Liam Dann: Union queries cutbacks after NZ Post announces profit

Business Editor at Large·NZ Herald·

23 Feb, 2015 06:00 PM3 mins to read

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Opinion by Liam Dann

Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.

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On the face of it, NZ Post seemed to deliver a very good profit yesterday. In fact it was so good it prompted the Engineering, Printing & Manufacturing Union to question the planned cut-back of daily postal deliveries from six days to just three.

But digging down into the result hardly reveals any great commercial grounds for a reprieve.

NZ Post reported a 41 per cent increase in net profit to $100 million in the six months ended December 31.

The result included a boost from the sale of an Australian courier business. Excluding that, profit rose 18 per cent to $84 million. That's also pretty solid but an improved performance from KiwiBank accounts for $71 million of that.

Then even as the big numbers dwindle and we get down to core NZ Post business, the company reports that mail and parcels business delivered an improved performance. That, ironically, is down to e-commerce.

The internet - harbinger of doom for the traditional letter and bill - is increasing parcel deliveries as consumers flock to online shopping.

Freightways, which also reported an improved half-year profit yesterday - up 21 per cent to $26.3 million - noted much the same thing.

That's good news for NZ Post. It is a business with a future, in banking and parcel delivery.

But it doesn't point to improved fortunes for the daily letter drop. This result confirms NZ Post is making the right calls as a business.

Whether these calls are in the best interests of all the public is really a political matter. EPMU organiser Joe Gallagher was measured and realistic in his response.

The nature of the postal service is changing, he acknowledged, but given the overall result was okay he argues there is no need for NZ Post to move as fast as it is to cut daily deliveries.

He may have a point. Clearly that would mean subsidising that part of the business from earnings in other areas. The state-owned enterprise model requires organisations like NZ Post to act like proper businesses.

This Government, with its surplus obsession, is keen to receive dividends from SOEs. NZ Post will deliver $2.1 million for the half year.

Any change to NZ Post strategy would have to be driven by government policy. And that would require a groundswell of public opposition to the delivery cuts.

That's something we're just not seeing.