Österreichische Post AG (POST) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to this conference call of Austrian Post, where we would like to discuss the third quarter and the 9-month figures of the company. Here with me in the Board is Walter Oblin, our CEO; and Barbara Potisk-Eibensteiner, our CFO. And I would like to directly hand over to Walter to answer.

Good afternoon, ladies and gentlemen. It's a pleasure to have the opportunity to present to you our Q3 results and our outlook for the full year, including a strategy update. Let me start on Page 2 with our environment. I think for those of you who follow the postal industry, it's quite clear, we operate in a challenging market economic -- we operate in a challenging economic environment. The macroeconomic context remains subdued and the postal megatrends continue to be quite pronounced. Mail continues to shrink in a somewhat accelerated order of magnitude. At the same time, e-commerce and parcel remains the growth opportunity, however, with strong competition in all markets. In this environment, I think we have shown that we operate a solid and stable business model. The numbers after 3 quarters are as shown on Page 3. We are a little bit behind our 2024 figures, but substantially above 2023 revenues. Let me remind you that 2024 was a year with a number of positive one-offs. On the one hand, there were three countrywide elections in the Austrian Mail business, which helped support revenues. And on the other hand, we had a relation of Turkish lira inflation to the currency development, which was very favorable. Let me just point you to two figures. Turkiye revenues in 2023 after 3 quarters as opposed to 2024, a growth of 33%, which did not come from volume growth, but mostly from an inflation that was much higher than the currency depreciated. In the absence of such positive special effects, such positive one-offs, the megatrends and the economic environment is dominant. We see that we operate and let me move to -- no, sorry, we see -- we'll come to that later. We see that we grow in Parcel, however, on a relatively low growth rate given the special effects last year. And in Mail, we see a decline. EBITDA and EBIT also a little bit below last year, but above the last, I would say, "normal year" 2023. Page 4 reminds you of our new strategy that we communicated in Q2 in May. Our ambition is to be one of the leading logistics and services group in the region of Austria, Eastern Europe, Turkiye and beyond with three core pillars. One is we want to be the clear leading market player in the Austrian postal market, but we want to go beyond post. We want to be a leading provider of key services, post, bank, telecom and potentially further services. Second, international e-commerce is our main growth opportunity. There, we want to be the leading partner for e-commerce platforms and online retailers in our region. We are reaching today already 150 million people with daily high-quality delivery networks and want to invest and grow in this region. And third, we want to strongly exploit the synergies with a one group approach and with operational excellence and technology leadership. Let us use this framework to go through our core businesses, starting on Page 5 with our incumbent letter mail business. Here, we see now in the absence of positive one-offs as already mentioned elections last year, we see the pure volume decline. This year, a little bit accelerated, minus 8%, similar order of magnitude on the direct mail media post side here, we see a trend towards digital advertising and a crisis of the stationery nonfood retailers, which continues to lead to volume declines. The Austrian letter mail market, moving to Page 6, remains one of the cheapest in Europe. And so we think that we -- that our strategy to offer good quality services at moderate prices continues to keep mail relevant. We want to stick with that strategy. At the same time, this also, I think, shows that we have headroom in increasing prices without losing our customers, and we already got regulatory approval for a number of tariff adjustments as of January 1 next year. These will be mostly on -- these will be mostly outside the core standard mail products, so registered mail, international mail, direct mail or the letter mail product, I think we look for some adjustments during the course of the year. So much on mail. Let's move to our bank. bank99 has had a number of very positive events over the last months, including the harmonization of two core banking systems on the Easter weekend. We have seen good continued growth. We continue to operate a very stable, risk-averse balance sheet. And most recently, we made our debut on capital markets with the issuance of a preferred senior bond with a volume of EUR 85 million, which was 2.2x oversubscribed. That followed an initial rating by Moody's at the investment-grade level. So I think -- we think bank99 is becoming an adult, and we are satisfied that in the fifth full year since launching bank99 in the Austrian marketplace, we are very optimistic to reach breakeven for the full year. After 3 months -- after 3 quarters, we are already showing a positive result, and we are optimistic for the fourth quarter. And going forward, which gives us a lot of optimism is a number of very positive ratings of bank99 on the consumer side. So #1 in customer service among Austrian retail banks, top mortgage loan product, #2 in current account product that in the competition of very established, very strong Austrian retail banks with a lot of marketing spend, I think makes us very optimistic that the concept of a focused retail bank that leverages the Austrian Post platform has a strong future ahead. Moving to Page 8. We continue to strengthen our network, our postal network in Austria through self-service 24/7 solutions. These are very well accepted by customers. Last year, 32.4 million shipments handled by our customers through self-service solutions. This year, we are already seeing a double-digit increase. So we'll -- definitely we'll see more than 35 million shipments for the full year. So this is very well accepted by the marketplace, and we continue to strengthen our network. We have moved from 1,900 postal access points to, in the meantime, almost 2,900 for the full year. We'll reach around 3,000. And with that, we have in urban areas, a density where the aspiration of the so-called [Foreign Language], so to be really within short walking distance is reality. In Vienna, 75% of consumers have a self-service outlet within 250 meters. So the [Foreign Language] translated is the so-called slipper distance or the distance where you don't need to put on your sneakers, where you just can stay in your slippers. Let's move to Page 9. Our telecom offering. We remain in a partnership with A1, the Austrian telecom incumbent, until the end of this year in the distribution -- sales and distribution partnership. After that, there will be 3 months of silent period. And in Q2, the beginning of Q2, we plan to launch an MVNO under postal brand. This project is running quite well. We are now in the process of rebranding our branches, and we are very optimistic that this mobile offering will be well received. Let's move to our parcel business, Page 10. We continue to grow in the Austrian market after strong growth last year, a little bit of consolidation, but still 2% growth volume-wise, 5% growth revenue-wise. We continue to be the clear market leader with the strongest network in place, in particular, in the growing B2C market. And given that we are now starting the Christmas peak season, there is a number of services that we have put in place to allow for a very convenient online shopping by Austrian consumers, ranging from a relaunch of our AllesPost service, so a service where we provide a virtual address irrespective of which last mile carrier the sender has chosen, the recipient can receive all parcels by Austrian Post. We have equipped our Post App, which has 2 million downloads in Austria and 460,000 active users with features where you can more or less real time during the course of the parcel arriving at your door, redirect the parcel to wherever you wish, be it the next postal sub-service station, be it next branch, be it a specific place at your home. And we continue to see an increasing number of customers using those services. Moving to Eastern Europe. There, we started out -- we started into the year with some challenges on the volume side, given the volatility of Chinese volumes in Q3, we got back to a growth record after -- this compared to a quite strong last year, where in the first 3 quarters, we grew 19%. So Q1 to 3 cumulated, we are still 3% below last year, but that will still mean 16% growth over 2023. So overall, I would say, a solid development in Eastern Europe. However, the market is very competitive there. Page 12, brief update on Turkiye. Turkiye remains the most important and biggest foreign market for Austrian Post, revenues of more than EUR 360 million in the first 3 quarters, a plus of 5.3%. This year, inflation and currency is not as favorable for Austrian Post as it was last year. Therefore, in euro numbers, not that strong growth that we've seen last year. Volume-wise, we are relatively stable in a very competitive market in Turkiye where the core e-commerce platforms continue to build out their own networks in Turkish lira, given the inflation, we still show a strong growth. Moving to Page 13. Technology remains an ever more important success factor in our industry. I already talked about the Post App, which is very successful. We are increasingly using automation and robotics in our operations, are rolling out an integrated operating system, a self-developed one in Eastern Europe and continue to deploy technology across all areas. With that said, let me hand over to Barbara, who will give you more details on our financials.

