SINGAPORE (Feb 10): SingPost posted a 27.9% fall in 3Q earnings to $31.4 million from $43.5 million a year ago due to operating losses in the US e-commerce business, costs related to the new Regional eCommerce Logistics Hub, and a fall in domestic mail volumes.
Due to the poor performance of US subsidiary TradeGlobal, SingPost’s board warns there is a risk of “significant impairment to TradeGlobal’s carrying value”. The board will also be conducting a review of all the investments.
“Impairments, if any, will be assessed based on the results of the full financial year ending 31 March 2017 and future plans for the businesses,” said SingPost in its filing.
Revenue for the three months ended Dec rose 16.8% to $369.4 million.
Postal revenue increased 2.9% to $143.4 million (amended) but operating profit decreased 6.6% to $38.5 million. Cross-border e-commerce-related deliveries continued to rise, helped by higher volumes from the Alibaba Group.
But domestic business letter volumes fell as financial institutions pushed their customers to switch to electronic statements. Operating margins continued to slide as the postal revenue mix shifts towards international mail.
Logistics revenue rose 5.6% to $171.3 million, driven by higher e-commerce-related activities at Couriers Please and Quantium Solutions. However, costs related to the Regional eCommerce Logistics Hub and pricing pressures in the e-commerce logistics space caused operating profit to fall 30.2% to $8.8 million.
Consolidation of US subsidiaries TradeGlobal and Jagged Peak saw e-commerce revenue more than double to $81.1 million but the the division swung to an operating loss of $8.4 million.
Jagged Peak saw good growth in revenue and operating profit, winning new customers and exceeding targets.
Cincinnati-based TradeGlobal posted an operating loss as higher labour costs were incurred due to worker shortage in the city, and productivity impacted by delays in warehouse automation and the rollout of services for new customers.
Developments at two of its top customers also affected TradeGlobal’s performance: One customer has filed for bankruptcy, while the other has decided to in-source its e-commerce freight operations.
Mervyn Lim, Covering Group Chief Executive Officer, said: “We are building out our capabilities, broadening and deepening our eCommerce logistics network, to secure the future of SingPost. There are challenges along the journey and it is going to take a number of years for our investments to contribute.”
For the 3Q, the board of directors has declared an interim dividend of 0.5 cent per share to be paid on March 9.
Shares of SingPost closed at $1.47 before the earnings announcement.
