Australia Post’s revenue falls 2% due to letter volume decline

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In the first half of the 2023 financial year (1H23), Australia Post’s revenue was A$4.69bn (US$3.2bn), down 2.4% from the same period in 2022. The company reports that this was largely driven by an ongoing decline in letter volumes.

Group profit before tax of A$23.6m (US$28.6m) was considerably lower than the prior corresponding period, largely the result of a record first-half letters loss of A$189.7m (US$132m), compared with A$69.9m (US$48m) in 1H22. Australia Post has, for several years, been flagging significant structural headwinds. During Covid-19, its parcels business experienced a temporary surge, which masked the underlying challenges the business has been facing. With lockdowns ending and e-commerce volumes moderating, the challenges of the business are now more visible.

Letters revenue fell 5.7% compared with 1H22, despite the benefit of several one-off mailouts, including state election materials, cyberattack and interest rate notifications. In 1H23, the letters business made a loss of A$189.7m (US$230m). Letters revenue now makes up just 18.8% of total Australia Post revenue, down from 19.5% in 1H22. On January 3, 2023, Australia Post increased the basic postage rate (BPR) from A$1.10 (US$1.33) to A$1.20 (US$1.46). This change did not affect the concessional or seasonal greeting cards rate and is the first increase to the BPR since 2020. It is anticipated that this increase will only partially offset the substantial letters losses.

Parcels and services revenue during the half was A$3.80bn (US$2.65bn), a 1.6% decrease from 2022’s first half. Cost increases, driven by wage growth, severe weather events and labor shortages also affected the profitability of the business. Australia Post absorbed the majority of costs associated with force majeure events. Australia Post’s road express and B2B premium service, StarTrack, has continued to increase revenue and managed higher costs to deliver a strong result.

Operational costs during the half increased 1.2% from the same period in 2022 to A$4.64bn (US$5.6bn), due in part to severe weather events, rail network disruptions and a 6.1% wage increase granted to enterprise bargaining agreement (EBA) team members, effective 1H23. While operational costs remained elevated throughout the half, Australia Post invested A$208.2m (US$252m) in new facilities, fleet and technologies. This included the new Perth parcel facility (Boorna Wangkiny Mia), which was officially opened in December 2022, as well as investing in an additional 65,000 unit load devices (ULDs) for peak preparedness. Furthermore, A$288.8m (US$350m) was paid to the Licensed Post Office Network.

Australia Post has asserted that it remains focused on driving business and operational efficiencies, with A$121.1m (US$146m) realized in 1H23. With ongoing letters losses, and parcels growth moderating, a new operating model for Australia Post’s corporate support office is being introduced to simplify and streamline the business. This will, in part, help Australia Post respond to the financial pressures it is facing. The new operating model aligns with the recently launched Post26 strategy to ensure Australia Post remains customers’ preferred choice for e-commerce, digital, mail and retail services.

Paul Graham, group CEO and managing director of Australia Post, said, “Every year it’s costing Australia Post more to deliver fewer letters. We know letters are in an unstoppable decline, thanks largely to digital communications, yet letter costs are rising due to the increasing number of delivery points we service every day. This all contributes to increased losses and is a global issue facing all postal services. We expect annual volumes will decline further, with Australian households receiving less than one letter per week by the end of the decade.

“We are at a crossroads and the headwinds facing our business have never been stronger. As flagged in our 2022 financial results, Australia Post will report a full-year loss this year for the first time since 2015. Our Post26 strategy will help position Australia Post to be financially, socially and environmentally sustainable and enable the business to make a positive contribution to Australian communities, now and in the future. We are focusing on streamlining our product portfolio, making us easier to do business with and continuing to be a leader in sustainability. However, further changes to the way we operate are necessary.”

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