Hello. Also a warm welcome from my side. Let me start with the financial highlights for the first 9 months of 2025. Due to the outstanding year 2024 with the elections Walter already mentioned, we decided to do the comparison not only with 2024, but also with 2023, and I think this absolutely makes sense. In terms of top line growth, the first 9 months of 2025 implied a 1.1% decline compared with the same period in 2024, but a 12.3% increase against 2023. Similarly, EBIT was down by 6.6% if compared to 2024, but up by 3.4% against 2023. Other highlights of the first 9 months in 2025. We still have a very solid balance sheet structure with a very low debt. Net debt to EBITDA amounting for 0.4x, logistic equity ratio at 29%. Also a very strong cash generation with an operating free cash flow higher than in the recent year with a cash flow of EUR 240 million. Coming to the next slide. Looking into greater details of revenue development, the decline in Mail continues at minus 7% compared with the first 9 months in 2024, but remains only 2.3% below 2023. In this context, major elections in 2024 provided an additional revenue of about EUR 35 million. I think that's very important to consider. While we achieved a continued growth of Parcel & Logistics in Austria, as already mentioned by Walter, and also in Turkiye, we suffered a 3.9% decline in parcel in CEE, which is largely due to the massive peak of parcels from Asia in the first half of 2024, driven by a very strong e-commerce business in CEE. Finally, the top line in Retail & Bank was down by 4.5% year-on-year, which was essentially a result of low interest rate. Coming now to profitability. When applying the same analysis for EBIT on the next slide, group EBIT declined by 6.6% versus 2024 or 3.4% versus 2023 with earnings in Mail being down by 21.2% and in Parcel & Logistics by 26.6% year-on-year. I would just want to add that we managed to increase earnings in Austria on the back of good volume growth and price development, whereas intense competition and also some investments done for the out-of-home business in Turkiye and CEE impacted the profitability in these market segments. Overall EBIT decline coming from volume was compensated up to a certain extent by cost efficiency measures, which I will come to on the next slide. Please have a look on staff costs and also other operating expenses, where you can see our cost discipline already initiated in Q1 2025 as we saw the market not really getting up, not picking up and also seeing that Mail business is sharper declining than expected. EBIT of EUR 135 million is about EUR 5 million higher than in 2023, but down more than EUR 9 million compared to 2024. Earnings per share, EUR 1.41. That's a decline. But on the other hand, we were able to increase earnings per share compared to the first 9 months of 2023. Coming now to the segments. I think a lot of things already mentioned. I think main message of key income statement for Mail division is that this lack of elections in 2025 is the main reason for the decrease in all under segments of segment Mail division. But what we also have to mention is that the division still has a very good EBIT margin of 10.7%. Coming now to Parcel & Logistics division. Similarly, there, we see revenue was up by 2.8% and then taking into account the reporting change of Logistics Solutions, up by 3.9% year-on-year with strong growth both in Austria and Turkiye and -- but in Turkiye, mostly supported by the Turkish lira. However, it's worth mentioning that we face strong competition in our markets and also note some volatile customer volumes, especially in Turkiye and CEE. This resulted in an EBIT decline of 26.6% compared with 2024. But there, we also have to mention that in the year 2024, we have a sale of property of EUR 6.5 million, which is also stated on the slide. Coming now to the third segment, Retail & Bank, already said that there, we have a top line decrease of 4.5%. That's mainly coming from the low interest rates in Europe. In Retail & Bank, we are particularly encouraged by having achieved the breakeven now, as already said by Walter in bank99 and also in the branch network, we took great efforts on the cost savings side. I already mentioned the solid balance sheet. Coming now to the financial debt, which amounted for a little bit more than EUR 160 million. Also considering IFRS financial debt -- IFRS 16 financial debt, it's about EUR 526 million. Financial debt to EBITDA 0.4x and financial debt, including IFRS 16 versus EBITDA 1.3x. This is also the basis for further dividend payments and also for further growth in Austrian Post. The cash flow shows a solid picture with an improved operating free cash flow and also free cash flow for the logistics business. If compared against the same period last year and in the wake of having completed our major investments in processing logistics centers in Austria, we had maintenance CapEx down by more than EUR 10 million and growth CapEx by about EUR 4 million. In turn, bolt-on M&A was up by EUR 1.6 million year-on-year. Let me reiterate that our financial strategy of focusing on free cash flow generation allows not only for providing sufficient cash for our dividend commitment, but also investment opportunities for future growth. Slide 23 shows our CapEx development since 2020 with a massive investment program for logistics centers, mainly in Austria. This program has now been largely completed. There's only one project to be done. It's in Salzburg-Wals. This will be done in 2026 and 2027. We see CapEx in total is below the level of previous years. In line with these trends, a number close to EUR 150 million is expected for the full year 2025. On the right-hand side, you can see current investment split of about 2/3 of CapEx done in Austria and about 1/3 done in the international subsidiaries. International subsidiaries mainly means electric vehicles and on the other side, out-of-home business. I now want to hand over to Walter for giving the outlook.

