SingPost banks on e-commerce as Q2 net profit slips

The e-commerce boom continued to prop up earnings at Singapore Post (SingPost), although it on Tuesday posted a fall in second-quarter profits, in the absence of a previous one-off gain.

Net profit slipped by 9.5 per cent on the previous year, to S$28.47 million for the three months to Sept 30.

But, with exceptional items excluded, underlying net profit was in fact up by 1.9 per cent, on the back of a 10.2 per cent rise in revenue to S$354.7 million. More than half of that sum – S$190 million, or 53.6 per cent – came from activities related to e-commerce.

The postal service provider announced in August that it is going through a strategic review, and group chief executive Paul Coutts gave an update: “SingPost’s strategic vision of transforming from a postal provider to an e-commerce logistics player remains relevant and in the right direction.”

Revenue was up by 16.9 per cent in the group’s postal segment, to S$148.3 million, on the back of more e-commerce deliveries. SingPost singled out China’s Alibaba Group – which owns marketplaces such as Taobao – as a key driver of international mail volume tied to online shopping.

Meanwhile, logistics revenue increased by 7.6 per cent to S$165.9 million, spurred in part by higher last-mile e-commerce deliveries in Singapore and Australia, although profits were squeezed by the intense price competition in Hong Kong.

The e-commerce division saw turnover dip by 0.8 per cent to S$63.48 million, largely from the poor performance of TradeGlobal, the United States firm that SingPost picked up in 2015 but has struggled to make money on.

Mr Coutts said that SingPost is “fully focused on turning the company around”, particularly by drawing on best practices from its other American e-commerce unit, the “good-performing” Jagged Peak.

This would include tapping automation to bring down manpower costs, he added: “We’re focused on moving from a labour-intensive organisation to being a technology-driven business.”

Still, SingPost cautioned in its report that TradeGlobal is not expected to be profitable for the financial year ending March 31, 2018.

Separately, cross-border e-commerce deliveries are expected to be hurt by upcoming changes in the international terminal dues system, although SingPost said that “mitigating measures” are under way.

As margins are relatively low for international mail and domestic post drops amid a shift to electronic bills and statements, “blended postal margin is expected to decline”, it added.

SingPost has declared an interim dividend of 0.5 Singapore cent a share, to be paid on Dec 8 – half the size of the one-cent dividend in the same period a year ago.