Oesterreichische Post AG

VSE:POST

Q1-2025 Earnings Call

[Operator]

Good afternoon, ladies and gentlemen, and a warm welcome to the Osterreichische Post AG Q1 2025 Results Call.

[Operator Instructions]

Let me now turn the floor over to your host, Harald Hagenauer, Head of Investor Relations.

[Harald Hagenauer, executive]

Good afternoon, ladies and gentlemen. Welcome to this conference call of Osterreichische Post.

Today, we would like to give an update on the first quarter, plus an update on our strategic intentions for the next years. Here with me in the room is Walter Oblin, our CEO, plus Barbara Potisk-Eibensteiner, our CFO. So I would actually like to hand over to you, Walter.

[Walter Oblin, executive]

Good afternoon, ladies and gentlemen. It's a pleasure to have the opportunity to present to you our Q1 results, including an update on the Austrian Post strategy in the marketplace going forward.

As a summary upfront, I think we are operating in a challenging environment. But in this challenging environment, we could deliver a solid Q1 result. Let me start on Page 2. The economic environment continues to be challenging.

Austria is in the third year of recession. Fortunately, we do have exposure to markets with more favorable economic development, in particular, our CEE portfolio and Turkey.

The core trends in our markets are pretty much unchanged: growing e-commerce and decreasing mail volumes. Still, we see some softening of demand in eCommerce and some increased volatility of eCommerce volumes from Asia.

On the stationary retail side in Austria, consolidation is continuing with a negative impact on our advertising mail on direct mail volumes.

Turkey continues to be an interesting market with strong but decreasing inflation. The exchange rate deteriorated in Q1, but economic growth is quite positive.

In this environment, we delivered, I think, a solid Q1. The Q1 summary is a slight growth, 0.7% revenue growth, with a small EBIT decline of 7.6%. This has to be seen in the context of a very strong Q1 last year with positive tailwinds.

In particular, we had a strong countrywide election last year in our mail business. We had a substantial price increase effective late fall 2023 that supported Q1 figures last year.

We had a strong inflow of Asian volumes into Eastern Europe, contributing to a 44% growth in Eastern Europe. And we had a favorable development of inflation and exchange rate in Turkey.

All these positive supporting effects were not present in Q1. In addition, last year, we had two more working days than in Q1 this year. And I think in the context of all this rather negative context, I think the result is quite satisfying and as we expected it.

Page 4, the usual summary of our three core segments. Mail, our Austrian declining legacy business, is still a strong and profitable business with last year's revenues of EUR 1.2 billion.

Parcel & Logistics, our growth engine, last year's revenues, EUR 1.7 billion; and Retail & Bank, our Austrian retail network, and our Bank, EUR 99 million last year's external revenue, EUR 200 million.

I think interesting on the right side, the revenue distribution in Q1 this year. I think this shows you that we have roughly 60% exposure to a growing eCommerce parcel market in the meantime, and our declining letter mail and direct mail business in the meantime is less than 40%. This was substantially different only a few years ago.

Let me start with our core mail business, Austria only, as you are aware, with EUR 300 million, still a strong and profitable business in Austria.

However, given the strong back wins in Q1 last year, around 5% below last year. The negative volume trend has continued pretty much unchanged at a rate of around 5% per workday.

So on a yearly basis, of course, which means that we have lost roughly 60% of volumes since 2008. We are now in the 18th year of mail decline in Austria, and our mail business continues to be quite significant in size and in profit contribution.

We continue to adjust our operations to a declining mail volume. In the meantime, 85% of mail volumes are in the slower economy product. As of May 1st, we have implemented a product reform that not only adjusts and increases prices with the inflation since the last price change, but this product reform also makes the economy product the new standard product.

So the lower run time now is the standard product. Priority service is still available as an additional service.

Direct mail, again, similar to addressed mail, is a significant revenue contributor with last year's EUR 440 million, together with MediaPost, in Q1, minus 6% revenue and minus 2% volume.

Still, these products are strong, are relevant among the print media, and print advertising products with the highest reach in Austria. However, there is a trend towards digital marketing, and the core customer base, which is the stationary retailers, continues to be in crisis mode.

Page 9, coming to our growth field, Parcel & Logistics, first quarter revenue of EUR 418 million, which is around 4% plus compared to last year. In Austria, Page 10, we saw a volume increase of 5% after a double-digit volume growth in Q1 last year.

So, another growth here after a very strong growth last year. Revenue last year, EUR 930 million. So with the 6% this year, if we continue to grow along this trajectory, EUR 1 billion revenue is within sight.

Page 11, Austrian parcel market. We are the clear market leader in the Austrian parcel market and have gained share last year. Our aspiration is to be the clear leader in the Austrian market, not only in terms of volumes and market share, but also in terms of quality and service innovation.

