Australia Post profits from booming parcel volumes

Added costs and falling letter distributions have weighed heavily on AusPost’s bottom line.

AusPost CEO Christine Holgate said despite deriving 73 per cent of revenues from things other than letters there were significant fixed costs associated with letter distribution. Picture: Hollie Adams/The Australian

Booming parcel volumes have pushed Australia Post to a $42.3m profit after tax for the financial year 2020, but added costs and falling letter distributions weighed heavily on the bottom line.

This follows a $40.6m profit from AusPost in the financial year 2019.

Total revenue across the national postal service grew by more than $500m during the pandemic period, with parcel revenue up 15 per cent.

But this was coupled with even more significant losses across the letter side of the group where total revenues slumped 10 per cent.

This revenue slump was worsened by letter losses growing 26 per cent to a full year loss of $241m.

This comes after a 10 per cent boost to basic stamp prices on January 1.

Letter volumes tanked in April with a 28 per cent decline on the back of the first wave of the pandemic, followed by a 36 per cent decline in May, continuing to decline to July.

International post was also slashed by 50 per cent in April and has stayed persistently low on the back of difficulties due to significantly reduced flights.

AusPost CEO Christine Holgate said despite deriving 73 per cent of revenues from things other than letters there were significant fixed costs associated with letter distribution.

“We have a network of posties who traditionally have been on motorbikes and what they carry in the volumes of letters is a third or a quarter of what they were doing 10 years ago but we have the same number of posties,” she said.

“The reality is that letter volumes have got to a point where we were already only delivering on average to every other house every other day.”

AusPost was given temporary permission in April to move to every second day delivery of mail in metro areas until 30 June 2021 and Ms Holgate declined to say whether she’d like the postal service to make it a permanent change.

Labor shadow minister for communications Michelle Rowland said the results seriously called into question the cuts that were floated earlier in the year.

“These results completely contradict the narrative Australia Post were briefing out to the press gallery when they began laying the groundwork to cut services and jobs under the cover of COVID-19,” she said.

“It wasn’t addressed letter volumes that “collapsed” in April — but rather the integrity of Minister Fletcher on Australia Post.”

The move to scale back deliveries formed part of a broader movement within the postal service to cut costs.

Costs across AusPost grew by $477m in the last financial year, with significant airfreight charges and additional processing needed to cope with the huge volumes of parcels surging through the national postage network.

Ms Holgate said it was a continued struggle to get access to international flights, with AusPost having to work with DFAT to secure capacity to routes into the USA and New Zealand and Qantas to Europe.

“We have had increased costs we’ve made quite a strong effort not to be increasing costs generally and passing all those costs on as businesses in Australia are having a tough time,” she said.

“We have 17 planes flying across the country, that‘s an extra cost, we’ve got pop up processing facilities to manage these volumes.”

The postal service has had to hire an additional 600 people to man its 18 pop up postal centres and is planning on taking on another 2500 to cope with the Christmas crush in December.

AusPost sought to offset some costs by implementing business efficiency programs across the group, saving $220m for the year.

COVID-safe restrictions in Victoria have seen its sorting facilities in the state significantly impacted, but Ms Holgate said it was pleasing that there had only been 1 case of workplace COVID-19 transmission detected among its 80,000 workers.

“We’ve put plastic screens up, masks, sanitiser from March, we’re really proud of the safety record,” she said.

Overall 66 workers at AusPost have contracted COVID-19.