Australia Post to grow logistics despite economic constraints

Australia Post to expand domestic and international transport and logistics services, but warnings economic volatility may dampen prospects

By Brad Gardner

Australia Post is primed to expand its domestic and international transport and logistics services, but it warns economic volatility may dampen its prospects.

The government-owned business has released its annual report, which details significant revenue growth despite pressure from a tight labour market, increased running costs and greater demand on its services.

Total revenue increased by 5.3 percent over the previous year to $4.9 billion. Revenue from its parcels and logistics business grew 9.7 percent on the back of Australia Post’s continued development of its supply chain services overseas.

In the last financial year Post Logistics’ Australian operation, made up of 19 metropolitan facilities, achieved 17 percent in revenue growth as well as increased its customer base.

"We expect that our parcels and logistics operations will be the lynchpin of our business well into the future, so we have been investing a great deal of effort and resources in developing our capabilities in this area," Australia Post Chairman David Mortimer says.

His optimism, however, is tempered by the global economic downturn and the drop in business and consumer confidence in recent months.

"Although the outlook for the Australian economy remains positive in some segments, there is substantial risk from the recent instability of global finance markets, fuel prices and rising interest rates," the annual report says.

"Further drops in consumer confidence and any resulting economic slowdown would undoubtedly threaten our profitability levels."

The company intends on investing more in its overseas supply chain which links China, New Zealand and Australia.

According to the report, international supply chain revenue increased by 251 percent on the back of its logistics arm investing heavily in developing facilities and alliances in the Asia-Pacific region.

Post Logistics was launched in New Zealand in December 2007, while its Chinese operations began in 205 in partnership with China Post.

Australia Post’s annual report also highlights gains in the business’ efforts to reduce greenhouse gas emissions, which fell from 83 to 77 tonnes per $1 million of revenue.

The carrier, where possible, will buy Euro 4 compliant heavy vehicles to slash its exhaust and particulate emissions.

"Specifically, the reported improvement from Euro 3 to Euro 4 vehicles is a 30 percent reduction of nitrous oxide and an 80 percent cut in particulates," the report says.

In light of greater delivery points and growth in revenue, linehaul diesel consumption levels jumped more than 753,000 litres from 11.5 million litres to 12.3 million litres.

Consumption levels from large and small trucks, however, fell.

Despite this, surging fuel prices and wage increases bit into Australia Post’s bottom line, which recorded a decline in profit of 7.2 percent because of higher running costs.

"We expect the letters business will earn higher profits in 2008/09 as a result of the first increase in the basic postage stamp since January 2003," Australia Post Managing Director Graeme John says.

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