Sunday delivery, a pilot that we introduced in September last year in 4 districts in Vienna, has proven to be well accepted by customers, and we are now starting with the rollout across Vienna.

Page 12, Eastern Europe, a more difficult start into the year, in particular, compared to a very strong Q1 last year. Last year's growth, 44%, was driven by a strong inflow of Asian parcels.

These Asian parcels have a strong volatility, both in terms of general volumes that come into our markets, but also we see here customers that tend to frequently switch suppliers.

But if you look at Eastern Europe in a 2-year time frame, we still have substantially higher volumes than 2 years ago. At the same time, we are also working hard and have an expectation that we will come back to positive growth and development by the end of this year.

Page 13, Turkey growth in euro terms, around 11% growth in Turkish lira, and around 30%. The Turkish lira has deteriorated in combination with hyperinflation accounting.

This has weighed on our revenues and EBIT this year, in particular, compared to a more favorable Q1 last year, but still Turkey continues to be a strong generator of EBIT and profits to the group, also in Q1.

Retail & Bank division, slight growth in Q1. I think more importantly, a few very positive milestones for bank99 over the past few weeks. Number one, we had a positive Q1 development, where we are on a good track towards our plan to break even by the end of this year.

Second, we successfully harmonized 2 core banking systems into one on Easter weekend, successfully migrated all ex-ING Austria customers to the outsourced core banking systems that we have used since the beginning of bank99.

This was a very large, very complex, very challenging project, and we are relieved and positive that we now have this migration behind us and have 100% of focus and energy for customers and the market.

The third positive milestone was that Moody's has given us an initial rating of Baa2. So, a positive investment-grade rating, which I think is a confirmation that bank99 after 5 years now is growing, is a relatively mature bank and has a strong credit quality across its portfolio.

So I think 3 positive milestones that confirm to us that bank99 is an important part of Austrian Post's future.

Our self-service solutions continue to be well-received by our customers, and we continue to aggressively expand them. End of Q1, we had roughly 2,700 out-of-home locations in Austria as a sum of postal branches, postal partners, and self-service locations, comprising both self-service branches, but also postal stations.

Last year, more than 32 million items were either shipped or picked up through self-service solutions, and we continue to roll out these stations with a target of more than 3,000 postal locations across Austria.

With that said, let me hand over to Barbara, who will give us more details on our financial results.

[Barbara Potisk-Eibensteiner, executive]

Also, welcome from my side. Let me lead you through our Q1 figures. Despite the challenging market environment, Austrian Post was able to increase its revenues by 0.7%.

EBITDA margin a slightly lower than in Q1 2024. There, we had, on the one hand side, a mix effect, more revenues on the Parcel & Logistics side, lower revenues on the mail side, and also some other reasons for this.

EBIT margin is in line with EBITDA margin, declining from 6.9% to 6.3%. Earnings per share, EUR 0.56, compared to EUR 0.59 in Q1 2024.

As we already learned, Q1 2024 was a very strong one on the mail side due to the elections and also other positive one-timers. Very strong cash flow in Q1 2025 with EUR 125 million.

So this is also due to one specific item. We had a tax refund from the Austrian tax authorities in the amount of EUR 40 million and some interest on this, and this had a positive impact on the cash flow. Equity ratio also increased from 29% to 31% for the logistics business.

If we then go to Page 19, the revenue development on the segment level [Audio Gap] business and also the elections, which were created in 2024 revenues, which directly dropped down the whole P&L into net profit.

Also, positive news from retail and banks. There, we are better than last year. What we see is that bank99 is really on a good way to breakeven. On the corporate side, we were also able to show some cost savings, which resulted in a better performance of EUR 4.4 million.

Coming now to the income statement. Randy already went through the revenues. What you see in our P&L is the cost inflation, not only coming from Turkey, but also the cost inflation we got out of labor cost increases, which also had an impact on our profitability.

Financial result, there, we show a better result compared to Q1 2024. This is mainly coming from better cash flow and higher interest on the money we had in our deposits.

The profit for the period, very close to EUR 40 million, slightly below the profit of Q1 2024. Earnings per share, I already mentioned.

So, going into the segments. On the Mail side, I think already said everything. If we are going to Parcel & Logistics, I think that's of higher interest because there, we have a different picture.

We showed a rather healthy revenue on the Parcel Austria side in Q1 2025 with an increase of 6.4%. In Turkey, most of the growth is coming from inflation. What we saw were lower volumes.

Parcel CEE is really suffering from lower Asian volumes coming, but we also have to say that we had a very strong Q1 2024 on the Asian volume side in CEE.

