320 million losses in four years


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Hand out letters has long since become a ruinous business for Post, and each time it is more. First, because it is an activity in sharp decline; second, because Correos has the obligation to reach any corner of Spain -guarantees the universal postal service-, and that entails enormous costs in a country with a very extensive and very sparsely populated rural environment. The drift has ended up anchoring to Correos y Telégrafos S.A. in recurrent losses, in some red numbers that have fattened unchecked between 2015 and 2018.

In the last four years, this historic state entity has added net losses of around 320 million euros. In 2018, its red figures were a record: 178 million euros, according to the provisional results account that is included with its budget program this year. Of course, in the losses of 2018, the bulk has been due to a totally extraordinary cost: refund to the State of 137 million for subsidies received by Correos in the period 2004-2010 and that the EU declared illegal.

In terms of turnover, the revenues of this public company are articulated in two basic ways: the ordinary billing for its commercial activity and the money paid by the State for guaranteeing the universal postal service, a compensation for the cost that it means having to guarantee that all residents in Spain can send or receive a letter at a "social" price, wherever they live. The problem is that Correos does not know for sure how much it receives each year for that state compensation, because that contribution remains at the discretion of the government of the day. The postal unions say that it is one of the reasons for the losses that this company has been throwing for years.

In 2017, for example, Correos invoiced 1,641.87 million for its commercial activity, and received another 58.7 million for providing the universal postal service. A year before, the State had paid for the same concept 180 million, while in 2018 it was around 120 million.

In short, that source of income that should receive Correos for the public service provided varies without a fixed year after year, and is usually far below the commitments agreed.

Uncertain income

In 2018, for example, it would have had to receive 60 million more to comply with what had been expected between the Government and the Post Office at the beginning of the year. In addition, there is also no consensus figure on how much that annual payment would have to amount to the universal postal service. The person in charge of the trade union section of CC.OO. in Correos, Sergio Mira, affirms that it should be around 270 million euros a year if adequate calculation criteria are met. And stresses that, if so, Correos would not be giving losses.

In any case, budgetary transfers to the margin, the underlying problem is that the legal obligation to distribute letters at intervened prices -marked by the State- has been a bad business for Correos for some time. So you have to look for alternative commercial activities with which to offset the red numbers.

The parcel, on the rise

The field of parcel service is a strategic commitment that gives better results to Correos -an year-on-year growth of 61%in 2018-, where he has placed himself as operator of the large electronic commerce platforms and in which he wants to expand internationally. Last year, the Correos group distributed more than 165 million packages, of which 106 million were managed by the parent company (Correos y Telégrafos) and another 59 million shipments went through the Correos Exprés subsidiary, which has a workforce of one thousand workers

The Correos dome has started the year announcing new commercial lines to get the company out of the losses. In essence, these plans involve taking advantage of the large network of post offices and their logistics infrastructure, so that it provides administrative and commercial services to both institutions and companies. In short, take an extra commercial party, in various business lines, to the 2,396 offices that Correos has spread throughout Spain, to which 6,200 rural services are added, which adds a network of 8,600 points of service.

It is gaining ground in the parcel, in large part thanks to the growing internet commerce. But it intends to explore other sales sectors, such as the agreement that has just been launched with Telefónica to market its communications offer through the post offices.

Of course, while the Spanish postal company seeks the path of profitability, so far has embarked on an escalation of personnel costs. From the company they say that it responds to the fact that it carries out services that are very labor-intensive, and because of the growing activity in the field of parcels.

Post and Telegraph S.A. cut staff and salary spending for years, but in 2017 the payroll rebounded. Thus, in 2010 its personnel expenses amounted to 1,545 million euros; in 2016, after a progressive reduction, they remained at just 1.343 million; but in 2018 they were around 1,500 million euros, and this 2019 is expected to reach 1,600 million. All this, after the expansive agreements reached by the Government of Pedro Sánchez with the union representatives of the state entity at the end of last year, which foresee a significant increase in staff and salary improvements.

We must bear in mind that Correos is the parent company that dominates the structure of the Correos Group. This is completed by the companies Correos Exprés, Nexea Gestión Documental and Correos Telecom. But they are very small companies compared to the matrix, Correos y Telégrafos. This represented, in 2017, 88% of the group's total turnover, and almost 97% of its personnel expenses.

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The agreement sealed a few months ago between the company and unions contemplates, among other aspects, consolidate 11,200 jobs at Correos in a couple of years. From CC.OO., Sergio Mira emphasizes that this is nothing more than compensating a part of the destroyed employment in this public company for years: «Since 2009 about 15,000 jobs have been eliminated in the Post Office», says the head of this union in the state company. And, in addition, "with an eventuality rate of 28% of the workforce", he remarks.

In the opinion of the unions, the solution is not to lose weight in the company and see how the business is reduced and losses accumulate, but to take advantage of "the enormous potential that Correos has, investing and betting on lines of business such as parcel service, digital commerce or new technologies ».

Sergio Mira considers it urgent that Correos "have a plan for the future, a business plan that is committed to the company's potential for wealth". He insists that in Europe there are success stories of public postal companies, which shows that the road is viable. It blames the previous governments for not having taken it seriously, for having "tripped up" and submerged the Post Office in a "lethargy". "This company is profitable, can generate money, employment and wealth for the country," says this union official.

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