday, 23 February 2018

NZ Post chief executive David Walsh says the decline in letters volumes 'has resulted in a very financially challenging six months'.

A massive drop in letter volumes has thumped New Zealand Post's profit for the half year to the end of December.

The state-owned mail company reported a profit of $6 million after tax for the period, down $22m on a year earlier.

New Zealanders sent almost 38 million fewer letters in the last half of 2017 than they did a 2016.

Chief executive David Walsh said nearly 38 million fewer letters were delivered in the second half of 2017, a 13.8 per cent plunge resulting in a $20m loss of revenue.

Excluding a $19m contribution from Kiwibank, the group's core business made a loss of $13m.

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Chief executive David Walsh said responding to the decline in letters, while maintaining its service obligations, 'has resulted in a very financially challenging six months'.

'Our largest sending customers are increasingly moving to online communication for their own customers, as this is now what many of us expect in a digitised world.

'This is a significant challenge for NZ Post, and cannot be underestimated in terms of loss of revenue as we seek financial sustainability for this valued service,' he said.

Letter prices will be reviewed in in March with any changes taking effect in July.

NZ Post chief executive David Walsh said it was too early to say whether mail rates would increase.

Pricing was a 'tough balance' to get right so as not to further deter customers from sending letters, he said.

The FastPost service was dropped last year due to a lack of demand.

Walsh said it would be a challenge for the company to meet its full year financial targets.

'The business is having to adapt to rapidly changing customer preferences and the ongoing complexity of operational transformation.'

Asked at what point mail delivery would no longer be a viable service, Walsh said: 'That is a really hard question to answer. There is still demand. It will exist in some form, but we will not dictate that.'

However, parcel deliveries were up nearly 10 per cent in the half year, with 39 million parcels delivered.

NZ Post paid an interim dividend of $2.5m to the Government.