PostNL NV (AMS: PNL) shares are down 11% today. PNL shares represent both TNT, the logistics company, plus the old letter monopoly in Holland. It’s possible to view the problems as just an operational blip, if that’s what we want to do. It’s also possible to worry that there really just is no long term future for the old postal monopolies. Working out which is which leads to how we might assign a valuation both here and also to Royal Mail. If there’s not a long term future then the companies simply aren’t worth very much.
The business line in more detail: “PostNL N.V. provides postal and logistics services to businesses and consumers in the Netherlands, rest of Europe, and internationally. The company operates in two segments, Parcels and Mail in the Netherlands; and PostNL Other. It collects, sorts, transports, and delivers letters and parcels; and offers data management, direct marketing, and fulfillment services, as well as cross-border mail and parcels solutions…”
We can imagine that parcels delivery gets more interesting given online shopping. But then it’s also true that Amazon and others are building out their own logistics chains. So it’s not wholly obvious that trying to capture that business quite works.
PostNL NV share price from Google Finance
The fall today is on the announcement of the results. There’s a presentation here: “Parcel volumes up 1.6%, lower than anticipated; continued strong growth from international customers. Volumes Mail in the Netherlands -8.7%, in line with guided FY volume decline of 8% - 10%. Unfavourable shift in product and customer mix, both at Parcels and Mail in the Netherlands. Measures to mitigate inflation contributed to results”
Things just aren’t going well.
But the real worry here is that mail business. OK, so everyone sends fewer letters these days and so on. But it’s possible that we get to a level of usage where it simply cannot support the overhead costs of having a national and daily network. In order to have someone who goes past each mailbox each day there simply has to be a certain minimum level of cost. If volume of throughput won’t produce the revenues to service that necessary minimum then the postal network itself dies. The problem for all of the old national monopolies is that this is actually a possibility in the not too distant future.
Quite what society will do about that is unknown. But it’s an obvious risk of investing in the sector.