So EBIT of the Basel business, EUR 18.6 million. Retail & Bank division, as already stated, EBIT of minus EUR 1.1 million, minus EUR 0.7 million coming from bank99, which still had some costs on the migration side, on the IT migration side.

But there, we are really on a good way to breakeven. Coming now to our solid balance sheet. You see a slight decrease.

On the balance sheet side, it's mainly coming from volumes of bank99. So the savings slightly decreased, and in line with this also the loan side also had a negative impact.

We still have a very solid financial debt, it's about EUR 93 million. And the debt factor, financial debt versus EBITDA, is 0.2. Considering also IFRS 16, then we are at 1.1.

Operating free cash flow of EUR 125 million. So, the one reason for this is the one-time effect of the Austrian tax authorities. On the other hand, we also saw better cash in coming after the year-end 2024, where some of our customers are optimizing their cash positions. Due to this, we saw higher cash flow in 2025.

If we are coming now to investment, our guidance is still valid for this year. In Q1, we spent very close to CHF 25 million. Where did the money go to? Technology and optimization, about EUR 20 million and more than EUR 3 million, are still going into the decarbonization projects we are running.

On the right-hand side, you also see the CapEx mix of 2022 until 2024, where you see that about 1/3 of our CapEx is going into decarbonization. Now I would like to hand over to Walter again, who wants to give us an insight into our new strategy.

[Walter Oblin, executive]

Thank you, Barbara. Let me continue with an update on our strategy. We worked over the last months within Austrian Post and the broader leadership team on a review of our strategy. We call this Project Lead 2030.

It should reflect that we have a clear ambition to be a leader in our markets, a clear conviction that to be profitable and to be successful, a leadership position in our businesses is relevant and important.

2030, this should be a strategy that should guide us over the next years with a midterm horizon of 2030, a time horizon where we do expect the core trends to substantially change our market and our setup, both the continuation of the decline of mail revenues, but also the continued growth of eCommerce.

We see a rapidly changing economic and technological environment. Page 29, 6 megatrends. I don't want to go into detail. It's clear technology is changing our game in many ways. The whole macroeconomic environment is becoming more volatile.

Global trade and commerce are rapidly changing, also given increasing geopolitical ruptures. Consumer patterns are shifting with the most important trends in our markets, the digitization of communication leading to declining mail volumes and increasing share of online shopping as opposed to stationary retailing, changing urbanization and demographics and sustainability in also rapidly and dynamic environment, rapidly changing and dynamic environment to more relevant trends.

Page 30 summarizes the core strategic directions that should guide us over the next years. Our ambition, our vision for 2030, is to be a leading logistics and services group, reaching more than 150 million people in our region, consisting of Austria, Central and Eastern Europe, Turkey, and beyond.

3 core strategic thrusts, point one, Post and beyond in Austria. We want to continue to be a strong Post, but we think there is more opportunity in the Austrian marketplace for us.

As a provider of key services beyond Post, we see bank financial services as an important pillar of our future portfolio in Austria. And I'll come later to an announcement that also in the field of telecommunication, we see a more entrepreneurial growth opportunity for us.

Strategic thrust #2, international eCommerce. That is our big growth opportunity. Our aspiration is to be the leading eCommerce partner for this region, Austria, Eastern Europe, Turkey, and beyond.

This is a region where we are already today covering 150 million people with high-quality delivery networks. Our ambition is to grow in this region to bundle our offering for the large eCommerce platforms of this world to offer them a group service across this region, to continue to invest, and to also look for geographic opportunities that are not currently part of our portfolio.

Number three, one group, operationally excellent. We think there is an opportunity for more integration across our group, across regions, across businesses. And our aspiration is to establish operational excellence across the group.

We think we have quite a high standard in several countries already. We think that daily going into work and increasing efficiency, becoming even more innovative and efficient has become part of our DNA across a large part of our employees, and we want to continue with this ambition and to be technology focused and to be a leader in applying modern technology is part of that third thrust.

In the middle, the green circle, I should express that the 3 core values, 3 core overarching guidelines, continue to be important. We continue to have the aspiration to be a leader in sustainable logistics.

We have a clear aspiration to be a very customer-focused customer-driven company, and we want to be the employer of choice for our 20,000 employees in Austria and for roughly 30,000 employees across the group and an attractive company culture that we have been working on substantially over the last 2, 3 years and where we will continue to work on is a very important element of this aspiration.

Let me briefly lay out what this specifically means. Post and beyond in Austria, clearly, we want to defend our market leadership in the Austrian mail and parcel market.

We will continue the ongoing transformation of our networks of our product offering to reflect a declining mail volume and the growing parcel volume. But we see opportunities in a playing field that is mapped here on Page 31, beyond the pure postal services.