Yes. Thank you, Barbara. Let me close our presentation with the outlook for the full year and the first glimpse into 2026. So I think as a summary, we are cautiously optimistic. We do not expect the market environment to substantially improve. The megatrends of declining mail volume and the growing e-commerce market characterized by heavy competition will remain. In this context, we do expect a broadly stable revenue development on the back of the strong increase in the previous year with a modest decline in the order of magnitude that we have seen for the first 3 quarters for 2025 for the full year. And in 2026, we do expect and target a slight increase again. I think on the individual segments, I more or less already said the important things. On Mail, we do expect a steady decline with some support from tariff increases. On Parcel & Logistics, we do expect further growth. Of course, there is always the Turkish lira to euro exchange rate that we are dependent on. And in Retail & Bank, we do expect a slight fall in gross revenues due to the lower interest rate environment. In our group P&L, we show gross income and provision income. And for next year, also the discontinuation of the A1 partnership will result in a short-term decrease of revenues of approximately EUR 20 million in 2026. Despite all this, again, for next year, we do target a small growth again. On the CapEx side, Barbara already mentioned that for this year, we do expect roughly EUR 150 million in cash CapEx. And I would say for next year, roughly similar order of magnitude. And on the earnings side, our aim remains to be a stable earnings -- to show a stable earnings profile. Earnings 2025 are expected to be slightly below the extraordinary strong prior year, in line with the performance during the first 9 months. So expect a few percentage points below last year and for 2026. And this is a cautious outlook into the next year in a volatile environment. For 2026, Austrian Post targets a broadly stable earnings development in the order of magnitude of previous years. So thanks again. Thanks for listening to our presentation, and we're now happy to take questions and answers.

