Australia Post announced a profit of $36 million after tax today (Friday), driven primarily by its booming parcel business and reforms to letter delivery.

Executives will heave a sigh of relief in the wake of the $258 million turnaround, particularly because letter volumes have continued to dive steeply year-on-year and face terminal decline.

The company said that addressed letter volumes fell by 9.7 per cent, the largest ever 12-month decline, contributing to a loss in the postal business of $138 million but this was mitigated by profits from parcels, which were up 8 per cent to $314 million.

A two-speed letter delivery system was introduced in January this year, causing many to grumble that it now cost more to send a letter and took longer.

The basic postage rate (BPR) increased from 70 cents to $1 – now called the Regular letter service – while customers must now use on a 50 cent label to send an item Priority mail, taking the total to $1.50.

Australia Post pledged to deliver Priority letters within one to four business days (depending on the destination), while Regular mail can now arrive up to two business days afterwards, potentially taking more than one week to reach the recipient’s letterbox.

Australia Post announcement headlines

• Revenue up 3 per cent year-on-year to $6.6 billion
• Parcels business recorded profit growth of 8 per cent due to strong business-to-consumer growth and productivity improvements
• Reduced losses in postal business but still recorded a significant loss of $138 million driven by a 9.7 per cent letter volume decline
• Continued investment to support licensed post office operators – additional $125 million in annual payments now committed
• All community obligations, including service performance standards, exceeded for the 16th consecutive year

Ahmed Fahour, Managing Director & Group CEO, called the profit “one of the biggest transformations in the organisation’s history” and put it down to strong financial discipline across the business.

“Returning to profit is a pleasing result for our employees, post office operators and our other important stakeholders, and shows that Australia Post is on a more sustainable path for future growth,” Fahour said.

“The parcels business has performed well despite increased competition from overseas players. We have outperformed in difficult market conditions to post an 8 per cent profit increase.

He said the company’s bottom line was also helped by changes to the letters business introduced earlier this year.

“Our business is 207 years old, but we are more efficient and motivated than ever before,” Fahour said. “We have to continue to evolve to remain relevant and sustainable, so we can continue to serve customers and communities everywhere.

“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.”

Other highlights include:

• Strategic alliance announced with global logistics provider Aramex to facilitate seamless cross-border logistics and delivery support for Australian businesses and customers
• New government innovation partnerships signed by the Trusted eCommerce Solutions business, including the first online government police check with WA Police
• Advanced automation technology installed at major letters and parcels processing facilities in Melbourne and Sydney to improve efficiency
• New parcel delivery options for MyPost customers including parcel safe drop and redirection services. MyPost added 1.9 million new members this financial year, with more than 4 million Australians now registered
• Establishing a Chief Customer Officer portfolio to advocate for our customers and a Chief Innovation Officer to drive new customer innovation

The Australia Post Annual Report will be tabled in Federal Parliament later this year.

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