May 14 (Reuters) - Austrian Post expects a decline in 2020 revenues and core profit as a weak performance in its letter mail business countered the gains from soaring parcel volumes in the first quarter, the company said on Thursday.
The coronavirus pandemic boosted parcel revenues at postal companies worldwide as consumers confined to their homes turned to online shopping. But it hit freight volumes and accelerated the replacement of letter mail by electronic communications.
Increasing parcel sales cannot offset weakness in the high-margin mail division due to the high level of fixed costs in the logistics business, the company said, adding that it saw a high single-digit decline in its 2020 mail revenues.
Further costs arise from pandemic-related governmental regulations, as well as internal safety measures, so 2020 earnings would depend on how the crisis developed in the course of the year, the company said.
The majority state-owned group said its objective was to keep revenue development as stable as possible, compared to a previously cancelled forecast for full-year revenue to remain stable or rise slightly compared to the 2019 figure.
For the parcel and logistics division, sales growth of about 15% should be possible in 2020, the company said.
Business-to-business deliveries are the bigger driver of earnings, so any shift towards business-to-customer parcels will hurt postal companies’ margins, analysts have said.
However, performance of Austrian Post’s parcel division is developing above expectations because private customer parcels have already been the largest part of its parcel shipments, the company said.
Reporting by Zuzanna Szymanska in Gdansk; Editing by Himani Sarkar and Edmund Blairr