Russian Post wants to close some branches and reduce delivery frequency

Previously, the Federation Council had noted Pochta’s “very sad” financial situation and spokesperson Valentina Matvienko called for a “thorough analysis of what is happening” at the company. Then the Association of Internet Trading Companies offered to “provide assistance” in using the infrastructure of Russian Post.

As a result, Post has prepared a “Plan to improve the economic and financial situation of the company”, which reflects the state support measures available to the operator.

Basic measurements

• Additional capitalization of approximately 117 billion rubles and refinancing of the company’s debt (by the end of 2022 its size reached 153.5) with funds from the National Welfare Fund at 3.5%;
• the opportunity to close unprofitable branches following the example of Sberbank;
• relaxation of delivery frequency standards from six times a week to five for federal centers and from five to three for municipal centers. Otherwise, from three times a week to once;
• introduction of payment for infrastructure of large e-commerce platforms at 0.5% of turnover.

The Post argues the need for such measures, in particular, due to the fact that other actors do not have such a high level of costs, and this is precisely due to the difference in regulatory conditions.

“The greatest potential for restoring financial sustainability lies solely in covering the costs of incompressible public infrastructure, leveling the playing field with competitors, and refinancing debt,” the plan presentation says.

According to its own estimates, Post will be able to save about 20.7 billion rubles in interest payments until the end of 2025, subject to additional capitalization of the company. If the company’s debt is refinanced at 3.5% from the National Social Welfare Fund, up to 4.7 billion rubles can be saved.

In this scenario, net profit expectations in 2024 are 6 billion rubles and 33 billion rubles at the end of 2025. If there is no support, the company will not become profitable until the end of 2025.

The Ministry of Digital Development told the publication that the department does not consider closing any branches to be an acceptable measure. In addition, the ministry insists on immediate measures to open those branches that are temporarily not operating.

At the end of 2022, Pochta recorded RAS losses of 27.2 billion rubles and revenues of 208 billion rubles. Thus, the company’s negative profitability was 13%.

In June 2023, Post CEO Mikhail Volkov shared the company’s priority strategic goals. According to him, Correos should become a key logistics operator for e-commerce and also start developing new markets.

In September it became known that the company wants to open a subsidiary in the United Arab Emirates.