Bpost performed better than expected in the second quarter. But we must remain vigilant and keep costs under control as much as possible, says CEO Dirk Tirez. He revised the outlook for the full year ‘positively’.
Bpost saw its profit fall by a fifth in the first quarter of this year due to competition from Amazon and economic uncertainty. Many, including analysts, therefore assumed that the second quarter would be worse. But it wasn’t.
Bpost just passed the 1 billion euro turnover mark in the past second quarter, fully in line with the same quarter last year, and ended up with an operating profit of 82 million euro. That is 22 percent less than last year, but just like the turnover better than expected.
Nevertheless, parcel and postal volumes in our country – Belgium accounts for 50 percent of group turnover – fell by 12.9 and 7.5 percent respectively compared to last year. But that was partly compensated by the excellent performance in the US, according to CEO Dirk Tirez, where subsidiary Radial managed to increase its turnover and profit. Radial provides logistics and web services for large companies involved in e-commerce. The company, which had struggled for years and for which Bpost paid $ 825 million, posted growth of 18.3 percent thanks to new customers it acquired in 2021. The profit went from 10.7 million to 18.1 million euros.
- Bpost achieved better than expected results in the second quarter.
- Operating income amounted to 1.035 billion euros (-0.2%), operating profit 82.6 million euros (-22.5%) and net profit 71.4 million euros (-4.7%).
- Parcel volumes in Belgium fell by 12.9 percent, but Bpost said it increased its market share.
- Mail volume fell by 7.5 percent.
“We have outperformed expectations in a difficult market environment,” Tirez said in a conference call. Radial performed well and mail revenues remained strong. But we must remain very vigilant.’ Tirez warned of rising inflation, declining consumer confidence in Europe – although he saw a slight recovery in Belgium for the third month in a row – and rising costs. Wage costs make up 70 percent of Bpost’s total costs and due to rising inflation, the group is confronted with future wage indexations. They will take an extra chunk of 24.5 million euros from the budget this year.
In order to counter those rising wage costs, 780 jobs were cut last year up to July. “Without redundancies,” Tirez stressed. A ‘hire freeze’ was introduced at the Brussels headquarters and only 65 percent of the people who left were replaced. “The aim is to get that percentage even lower,” Tirez said. He made it appear that ‘reorganizations of agencies’ are still on the way. ‘But everything is done in consultation with the unions.’
Last year, the Bpost group employed 40,340 full-time employees (including interim workers), of whom about 26,000 in Belgium. To save additional costs, Tirez also wants to reduce energy bills by 15 percent.
Despite the drop in parcel volume of 12.9 percent, Bpost saw its market share in Belgium increase. To bring in more customers, it cut the price for sending certain parcels by 14 percent during the last month and a half of the first semester. Tirez also saw online retail sales rebound slightly in May, both in Belgium and the rest of Europe.
“We are outperforming the market,” says Tirez. ‘That’s because the customer appreciates our quality, as research shows. Because our mailmen are doing well.’
According to Tirez, Bpost regained 40 percent in parcel volume in the second quarter of what it lost to Amazon (20 percent in the first quarter), thanks to new customers, including SMEs and some major players such as Vinted and the National Lottery. In Brussels and Wallonia, Amazon has recently taken control of the ‘last mile’ of its parcels. At the end of this year, the American giant will open its first own warehouse in Antwerp.
Given the performance in the second quarter, is he optimistic for the full year? Tirez: ‘Macroeconomic conditions will continue to weigh. But I think we have the right strategy and the right priorities. But we will continue to see the huge effects of wage increases through indexation and of transport and energy costs in the next semester as well. Continued efforts will therefore be necessary to make a difference.’
I’m a sailor and when you see the wind changing or the wind getting stronger, you start adjusting your sails. We’re going to have to keep doing that.
‘However, we have managed to set sail in these uncertain market conditions. I’m a sailor and when you see the wind changing or the wind getting stronger, you start adjusting your sails. But you can also quickly continue with the same measures. We are taking these measures to guarantee the future of Bpost.’
Tirez revised its full-year outlook. In May, when announcing the poor first-quarter results, the CEO maintained the annual operating profit forecast of between 280 million and 310 million euros, but saw a “potential downside risk” of 40 million euros.
Based on the current outlook – a historically less third quarter, but a peak fourth – he reduced that ‘potential risk’ to 25 million euros.