Australia Post returns to profit as parcels prosper

Australia Post has returned to profit thanks to its growing parcels business and despite a record slump in letter volumes.

Neesha Mavji sorting parcels at Narellan Post Office. Parcels are behind Australia Post’s return to profit

Australia Post has swung back to profit after reporting its first loss in 30 years in fiscal 2015, as the leaking of cash at its legacy postal unit was partially curtailed and as its parcels business continued to expand.

The government-owned mail business said it booked a net profit of $36 million for the 12 months to June 30, a sharp improvement from the prior year’s $222m loss.

Australia Post said parcels profit growth was up 8 per cent to $314m, while total revenue advanced 3 per cent to $6.6 billion.

The robust result was partially offset by a $138m loss in its postal division as letter volumes slumped 9.7 per cent. The volume decline was the largest on record.

The red ink was not quite as deep as last year, however, when the postal operation lost $381m.

Australia Post chief executive Ahmed Fahour said cost-cutting at its letters business - a unit he admitted was in “rapid decline” - was a key to the result as the parcels business grew steadily in the face of intense competition.

“Returning to profit is a pleasing result and shows that Australia Post is on a more sustainable path for future growth,” Mr Fahour said.

“Changes to the letters business introduced earlier this year were an important factor in the group returning to profitability.

“While the letters business is in structural decline, we have reduced our forecast cumulative losses in letters from around $5bn to $1.5bn over the next 5 years.

“The parcels business has performed well despite increased competition from overseas players.”

In a conference call discussing the results, Mr Fahour said the group was pushing hard to get to where the customer wanted it to go, with innovations on the horizon potentially including drone delivery.

“We’ve been doing some testing on those and I’m looking forward to that,” he said.

“(But) I don’t want people getting caught up in this being the standard way (of delivery).”

He added high-profile innovations such as drones may draw the limelight, but it was other changes to the business that would have a more marked impact on the group in the near-term.

Among those was an ongoing trial of different delivery times to better adjust to the lifestyles of Australians, with tests for whether early morning or early evening delivery may be preferred.

Progress on this is expected before Christmas, while the group is also looking at new secure ways to deliver bills beyond the standard delivery of letters.

“Some of those other things are exciting but they are very long-term,” he said, noting drones were a five to 10-year project.

Australia Post added it had exceeded its community service requirements for a 16th straight year.