SingPost Q1 operating profit falls 47% on higher costs, post and parcel weakness

SINGAPORE (THE BUSINESS TIMES) – Steeper costs and challenges in the core post and parcel business weighed on the performance of Singapore Post for the first quarter ended June, with operating profit falling 46.7 per cent to $10.6 million.

This came even as SingPost’s first-quarter revenue rose 34.7 per cent to $475.2 million, as it enjoyed higher contributions from its Australia business, including Freight Management Holdings (FMH), the company disclosed in a business update on Friday (Aug 19).

Consignment volume in Australia grew 29.5 per cent with the addition of FMH’s volume in CouriersPlease’s business, while SingPost also saw higher revenue from Famous Holdings. Excluding the General Storage Company, which was deconsolidated, property revenue also came in higher, with SingPost Centre seeing “relatively high” occupancy of 95.9 per cent as at end-June.

The stronger top line was, however, offset by lower revenues from the core post and parcel business due to the structural decline in letter mail, lower e-commerce logistics volume and continued supply chain disruptions in international e-commerce operations. The segment recorded an operating loss.

In Singapore, letter mail volume dropped by 8 per cent, while e-commerce logistics volume fell 26.1 per cent due to the easing of post-pandemic demand, as well as a major e-commerce customer’s move to insource part of its logistics.

In the international post and parcel business, volume declined 32.5 per cent amid supply chain disruptions and Covid-19 lockdowns in China, which hit conveyance costs. The majority of SingPost’s international e-commerce volumes originate from the country.

Further weighing on performance was a 39.8 per cent rise in first-quarter operating expenses to $466.3 million, largely due to higher volume-related expenses from the consolidation of FMH and growth in Famous Holdings. SingPost was additionally hit by higher fuel, labour and utilities costs. Air conveyance rates also remained high in the first quarter.

SingPost said that it is “actively managing” the challenges in the post and parcel business, and continues to work on transforming the postal business to a global logistics enterprise. It also continues to expand in the Australian market and seek operational synergies.

“We are focused on prudent cost management and cost efficiency in the group’s operations. This includes the simplification and integration of various international operations to drive synergies and cost efficiency, and to enable the group to better serve the cross-border e-commerce logistics market,” the company added.

SingPost had $485.6 million in cash as at end-June, against $466.7 million in borrowings.

Its shares ended on Thursday at 63 cents, up 0.5 cent or 0.8 per cent.