Freightways’ Bracewell remains positive on mail as NZ Post fires posties
Freightways [NZX: FRE] managing director Dean Bracewell says he is upbeat about the prospects for his mail operations, seeing growth in niches such as overnight deliveries to businesses in a market where dominant player New Zealand Post is downsizing.
The company's DX Mail unit, acquired in 1985, is the only nationwide business mail competitor for NZ Post, which plans to sack 2,000 workers over the next three years and shift to alternate-day mail deliveries in response to falling demand. DX Mail sits alongside Freightways' Dataprint unit, a mailhouse that handles both physical and digital deliveries.
"We're actually positive about our mail business," Dean Bracewell, managing director of Freightways told BusinessDesk. "We see plenty of opportunity within the mail market, hence we've invested in street delivery networks, or posties on the street if you like, in many locations throughout New Zealand and are getting good growth in those areas."
Freightways doesn't split out results for DX Mail, which is a minor part of the express package and business mail division that lifted sales by 7 percent to $168 million in the first half. DX Mail grew revenue in the period, though its overall performance was down on a year earlier, as it shifts its focus from business box-to-box delivery to street delivery mail, Bracewell says.
"We see DX Mail being a growth opportunity for the company," he said.
Targeting niches within mail delivery may give Freightways the opportunity to squeeze profit out of a market in which NZ Post is struggling to maintain a full postal delivery service. The state-owned company is trialing reduced deliveries in the next six months and is shrinking its network of 880 outlets, having relied on cost cutting to boost earnings in its first half.
NZ Post's strategy includes making growth in parcels and logistics its top priority, as it retreats from a mail market it estimates has had a 30 percent decline in letter volumes since 2006. Freightways said in last year's annual report that it expects to see customers "talk to DX Mail about its alternative services."
Shares of Freightways gained 2 percent to $4.80 on the NZX, adding to a 2.8 percent gain yesterday, when the company reported a 3 percent increase in first-half profit. The stock is up 8.4 percent in the past 12 months, about half the gains of the NZX 50 Index.
Analysts say they want more evidence that there's growth in mail.
"It is a good strategy. Whether it will pay off or not, time will tell," said Dennis Lee, an analyst at Craigs Investment Partners. "When one pulls back, there is a gap in the market and if you can do it cheaper, if the environment is right, why not take the market?"
Freightways acquired DX Mail, then known as Legal Couriers in 1985, expanding it to a nationwide business-to-business mail system and a mail digitising service. It operates alongside Freightways' stable of courier service brands.
"Door to door delivery in the city is very competitive but their major strength is from their national network and that puts them in a strong position," Craigs' Lee says.