And the first question is from Patrick Steiner, ODDO BHF.

Patrick Steiner speaking. I have four in total. I will take them one by one, if that's okay. First one, could you give us please some more information or maybe some numbers on your plans to become a regional network operator in Austria? How can you leverage your current infrastructure, the kind of planned revenues, user numbers? You just mentioned the temporary EUR 20 million revenue decline due to the discontinuation of the partnership in 2021. I mean, if you just could give us some more info on this, this would be appreciated.

Yes. As mentioned, we will discontinue our current distribution partnership with A1, and we will launch an MVNO as of Q2 next year. While we do not disclose our precise targets for that, I think our bank shows a good benchmark. After 5 years, we have been able to acquire 300,000 customers. This, in our view, is a reasonable 5-year benchmark that is also relevant for our new MVNO and it fits well with the run rate of sales numbers that we've seen in the past. In terms of profit contribution, do expect some start-up losses in the lower to mid-single-digit numbers in the first 2, 3 years. But of course, we do expect positive earnings contributions to Austrian Post relatively soon.

Okay. Great. You also mentioned that you would potentially like to offer further services apart from telecommunication, banking services. Could you maybe give us some examples if that's possible?

I think the European postal companies show that positioning as a provider of basic services fits well with a postal brand that stands for trust, that stands for proximity and there are no specific plans that I'm ready to talk about. I think for the moment, the three pillars, post, financial services and telecommunication, are our clear focus. But I do not -- cannot exclude that we will have some ideas going forward to strengthen and broaden this service proposition.

All right. Understood. A third one, you mentioned that you received regulatory approval for tariff adjustments in February next year for non-letter mail products, if I understood correctly. And for letter mail products, you seek to increase tariffs throughout the year, so a bit later. Can you give us more information on the magnitude of the targeted price increases as well as why you aim to address the letter mail part later in the year?