We see several examples across Europe that postal companies with their strong platform, with a trusted brand, with a branch network that is one of the densest retail networks in the country, with strong digital channels that postal companies have opportunities beyond postal services.

We have proven that we can build new businesses on this platform with bank99, where I think we're on a very good way. We have a focused retail offering in our branches.

We have established singular services in health care, government services, and energy in the past. And we have been in telco throughout the history of our company. And we announced today that we will continue our presence in the Austrian telecommunication market next year.

On a new level by entering the telecom market with an MVNO as a mobile virtual network operator, in a new cooperation with our current telecom partner, A1. We will continue our sales cooperation until the end of this year. And in Q2 next year, we will start an MVNO, so mobile phone and Internet offering under our own brand.

We think there is a strong opportunity in the Austrian marketplace given Austrian Post's past history in telecom, given our strong and trusted brand, given our strong branch network and our digital channels, and we look forward to capturing this opportunity.

Moving to the second pillar of our strategy, international eCommerce. We are already a strong group in the eCommerce market in the region, shown on Page 33, covering 11 markets with a strong logistics network that has reached 150 million consumers.

We expanded to Azerbaijan last year. We already communicated in our last quarterly call that we will make cautious steps in Georgia and Uzbekistan this year in a very risk-averse approach.

We see white spots within this region. We see opportunities to strengthen our market position in some of the geographies and have a clear commitment and ambition to grow as eCommerce partner for the large and small eCommerce customers in this region.

We think this is an attractive region showing above-average growth, given that the penetration in terms of parcels per capita in most of these markets is still substantially below the European or worldwide average.

Moving to strategy pillar #3, one group is operationally excellent. We want to develop a much more integrated international group operating model, capturing the synergies across our portfolio, offering our large international customers one integrated product offering with integrated IT interfaces through one sales force.

I think a very substantial change from the model we have been operating so far. This combined with a strive for excellence in our operations and with an ambition to use modern technology, be it modern sorting equipment, modern IT solutions, or new technologies such as AI, robotics, or autonomous driving.

And last, our overarching guidelines, sustainability, customer centricity, and an attractive corporate culture. On page 35, we, I think, have a very strong track record, sustainability. We believe that sustainability gives us a competitive edge in our consumer markets, in our B2B customer markets, gives us a strong sense of purpose for our employees, and also captures a premium vis-a-vis investors and capital markets.

All these sustainability solutions that we currently apply, be it electric mobility, PV, are also economically advantageous solutions; the total cost of ownership of our electric delivery fleet is already substantially favorable compared to combustion engines.

So, we will continue to roll out these technologies across our geographies. And as I said, being the employer of choice for our employees is an important element of the strategy.

We are in a service business where our postman or the people working in our postal branches make the difference for our customers, and we will continue to work hard to be an attractive employer for our employees.

With this strategy, moving to page 36, we want to deliver along our value proposition to investors to be a defensive, attractive dividend stock also for the next years.

We have a track record of 16 years of successful development along this value proposition to defend. I think our management team, consisting of Barbara as our new CFO, Peter Umundum, our Deputy CEO, and myself is highly committed to this strategy, which I think stands for both continuity as well as change and transformation.

I'm delighted to inform you that Peter Umundum yesterday got the confirmation by our Supervisory Board for another contract period starting April 1st next year.

So, the continuity of the current management team is confirmed for the next years, and I look forward to working with this team to develop Austrian Post into the future.

We also have clear financial goals for our future. We already communicated the target of $4 billion in revenues by 2030, after we have achieved $3 billion faster than originally anticipated.

We also have a clear profitability goal with an EBIT margin of at least 6%. And with these ambitions and the outlook for 2025, I will close this presentation.

Our outlook is unchanged and unchanged to the outlook that we communicated in March this year. We continue to see a challenging environment ahead, letter mail volume declining, not very much economic growth support coming from the macroeconomic environment, but we stick to our target of a modest revenue growth for the full year and an EBIT target in the order of magnitude of $200 million.

Despite this challenging economic environment, we think Q1 is well on track towards these goals, and we are committed to these goals also going forward.

So, thank you very much for your attention, and we're now happy to take your questions.

[Operator]

[Operator Instructions]

At the moment, there seem to be no questions submitted. So, since there are no questions incoming, I close the Q&A session with that and turn it over to the host.

[Walter Oblin, executive]

Thank you, ladies and gentlemen, for participating in this call. It looks like everything is clear. But of course, if you do have some questions in the next days, don't hesitate to call us today or in the next days. We are, of course, available for you.

So, I thank you once more and here and see you hopefully soon. Bye-bye.