Russian Post makes its first loss in nine years of $350mn due to sanctions

Russian Post makes its first loss in nine years of $350mn due to sanctions
Russian Post made its first loss in nine years of $350mn after sanctions seriously curtailed its international delivery business. / bne IntelliNews
By bne IntelliNews March 30, 2023

Pochta Rossii (Russian Post) reported its first loss in nine years of RUB27.2bn ($353mn) at the end of 2022, RBC reported on March 30.

A black pit with a famously poor service record, Potcha Rossii was transformed in the boom years during the noughties into a modern and highly profitable service that has important social implications in a country as large as Russia. A banking services was also set up based on its country-wide branch network in partnership with the state-owned VTB Bank.

However, its business has taken a hit thanks to the economic slowdown of the last year and sanctions.

The company's revenue decreased by 4% year on year to RUB208.4bn ($2.7bn), with over half of that revenue coming from postal activities. However, Pochta Rossii suffered a loss on sales of RUB21.9bn, compared with a profit of RUB8.3bn in the previous year.

The company's operating expenses increased by RUB16bn, with a significant portion attributed to logistics costs and equipment servicing.

The decrease in revenue was primarily due to a reduction in international mail flows, caused by payment difficulties, transport restrictions and the suspension of global brands in Russia, according to a company spokesperson.

Pre-war Russians made heavy use of online shopping and snapped up bargains in European countries, especially during the post-Christmas January sales, causing the Russian post service to temporarily collapse on several occasions thanks to the volume of parcels arriving from overseas. Pochta Rossii subsequently introduced a special tariff to manage the volume of orders better.

But sanctions and the inability to use a Russian based debit or credit card overseas thanks to the sanctions has dramatically reduced the volumes of this international trade. The Pochta Rossii’s revenue in the cross-border segment decreased by RUB11.4bn. Additionally, the company's expenditure increased due to an increase in salaries for employees, which cost RUB14bn, RBC reports.

Mikhail Volkov, CEO of Russian Post, acknowledged that the past year was challenging for the company, and he emphasised that the main task for 2023 is to "reconfigure work taking into account new economic and geopolitical realities, reasonable cost reduction and increasing company revenues.” Volkov also underscored that the company will continue to prioritise social responsibility.

Pochta Rossii was able to achieve profitability in 2014 by reducing operating costs. However, in 2022, the company had to re-evaluate its strategy, including reducing administrative staff, and is currently working on a new approach.