Mail monopoly loses $91.3 million in reserved services

Australia Post has finished the financial year in a stronger position than the year prior, claiming an annual profit of $332.3 million before tax – up 31.3 percent from the year ending 2010.

The results were released this week in the company’s annual financial report, and indicate that, while the overall profits of the company seem to be in good shape, its ailing reserved mail services business – a mainstay for direct marketers – continues to lose money.

This year saw the reserved mail business make a $91.3 million annual loss and, although this is a better result than the previous year’s loss of $250.1 million, it is clearly representative of the troubled mail sector.

In an attempt to stem the severe losses coming from the reserved mail business, Australia Post lobbied the ACCC to lift its oversight on the business’s pricing. In July, the mail group succeeded in getting the green light from the competition watchdog to freely change its prices in that business. This primarily affected its pre-sort letter service, leading to increased expenses for direct mailers.

Despite the resulting reduction in losses, Australia Post’s CEO, Ahmed Fahour, says that other market factors will continue to minimise profits. This may leave marketers open to the possibility of further price hikes to make up the shortfall.

“The increase to the stamp price helped to reduce the losses in our reserved letters business,” says Fahour. “However, this was offset by the continued decline in the volume of domestic addressed letters mailed in Australia (down 3.7 per cent this year), while the cost of servicing Australia’s expanding delivery network continues to rise.”

The annual financial report comes only days after Australia Post announced changes that will encourage greater use of its parcels and financial services – two areas which have grown over the past year.

“Our focus on ecommerce has been vindicated as we’ve experienced overall parcel volume growth of 10.9 per cent which drove parcels revenue up 5.3 per cent and resulted in a 36 per cent growth in profit over the past 12 months,” says Fahour. “This is only going to continue as online retailing in Australia continues to grow at a rapid rate.”