We just had a product and tariff reform on the core mail products in May of this year, so just more or less 5 months ago. And our current regulatory framework, and that is also an answer to your question on the order of magnitude basically allows us to increase prices in line with inflation across the whole product portfolio. And this is, I would say, the order of magnitude we have seen around 3% to 4% inflation in Austria over the last 12 months. And I think this is the order of magnitude across a business that is worth roughly EUR 1 billion in revenues that we aspire to gain from price adjustments.

Okay. Perfect. Last one from my side. You highlighted the implementation of this integrated operation system in CEE/SEE and in Turkiye. What kind of benefit in terms of cost savings or delivery KPI improvements do you expect from that?

I think we're not in a position to and we should not expect strong cost savings. I think we are -- I think the main target was to become independent to leverage synergies across the group to offer one interface to our big e-commerce customers and to enable further growth in volume, but also in innovative new services going forward. This is an in-house development out of our Turkish Aras digital subsidiary. And we are in the midst of the rollout. This is running well, and we expect to gain more traction from that over the coming months.

And the next question is from Marco Limite from Barclays UK.

I've got a couple. So the first one is on your '25 guidance. With Q3 results, you were guiding for EUR 200 million. Now the wording is slightly changed. So my question to you is if you could give an indication on Q4. I mean Q3 was kind of a bit down year-over-year. Shall we expect broadly the same trends also for Q4 as Q3? Is the first question. Maybe if you can reply to that, and then I will move to the second.

Well, I think the interpretation of the wording should be more or less look at the results over the first 3 quarters. We are down a little bit above 1% in revenues, and we are down a mid-single-digit number in earnings. And I think that is roughly the picture we do expect for the full year. There is quite some uncertainty in it, in particular, on the revenue side. The most important unknown variable is the Turkish lira, where you could calculate different scenarios. and depending on where the lira comes out at the end of the year, will -- the revenue will be higher or lower. And let me remind you that we are accounting our Aras Kargo revenues under the hyperinflation accounting standard, which basically means that we use the exchange rate at the end of the year for more or less recalibrating the revenues we have already shown. So the lever of the exchange rate on the last day is quite big given this hyperinflation accounting standard. And on the earnings side, this -- I think that there is no strong message in the readjusted wording. I think we've just tried to be a little bit more precise. I think on the revenue side, there is some -- a little bit -- yes, we are a little bit more precise in the sense that the current -- the guidance so far was some stability and stability -- currently, we do expect a slight decrease in revenues. But on the earnings side, I think we're pretty stable, and it's a little bit modified wording referencing to the results that we've shown after the first 3 quarters.

Okay. My second question is on your '26 outlook because I think there are quite a few moving parts when we think about the Retail & Banking division. So I think in your Slide 7, I'm just trying to pull it, yes, Slide 7, you are showing bank99 earnings up a bit compared to the 9 months. So I guess, up -- '26 up year-over-year as well. But then you are mentioning interest rates down next year and then EUR 20 million less revenues from A1 and some losses from start-up costs from the launch of your own network. So any indication of, let's say, the net effect, what sort of EBIT level we should expect in the Retail & Banking unit in '26?

Yes. Thanks for that question. And sorry for the misunderstanding, maybe some wording is resulting in. So let's distinguish three things. One is the top line shown in our group P&L. There, we show gross interest and gross provision income, which means that in a landscape of decreasing interest rates, even if we have growth on number of customers and even with an expanding interest margin, we show probably slightly decreasing gross revenue in our group P&L. In our solo accounts for the bank, we report -- as any bank, we typically report net interest and net commission income, which is stable to increasing. And then we're talking about profit before tax. And then sorry for the misunderstanding the word earnings trend bank99 on Page 7 might have induced. So with earnings, here, we mean profit before tax, and here, in 2024, we had a loss in a single million digit order of magnitude, this year, we have breakeven, so a small positive number. And for next year, we expect a positive result for bank99 in the order of magnitude of a mid-single-digit million euro figure.