NZ Post in 'difficult position' over declining letter volumes despite profit jump

Friday, 21 February 2020

NZ Post chief executive David Walsh says it needs to 'face reality' over declining mail volumes, despite its higher profit, and is keeping the Government fully informed.

NZ Post has reported a big jump in its profits after it delivered a record number of parcels over Christmas.

But chief executive David Walsh said it would probably increase the price of sending letters again, later this year.

The state-owned enterprise posted a profit of $31 million for the six months to the end of December, up from a profit of $7m during the same six months the previous year.

Walsh said it delivered 34 million parcels during the half-year, but letter numbers fell by 11 per cent to 177 million.

'While there's no doubt that the growth in profit generated from parcel delivery is good news, NZ Post continues to manage the challenge of a declining number of letters being sent,' he said.

After mail blew out of a north Auckland letterbox in December, a business owner resorted to securing the NZ Post box with masking tape.

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'This coming year will be important as we plan to meet the opportunities of e-commerce and start to invest for growth.'

Walsh said last year's local government elections helped letter volumes, but it had to 'face the reality that New Zealanders are relying less on letters to communicate'.

'This puts NZ Post in a difficult position,' he said.

'Providing a physical mail service for New Zealanders … is part of NZ Post's 'DNA'. But it must be financially sustainable on its own.

'We will be taking a methodical and planned approach to this. We are keeping our shareholder, the Government, fully informed,' he said.

Walsh clarified that it was not planning for a reduction in its obligation of delivering mail three times a week.

'Right now there are no changes to our letters business. Our service standards will continue.'

But he said prices could rise.

'We typically make our pricing announcement about two or three months from now.

'It is quite likely we will continue a small price path increase on letter services. We will do it at the lowest possible end of the price range we can do,' he said.

Last year, NZ Post increased the price of posting a standard letter by 10 cents to $1.30.

NZ Post has had a mixed track record in e-commerce.

It launched a service called eBill in 1999 that let people view and pay bills online, but canned it in 2006 because of a lack of uptake.

The service attracted support from 21 utilities and other billers but had only 14,500 users when it closed.

It planned to revive an enhanced service in 2012, when it set out plans for a new service called YouPost, but that service never eventuated.

NZ Post would focus on its 'core strengths' in future initiatives, Walsh said.

'Our primary focus is on getting that fantastic parcel business continuing to serve New Zealanders.'