NZ Post's profit forecast falls

NZ Post is blaming less mail and tight margins in the banking sector on a fall in its profit forecast.

New Zealand Post Group will be returning less money than forecast to government coffers this year.

The state-owned enterprise said today it expected its net profit after tax (npat) for the year ended June 30 to be about break even due to declining mail volumes, tight margins in the banking sector and a series of significant one-off items.

Its operating npat was now expected to be about $72 million, $5m down on "normalised" npat for last year and lower than the $80.8m projected in its 2009 statement of corporate intent.

Group chief executive Brian Roche said after various one-off adjustments meant the reported npat for the 2009 financial year was $71.8 million, so npat for the latest financial year would break even after taking into account four one-off costs at the group level and in the postal services business in the second half of the financial year.

The final outcome would be known when the full-year audited accounts were completed.

New Zealand Post expected to confirm its annual result on August 20.

Mr Roche said that, given the non-recurring, largely non-cash nature of the one-off costs, the revised profit projection did not have a material effect on the group's commercial value or its ability to service its debt obligations.

NZ Post Group's cash position remained strong.

In keeping with ministerial expectations for transparency by state-owned enterprises, the board had decided to provide an early public indication of its revised profit outlook.

From the 2011 financial year, npat was expected to return to projected levels - $60.8m in 2011, $84.3m in 2012 and $117.5m in 2013.

Mr Roche said that, as signalled in the half-year report, the operating profit for the 2010 financial year has been affected by reduced contributions from across the group, due primarily to declining mail volumes and generally tight margins in a competitive business environment, especially in the banking sector.

"The impact on New Zealand Post's letters business of economic conditions and digital substitution is well understood," he said.

"We will continue to work with our shareholders on a range of options to ensure a sustainable future for our mail processing and delivery networks.

"We continue to closely manage costs across the group and we are advancing broader business strategies that address our need to remain relevant to customers in this age of rapidly developing technologies and digital communications."

The estimated one-off expenses reflected in the revised npat were:

* $20m arising from a taxation change introduced in the May budget affecting the depreciation treatment of property assets.

* $19m of write-downs and provisioning in international mail business.

* $4m write-down of various assets, including property and aircraft, whose value had been affected by economic conditions.

* A reduction of $28m associated with ParcelDirect Group (PDG), New Zealand Post Group's 50:50 courier joint venture with DHL in Australia.

- NZPA