Pos Malaysia in the red on continued decline in traditional mail volumes

The business prospects remain challenging on the contraction in mail volume as businesses shift to electronic and digital channels

by MARK RAO/ pic by BLOOMBERG

THE continued decline in traditional mail volumes continued to weigh on Pos Malaysia Bhd’s earnings with the company remaining in the red for the fourth consecutive quarter, awaiting a change in its postal tariff rates.

For the quarter ended June 30 this year, Malaysia’s national courier and postal service provider fell to a RM15.1 million net loss against the RM4.98 million net profit managed in the corresponding quarter last year.

This was owing to the lower turnover brought in from the postal services and aviation businesses coupled with the higher costs, namely cost of sales operating expenses of RM7.2 million, incurred for the quarter.

Revenue for the quarter dipped 3% year-on-year (YoY) to RM572.95 million, its exchange filing yesterday stated.

The company’s business prospects remain challenging going forward on the contraction in mail volume as businesses shift to electronic and digital channels at the expense of mail-based communications.

Costs for Universal Service Obligation (USO), whereby the company provides postal coverage to the whole of Malaysia, also remain high.

Pos Malaysia group CEO Syed Md Najib Syed Md Noor said the loss incurred for the quarter under review arose from the continuing decline in mail volume, which was down 18% YoY, and the higher costs to serve the USO.

“We are working closely with our regulator since 2018 and continue to seek a quick resolution on the tariff balancing. We expect a positive outcome from the regulator on the tariff rebalancing,” he said in a statement yesterday.

In the meantime, the company is making significant investments for its digital transformation and to expand its capabilities to serve growing e-commerce demand, he said.

“We have launched our second integrated parcel centre in KLIA (Kuala Lumpur International Airport), increasing 78% of our capacity to 530,000 parcels per day from 300,000, and a RM100 million spend on our core system to enhance the overall customer experience on digital technology,” he said.

“On the people’s front, we are looking to implement an entrepreneurship programme with our staff to improve cost efficiency,” he added.

Syed Md Najib said these investments will help build the foundation for the company to expand its business with the best infrastructures and solutions to serve the market.

The courier business was Pos Malaysia’s largest revenue contributor, making up a 39.2% of total group turnover for the quarter under review, and was bolstered by the increase in demand from online business customers.

Turnover from the company’s second-largest revenue contributor, namely postal services, came in lower due to the continuous decline in traditional mail volumes.

Revenue from its aviation business fell largely owing to the lower tonnage of cargo handled, while the international segment noted lower volume from the transshipment business.

The logistics division, meanwhile, recorded slightly higher revenue on stronger contribution from the haulage business segment.

Note that Pos Malaysia changed its financial year from March 31, 2020 to Dec 31 this year. Thus, its 2019 fiscal performance will only account for three quarters.

In a separate filing, the company announced that its non-ED Datuk Abdul Hamid Sh Mohamed has resigned after serving close to 11 years on the company’s board.

Ahmed Fairuz Abdul Aziz, who is presently KUB Malaysia Bhd group CFO, is appointed to the board as chairman for the audit committee, while Datuk Idris Abdullah @ Das Murthy is also appointed to the same committee.

The appointments took effect yesterday. Shares in Pos Malaysia closed flat at RM1.61 yesterday.