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Fall in letters cuts into NZ Post’s earnings

New Zealand Post’s first-half profit dropped 19 per cent after the sale of almost half its stake in Kiwibank reduced income and as revenue from traditional postal services continued to decline.

Net profit fell to $89 million in the six months ended December 31, from $110m a year earlier, the state-owned enterprise said.

Revenue dropped 9 per cent to $467m, while expenditure declined 12.7 per cent to $446m. The company is in the fourth year of a five-year turnaround to shrink its business to keep pace with falling mail volumes.

The company sold 47 per cent of its Kiwibank stake for $493.5m in October 2016, which it used to repay $180m of debt and make a $100m dividend payment to the Crown, while also booking a $25m gain.

Chief executive Brian Roche said NZ Post loses between $20m and $30m annually from a declining number of letters sent, but the postal business as a whole produced positive earnings, thanks to cost savings and a 7.5 per cent uptick in parcel volumes through the first half, driven by online shopping.

NZ Post processed two million more parcels in November and December 2016 than in the previous period, while letter volumes fell 9 per cent in the six months.

The company has launched new delivery options to keep up with increasing online shopping volumes, including parcel collect and drop-off at supermarkets, bookshops and pharmacies. It opened a new operations centre in Hamilton and will open another in Christchurch by midyear.

The company declared a $2.5m interim dividend to the Crown.