Singapore Post Q2 profits slipped 12.9% to $25.15m

Its stake in an associated company was diluted, making it ineligible for equity accounting.

Singapore Post’s (SingPost) profits for second quarter FY2018 slipped 12.9% to $25.15m from $28.87m in the same period last year largely due to negative contributions from associated companies and joint ventures. Revenue also fell 6.2% to $76.77m.

According to an announcement, SingPost’s associated company in China, 4PX, incurred higher expenses from investing in warehousing and infrastructure. 4PX then issued additional shares in shareholder Cainiao to deepen business integration with Alibaba and SingPost.

SingPost subsidiary Quantium Solutions International (QSI) previously held an interest of 30.52% in 4PX, but after the share issuance, QSI’s interest has been reduced to 19.75%. 4PX stopped being an associated company of SingPost. SingPost will no longer equity account for 4PX as an associate.

As a result, the investment in 4PX will just be classified as an equity investment measured at Fair Value Through Other Comprehensive Income (FVTOCI).

Meanwhile, SingPost’s underlying profit barely rose by 0.4% to $28.1m as it reported growth in all operating activities except e-commerce. e-commerce profits fell 227% to $11.23m largely due to its US businesses.

“The pricing pressures highlighted earlier had led to certain customer contracts being renewed at lower rates,” the company said. “This was exacerbated by an increase in costs due to ongoing initiatives to integrate TradeGlobal and Jagged Peak, as well as investments in automation.”

Post and parcel profits inched up by 0.5% thanks to higher margins from domestic last mile e-commerce deliveries in Singapore. “The group is starting to reap operating synergies from the ongoing integration of our last mile delivery capabilities in the post and parcel divisions,” SingPost said.

Post and parcel revenue grew 1.6% as higher international mail revenue from cross-border eCommerce deliveries helped offset the impact of lower domestic letter mail volumes. However, SingPost warned that domestic mail volumes could trend downwards.

SingPost’s logistics segment was back in the black with $343,000 profit, thanks to reduced losses at Quantium Solutions. Profits of its property segment rose 54.1% due to rental income from the SingPost Centre retail mall, which reopened in 2017 after a period of redevelopment.

The board of directors declared an interim dividend of 0.5 cents per share payable on 30 November 2018.